Brazil’s Runoff Election Is a Close Race Between Lula and Bolsonaro

Markets are pricing Flávio Bolsonaro as a fiscal savior for Brazil, but constitutionally locked-in spending makes rapid austerity structurally unlikely.

• Markets bet on Bolsonaro: Since late September, polling shifts toward Flávio Bolsonaro have consistently coincided with a stronger real, tighter CDS spreads, higher equities, and lower bond yields.
• Fiscal math is brutal: Brazil's debt-to-GDP sits near 90% (double Mexico's), the Selic policy rate is ~14%, and real GDP growth is only ~2%, making debt dynamics hard to stabilize.

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