PagSeguro Falls 26.4% After Lula Re-Elected Brazil’s President

Key Facts

Luiz Inácio Lula da Silva was re-elected president of Brazil after winning the runoff, whose result was announced Sunday, October 25, in a vote watched by markets for signals on future fiscal policy. The Superior Electoral Court said Lula secured 51.79% of valid votes, against 48.21% for Senator Flávio Bolsonaro. Lula received 64,256,232 votes, while his opponent received 59,826,041. The following day, PagSeguro shares fell 26.4% by 11:20 a.m. Eastern time, according to a report by The Motley Fool. The price page cited in the report showed a decline of 26.27% at 11:27 a.m. These figures capture the share’s movement during trading, but alone do not establish a direct financial impact on the company from the election result.

PagSeguro’s decline followed a strong performance earlier in the month, when Flávio Bolsonaro led the first round, according to the same report. The Motley Fool reported that Flávio had received 47.3% of the vote at the time, against 44.8% for Lula. The report said investors had bet on a Bolsonaro victory and that the stock’s rise was tied to those expectations. After Lula’s win, those bets reversed as the president-elect remained in power. The report described investors as dissatisfied with “Lula’s management of the economy” and said they hoped a change in administration would help strengthen public finances, reduce debt and tax costs, and improve the business environment. This is the report’s interpretation of the share move, not evidence that the election result directly changed PagSeguro’s revenue or costs.

Pressure in premarket trading extended to other Brazilian stocks listed in the United States, according to a report published by Investing.com on October 26. Petrobras shares fell about 22% by 5:10 a.m. Eastern time, the report said. Shares of Itaú Unibanco, Banco Bradesco and Nu also fell between 23% and 29% in premarket trading. In Asian trading, the Tokyo-listed Nomura NF Ibovespa Link ETF fell 15%, while November real futures declined 10%, Reuters reported via Investing.com. The picture had been different before the runoff: Brazilian stocks closed Friday about 7% above their level before the first round, and the real had gained about 5% against the dollar over the same period. Reuters quoted Luis Felipe Vital, a strategist at Warren Investimentos, as expecting “a sharp market reaction on Monday, with a strong repricing and asset selling,” indicating that the moves were part of a broader retreat in Brazilian assets.

Lula’s fiscal agenda faces a test as public debt rises to more than 82% of gross domestic product, according to a Reuters report. His team aims to achieve a primary budget surplus, before interest payments, of about 1.3% of GDP by 2030, the report said. Against this backdrop, Reuters quoted Alejo Czerwonko, chief investment officer at UBS, as saying investors want “a clear and credible commitment to fiscal discipline.” He added that sentiment would remain weak until a clear fiscal plan emerged. An Associated Press report also cited challenges including political polarization and the possibility of a fiscal crisis, and said Bolsonaro’s right-wing party would hold more seats in Congress than any other party. These fiscal and political issues have put the incoming administration’s ability to carry out its plans under investor scrutiny.

Investors are watching for early signals about the incoming government’s direction, including the choice of the next finance minister, the 2027 budget and the spending cap, according to a Reuters report. Reuters quoted an unnamed official in the report as saying the finance minister’s appointment would be an early signal to markets, adding: “We want to see what the 2027 budget and spending cap will look like.” On the political front, an Associated Press report said Flávio Bolsonaro refused to concede defeat and called for the election results to be annulled. The head of the electoral court said extending voting hours did not affect the result, according to the report. Lula is expected to begin his fourth, nonconsecutive term on January 5, 2027, the Associated Press reported. Between the result’s announcement and the start of the term, appointments and budget choices will remain among the signals markets are monitoring.