Brazilian Real Drops 10.5% After Lula Secures Fourth Term

Brazil’s financial markets faced a sudden shock on Monday as investors digested the outcome of the presidential runoff. The currency and equity markets reacted immediately to the election results announced by the Superior Electoral Court.

Luiz Inácio Lula da Silva secured 51.8% of valid votes against 48.2% for Senator Flávio Bolsonaro. Nearly all ballots had been counted by Sunday. This result marks the first time since 1989 that a candidate won the final runoff after losing the initial first-round vote. Lula will serve his next term from 2027 to 2030.

The Brazilian real lost 10.5% of its value against the U.S. dollar, reaching its lowest point since December 2025 according to LSEG data. Traders on the local stock exchange faced an automatic circuit breaker that halted trading. The iShares MSCI Brazil ETF fell 25% by 10:30 a.m. Eastern Time.

Major U.S.-listed Brazilian companies saw steep declines. Energy giant Petrobras dropped 16% and banking group Itaú Unibanco fell 20%. Brewer Ambev lost 10.3% of its value, while aircraft manufacturer Embraer was down 5%. Mining firm Vale slipped 1.2%.

The Brazilian Treasury canceled auctions for inflation-linked and fixed-rate government bonds scheduled for October 27 and 29. The agency stated it would monitor market conditions to ensure the bond market functions properly. An auction for Treasury Financial Bills on October 27 will proceed as planned.

Analysts at Citi noted that investors are worried about fiscal policy and state-owned enterprises under Lula’s administration. Chris Turner of ING described the budget deficit and high net debt-to-GDP ratio as major vulnerabilities. He warned that Lula’s campaign pledges, such as a shorter working week, pose challenges to fiscal consolidation.

Flávio Bolsonaro refused to concede the defeat overnight, according to Reuters. He said he would seek to have the result annulled and called a Supreme Court order to extend voting by two hours unacceptable. Peruvian President Keiko Fujimori called the win a democratic day, while Uruguay’s President Yamandú Orsi referred to Lula as a friend.

Lula faces a Congress where Bolsonaro’s Liberal Party holds the largest number of seats in decades. He must manage a substantial public debt while extending social welfare programs. The election process included allegations of voter suppression and a two-hour extension of voting hours ordered by Justice Cristiano Zanin.