Brazil first round: heading to a runoff

In our recent Latin America 2026 Electoral Supercycle note we described the regional pendulum as shifting to the right. The five presidential contests held in Latin America between 2025 and June 2026 (Ecuador, Chile, Costa Rica, Peru and Colombia) produced center right winners on platforms centered on public security, market-oriented economics, and closer alignment with Washington, extending a run that had earlier included Argentina (2023) and El Salvador (2024). Brazil, the region's largest economy, was the cycle's last remaining contest, and its first round took place today.

What happened

Brazilians voted on Sunday for the presidency, all 513 seats in the Lower House, 54 of 81 Senate seats, and governors in all 27 states. As expected, two presidential candidates advanced to a runoff on October 25.

Right wing challenger Flávio Bolsonaro unexpectedly finished ahead of leftist incumbent President Luiz Inácio Lula da Silva in the first round of Brazil's presidential election while conservative allies dominated down ballot, setting the nation up for a sharp shift to the right. Bolsonaro earned 47.2% to Lula's 44.7% with about 97% of votes counted, according to Brazil's electoral court, which said the two candidates would advance to a runoff on Oct. 25.

Polls had suggested Bolsonaro, the eldest son of former President Jair Bolsonaro and a senator for the right leaning Liberal Party (PL), would trail Lula in the first round. Instead, his overperformance headlined a night of major victories for the right, which also secured substantial gains in the Senate and key governors’ races. One statistic worth flagging as we head into the runoff: since Brazil's re-democratization in 1989, the candidate leading after the first round has gone on to win every subsequent presidential runoff (7 for 7). That pattern now cuts against the incumbent.

The down ballot results reinforce the shift. Bolsonaro's PL became the single largest party in both chambers of Congress, and together with its allies on the right and in the Centrão (a bloc of pragmatic center right parties that typically swings behind whoever controls the presidency) it now commands a working majority. State governors moved the same way: of the 20 governorships decided outright on Sunday, the right took roughly 14 and the left 3, including a comfortable first round win for the right in São Paulo, Brazil's largest state. Seven more states head to a gubernatorial runoff on October 25.

Now Bolsonaro and Lula are heading towards the final runoff in three weeks, October 25. Lula has signaled continuity across the existing fiscal framework, the implementation of the recent tax reform, the current mix of social policy, and the incumbent economic team, with state-owned enterprises retained as strategic instruments and public credit through BNDES (Banco Nacional de Desenvolvimento Econômico e Social) and Caixa Econômica Federal used as a development tool. Flávio Bolsonaro has signaled a different direction. On the fiscal framework, his stated aim is to downsize the federal government and tighten spending, with the rules themselves reformed rather than worked around — the end being a smaller state and lower expenditure rather than higher revenue. On tax, the emphasis is on reducing the overall burden, which implies revisiting the reform's calibration rather than reversing it. On the state's footprint, the approach is case-by-case divestment paired with stronger governance rules, rather than broad privatization; public credit instruments would remain relevant but be confined to targeted areas. On labor, he favors "negotiated over legislated" terms, lower labor costs and reduced union influence. Neither candidate proposes any explicit change to Central Bank autonomy.

What we are watching

1. The fiscal backdrop

The central question facing the next administration is whether it can put public finances on a more sustainable path. Gross public debt has been rising since 2013 and sits at roughly 83% of GDP, up from around 74% at end 2022. The primary balance remains in deficit, (-0.4%) while a surplus would be needed to stabilize debt, and interest costs over the twelve months to June ran close to 9% of GDP. Growth has decelerated from above 3% to around 2%. The monetary and FX backdrop offers some offsets: real interest rates are higher than at the last election, currency volatility is materially lower, and the Central Bank is on an easing path.

Neither candidate has published projected numbers on how their campaign proposals will alleviate the primary deficit or stabilize debt. What they have offered is direction. Lula's platform keeps the current framework and raises revenue through higher tax progressivity, with public credit through BNDES and Caixa retained as development tools. Flávio Bolsonaro's works the other side: downsizing the federal government, tightening spending and reforming the fiscal rules themselves, with public credit confined to targeted areas and divestment handled case by case rather than through broad privatization.

2. The shape of Congress

Regardless of the direction of travel at the presidential level, the arithmetic of the new Congress will decide how much of it can actually be delivered. More than 90% of the federal budget is classified as mandatory spending, which leaves little room to adjust it through ordinary legislation. Structural fiscal reform typically requires amending the constitution instead, which sets a much higher bar in Congress: 308 of 513 deputies and 49 of 81 senators, in two rounds of voting in each chamber. Ordinary laws, by contrast, need only a simple majority. The Senate also confirms Supreme Court justices and Central Bank leadership, a power it has recently used to reject Lula's own Supreme Court nominee. We will be watching how close each candidate's plausible coalition sits to those thresholds as the new Congress is seated.