A Lula victory is projected in a tight runoff - a chart that reads "President Bolsonaro performed much better than polling results indicated"

Despite Lula’s strong showing in the first round, polling significantly underestimated Bolsonaro’s level of support

After the Sunday results, Ibovespa jumped 5.54%, and the dollar retreated 4.07% to BRL 5.17. The tighter-than-expected gap between the two candidates will likely moderate political rhetoric as they compete for undecided voters, lowering FX volatility risks in the coming weeks. Additionally, the potential of having a Lula presidency amid a right-leaning Congress also decreases the chances of business-unfriendly reforms being passed. However, it is unlikely that either of the candidates will roll back promises of additional government spending, which poses long-term growth challenges for Brazil. 


As expected, former President Luiz Inacio Lula da Silva (PT) will face the incumbent, President Jair Bolsonaro (PL), in a second round. The leftist candidate from the PT received 48.4% of valid votes, followed by the incumbent, who received 43.2% of the votes. The five percentage point gap between Lula and Bolsonaro was much tighter than suggested by the latest polling agencies, with most of the discrepancies between the results and the polls coming from states in the southeast, where Bolsonaro performed much better than polling expected. Both third-way parties—the MDB and PDT—are poised to endorse Lula in the coming days. However, President Bolsonaro should benefit from the outright election of right-leaning governors, who may support his re-election bid. 

Our View

Lula still heads into the second round as the favorite to win, but that advantage is now much lower than initially projected. For Bolsonaro, high rejection rates will still represent a challenge in securing a second-term win, and no second-place contender has won a runoff race since 1989. However, the high level of polarization in Brazil’s society and the uniqueness of having two presidential figures in the runoff could lead to a different outcome than previous election cycles. Most importantly, however, after Sunday’s vote, congressional results showcase a strong showing by far-right parties, which will lead to challenging governing relations in the event of a PT win. The PL will likely secure 99 out of 513 seats in the lower house, controlling 20% of its seats. While the PT coalition remains the second biggest party in the Chamber of Deputies, the strong performance of right-leaning parties will limit Lula’s political capital vis-à vis his earlier terms.

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