Brazilian Stocks Fall as Much as 29% After Lula Re-election, Raising Fiscal Concerns
Key Facts
Lula da Silva was re-elected president of Brazil after receiving 51.79% of valid votes, against 48.21% for Flávio Bolsonaro, according to the Superior Electoral Court. Lula received 64,256,232 votes, while Bolsonaro won 59,826,041 in the runoff on 25 October 2026. The result was followed by a sharp fall in U.S.-listed Brazilian companies in premarket trading on Monday, 26 October. Petrobras fell about 22%, while shares of Itaú Unibanco, Banco Bradesco and Nu dropped between 23% and 29%, according to Investing.com. MercadoLibre fell 10.9%, while the iShares MSCI Brazil ETF declined more than 27% and Ambev shares fell about 18%.
The reaction extended beyond equities; a Reuters report via MarketScreener said Brazilian assets had risen in the weeks following the first round. The Bovespa closed on the Friday before the runoff about 7% above its level just before the first round, while the real was about 5% stronger against the dollar. “We expect a sharp market reaction on Monday, with a strong repricing and asset selling, and futures interest rates are likely to reach their upper limit shortly after the open,” a strategist at Warren Investimentos said. Alejo Czerwonko of UBS Global Wealth Management warned that the gains after the first round could largely reverse. He added that sentiment could remain weak until a fiscal plan becomes clear, putting fiscal policy at the forefront of what investors are watching after the election.
Markets are sensitive to concerns about the path of public spending and debt. Investing.com reported that lenders could demand higher interest on government debt if confidence in the government’s ability to carry out its plan weakens. Higher government borrowing costs would add to the fiscal burden and raise credit costs for companies and households, the report said. Lula’s economic team is targeting a primary budget surplus, before interest payments, of about 1.3% of GDP by 2030. Public debt, meanwhile, exceeds 82% of GDP, according to the same source. The parliamentary landscape also constrains the president-elect’s ability to pass reforms: conservatives expanded their positions in the 4 October congressional elections, depriving Lula of the support needed to pass significant reforms, according to the Associated Press.
MercadoLibre’s exposure to the Brazilian market is another reason investors are tracking the impact of the result on the company. Brazil was its largest market in 2025, generating $15.2 billion of its $28.9 billion in net revenue and financial income, or about 52.6% of the total, according to Benzinga. Benzinga said the stock fell about 9% in premarket trading after Lula’s victory, a decline that differs from the 10.9% drop Investing.com reported for that trading. Benzinga reported that investors had expected Bolsonaro to pursue pro-business reforms, cuts to government spending and support for privatization. Lula’s victory led to the unwinding of positions tied to the possibility of Bolsonaro taking office, the report said. The company’s heavy reliance on the Brazilian market makes its future financial performance another focus for investors.
Investors are looking ahead to MercadoLibre’s results, expected on 6 November 2026, according to Benzinga. Analysts expect earnings of $9.37 per share, compared with $8.32 in the same period a year earlier. They also expect revenue of $10.66 billion, against $7.41 billion a year earlier. These estimates show the scale of growth expected from the company as markets track the impact of its heavy exposure to Brazil. In local data, the Brazilian Institute of Geography and Statistics calendar sets 30 October for the release of the monthly Continuous National Household Sample Survey for the September 2026 reference period. The survey is due a week before the company’s results, as investors watch Brazilian economic data and developments in the fiscal plan.