Brazilian markets plunge after Lula’s victory, while the real loses nearly 12% against the dollar

Brazil’s financial markets recorded one of their sharpest declines in decades on Monday after Luiz Inácio Lula da Silva won the presidential election. The São Paulo stock exchange fell approximately 15%, and trading was temporarily suspended. At the same time, the real depreciated by nearly 12% against the dollar in the first hours of trading, before recovering some of its losses.

Lula won 51.8% of the vote in the runoff, while his rival, Flávio Bolsonaro, received 48.2%. Investors had been betting on the victory of the right-wing candidate, who was considered more supportive of reducing the budget deficit and public spending. The result reversed the gains recorded before the election, when the real had appreciated by approximately 10% and the stock market had risen 38% in dollar terms.

The Bovespa index had its worst session since 1990, while yields on some government bonds exceeded 15%. Significant declines were reported at B3, BTG Pactual, Banco do Brasil and Bradesco, while XP Inc shares lost 48%.

Markets’ reaction reflects concerns about public finances. Brazil’s deficit could reach 8% of GDP in 2026, while public debt stands at approximately 83% of GDP. Investors are now watching the appointment of the finance minister and the presentation of a credible deficit-reduction plan, amid a political context complicated by a Congress dominated by conservatives.