Key facts
- Lula must slow debt growth while protecting social programs and investment.
- Lula's team aims for a budget surplus before interest payments of about 1.3% of GDP by 2030.
- Public debt already exceeds 82% of GDP.
Luiz Inacio Lula da Silva won reelection as Brazil's president on Sunday, defeating Senator Flavio Bolsonaro. Investors anticipate a sharp market reaction on Monday as bets on a right-wing shift are unwound. Markets had moved significantly in anticipation of a right-wing shift since Bolsonaro unexpectedly finished first in the opening round three weeks ago, with stocks closing on Friday almost 7% above their level going into the first round and the real currency nearly 5% stronger against the US dollar. Over the next four years, Lula must slow the growth of Brazil’s debt while protecting social programs and investment. The question for investors is whether his gradual approach to fixing public finances can bring borrowing costs down.