Aberdeen: Reaction to the Brazilian elections

Aberdeen: Reaction to the Brazilian elections

October 5, 2026

Emerging Markets Politics

Viktor Szabó, Fixed Income Investment sStrategist at Aberdeen Investments, comments on the first round of the elections in Brazil.

'Markets now expect Bolsonaro to win. The four eliminated candidates, who collectively secured around 8% of the vote, were mostly from the centre to centre-right, suggesting that vote migration should favour him.

However, the election is not over: Lula has never lost a presidential election and still benefits from incumbency, an increase in Bolsa Família payments and the proposed shortening of the working week currently before the Senate. He is now the underdog but remains competitive in what could become another election where pre-election fiscal largesse fails to keep the incumbent in power, following recent examples in Hungary and Colombia.

For markets, however, the central question remains Brazil’s fiscal outlook, its longstanding Achilles heel. Lula’s spending commitments are already well understood; Bolsonaro must now demonstrate that market expectations of stronger primary balances and fiscal reform are supported by credible proposals rather than campaign rhetoric. The promises and commitments made by both candidates over the next three weeks will therefore matter more than the headline political momentum.'

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