Brazilians will head to the polls to decide whether they will grant Jair Bolsonaro a second term or bring about a new government for the next four years.

  • What does this all mean for Brazil’s economic outlook?
  • Which industries and segments are better prepared to navigate new headwinds?
  • How can multinationals stay profitable in this environment?

As Brazil enters the final stretch of its presidential campaigning season, former President Lula leads the polls, with – in recent weeks – a narrow but viable path to a first-round win becoming a viable scenario. As a Lula victory becomes increasingly probable, the question now shifts to what a third Lula term would consist of.

In our view, there is no strong indication that Lula’s priorities for 2023-2026 would differ significantly from the emphasis of his previous two terms. While mentions of changing the spending cap to enlarge the Auxilio Brazil benefit signal a bit of a policy break on the fiscal spending outlook, Lula is expected to take on a pragmatic approach when introducing new industrial and economic policies. Despite his practical approach, Lula will quickly need to learn and maneuver a much more fragmented and likely right-leaning Congress than he once led, possibly limiting his policy-setting agenda. 

Both candidates will face similar short-term fiscal challenges and will likely double down on additional government spending to compensate for a likely economic slowdown in the upcoming calendar year. However, while relatively similar fiscal concerns await the winning candidate in early 2023, we believe that Bolsonaro and Lula would offer different growth plans over the medium term. A second Bolsonaro administration would likely retain a more pro-market strategy of prioritizing privatizations, concessions, and a smaller footprint for SOEs. Conversely, Lula views the state as an inducer of economic development, leading Brazil’s economic model to have a much larger role for the state. 

Key Takeaways

  • We expect Lula to become Brazil’s next president
  • The electoral landscape remains uncertain, but many factors point to a Lula victory
  • Voter intentions indicate Lula will likely win the presidency
  • From an economic policy standpoint, Lula’s 2022 priorities don’t indicate a more radical agenda
  • Lula’s campaign promises indicate a revival of flagship social programs

Preview the Brazil’s Elections Webinar Recording

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