SAO PAULO, BRAZIL – OCTOBER 24: Luiz Inácio Lula Da Silva, incumbent president of Brazil and presidential candidate for Partido dos Trabalhadores (PT) waves a Brazil flag during a rally ahead of the presidential runoff at Avenida Paulista on October 24, 2026 in Sao Paulo, Brazil.
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Luiz Inácio Lula da Silva has won an unprecedented fourth term as Brazil’s president, overturning a first-round loss to beat Senator Flávio Bolsonaro and catching markets off guard.
Lula took 51.8% of valid votes to Bolsonaro’s 48.2%, according to the Superior Electoral Court, with nearly all ballots counted on Sunday.
The results are also historic as it’s the first time since Brazil returned to direct elections in 1989 that a candidate has won the final runoff after losing in the first round.
Markets caught off guard by Lula win
Brazilian stocks plunged following the unexpected victory, unwinding some of the rally from the first-round result three weeks earlier. That reflected expectations of more market-friendly policymaking by Bolsonaro and broader jitters around Brazil’s fiscal trajectory.
The iShares MSCI Brazil ETF was 25% lower in premarket at 7:25 a.m. ET. U.S.-listed Brazilian companies were also down sharply in premarket trading. Energy giant Petrobras was down 24%, banking group Itaú Unibanco 26%, brewer Ambev 13%, and mining firm Vale 3.3%. Aircraft manufacturer Embraer was 2.6% lower.
Bolsonaro refused to concede defeat, saying he would seek to have the result annulled, Reuters reported. He also said a ruling by a supreme court justice to extend voting for two hours was “unacceptable,” according to the outlet.
The election process was marred by allegations of voter suppression, with Lula’s campaign reporting suspended public transportation in some key areas. Supreme Court Justice Cristiano Zanin extended voting by two hours. Bolsonaro’s campaign had also requested an extension, citing heavy rains that shut polling stations in the south, a right-wing stronghold.
Flavio Bolsonaro, Brazilian presidential candidate, speaks during a press conference at the Liberal Party (PL) camp following the runoff election in Brasilia, Brazil, on Sunday, Oct. 25, 2026.
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The victory of the 80-year-old leftist, who had trailed in the first round, blocks a rightward shift in Latin America that U.S. President Donald Trump has backed.
Trump called Bolsonaro’s lead in the first round “a very, very big victory.”
He would have preferred a Brazilian president in closer alignment to U.S. foreign policy as Washington makes efforts to project U.S. power across the Americas, according to Daniela Portella Sampaio, senior research fellow for Latin American Security at the U.K. think tank Royal United Services Institute.
Lula, who has publicly sparred with Trump, is set to govern from 2027 to 2030, facing a Congress where Bolsonaro’s Liberal Party holds the largest bench in decades, and with a substantial public debt that he would need to stabilize.
Under Lula’s leadership, Brazil has grappled with worsening fiscal health and mounting public debt driven by double-digit interest rates, elevated cost of servicing the debt, and rigid mandatory spending. Gross debt reached 82.9% of the country’s GDP in August, the highest since March 2021, according to the Central Bank of Brazil.
Analysts had expected a rally in Brazilian assets before Sunday’s election results, with Bolsonaro holding a narrow lead earlier this month.
Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING, had forecast both the currency and bond markets would rally if Bolsonaro won.
Lula will need to convince investors that Brazil can stabilize its debt trajectory, said Alejo Czerwonko, a fellow at the Atlantic Council. Lula’s administration will likely extend the more “gradual approach,” building on the existing fiscal framework while seeking to preserve public investment and social spending, Czerwonko said.
Goldman Sachs analysts expect “modest measures” to contain the government’s spending growth, alongside further increases in an already high tax burden, while major structural reforms remain unlikely.
Leaders from across Latin America largely congratulated Lula’s historic win.
Peruvian President Keiko Fujimori hailed Lula’s victory in a post on X late Sunday, calling it a “democratic day” for the Brazilian people. Uruguay President Yamandú Orsi congratulated Lula over a call, calling the Brazilian president a “friend.”
— CNBC’s Matthew Tan contributed to this report.