The BOVESPA stock index is displayed on an electronic board at the Sao Paulo Stock Exchange (B3) in Sao Paulo, Brazil, on October 26, 2026. (AFP Photo)
The reelection of Brazilian leftist Luiz Inacio Lula da Silva rattled markets as investors, who had expected a win for his conservative rival, worried about fiscal discipline.
Sao Paulo's stock exchange, which had soared to new highs after Flavio Bolsonaro received the most first-round votes earlier this month, plunged 17 percent on Oct. 26 before slightly recovering to end the session down almost 14 percent.
The sharp decline in the benchmark Ibovespa index at one point triggered the first 30-minute halt to trading since the COVID pandemic in 2020.
"No one had this result on their radar," Leandro Gabiati, of the political consultancy firm Dominium in Brasilia, told AFP.
Against a backdrop of mounting fiscal pressures, Bolsonaro had promised to slash government spending and shrink the state.
However, he never gave details on where the cuts would come from, and vowed to maintain social programs.
The Brazilian state spends more than it collects, public debt exceeds 80 percent of GDP.
In the final stretch of his campaign, Lula rolled out costly measures, such as increasing the value of cash transfers to the poor or debt forgiveness for micro-entrepreneurs.
"Lula made several spending promises, and those need to be priced in," said Andre Perfeito, chief economist at the financial firm Garantia Capital.
"Sound fiscal reform is the price Lula 4.0 must pay to regain market confidence," said Mariano Machado, Americas Principal Analyst at global risk intelligence firm Verisk Maplecroft.
