Brazil markets, currency reel from leftist Luiz Inácio Lula da Silva’s election win

Brazil’s markets and currency plunged Monday in the aftermath of leftist President Luiz Inácio Lula da Silva’s reelection victory, prompting a temporary halt in trading in the South American country.

Futures on the Brazilian stock index, Bovespa, fell nearly 15%, and the country’s currency, the real, fell nearly 12% Monday morning, according to the Financial Times. 

Sunday’s election victory for Lula marked a comeback after he narrowly lost to hard-right candidate Flavio Bolsonaro in the first round of voting earlier this month. Polls had shown the son of imprisoned Trump ally Jair Bolsonaro on track for a big win in runoff voting.

In the aftermath of the first round, Brazilian markets had one of their best days in years, according to Bloomberg. Stocks had their biggest gains since 2020 and the real went up by 5%. Investors including the world’s top meat producer competed for meetings with the candidate, seeing Bolsonaro as more market-friendly than Lula.

Bolsonaro’s loss has sent ripples beyond Brazil, which has been dealing with a debt crisis.

Shares in the US arm of Brazilian investment firm XP were down 50% premarket. A Brazilian beer company that’s part of Anheuser-Busch lost more than 10% in early trading, according to the Wall Street Journal. 

Lula, 80, first took office back in 2003 and was the first leftist leader elected since the fall of the country’s dictatorship. He scored 51% of the vote on Sunday to secure his fourth non-consecutive term.

Brazil’s public debt has grown over 10% during Lula’s current term, driving up borrowing costs. His disapproval rating has remained high but he narrowly won over voters with his promise to keep interest rates low while preserving social programs and raising wages, according to reports.

When Lula first took office, the country’s economy was booming. Later on, his reputation weakened as he got caught up in corruption scandals. Lula has been a vocal critic of the Trump administration, but some see him as pragmatic enough to work with the US president, according to ABC.