On Oct. 25, the people of Latin America’s largest democracy and economy will vote in a presidential runoff. Neither the conservative candidate, Sen. Flavio Bolsonaro, nor the socialist incumbent, Luiz Inacio Lula da Silva (known as Lula), secured an outright majority in the first round of voting.
Bolsonaro is the favorite. Recent polls show him with a narrow but consistent lead, with 51% support.
Brazil’s politics are highly personalistic. Most are voting against the other side rather than for a specific policy agenda. Still, crime, the economy, and inequality are the major issues. The election will also have a powerful impact on Brazil’s foreign policy amid political change across Latin America, where conservative parties are ascendant. The next president will have to navigate relations with the world’s two dominant economic powers, the United States and China, which are also Brazil’s largest trading partners.
Bolsonaro has promised closer relations with the U.S., while Lula would continue aligning Brazil with the broader “Global South” movement and its orientation toward China. During his third term, Lula presided over modest economic improvements and took a more active role in multilateral organizations. If reelected, he promises to continue these policies, with greater emphasis on reducing inequality and promoting environmental sustainability.
Security is central to Bolsonaro’s campaign. In June, he released a plan that includes designating criminal groups as narco-terrorist organizations and building maximum security prisons modeled on those in El Salvador. On the economy, he has promised to lower inflation, cut government spending, and bolster Brazil’s critical minerals sector. He also supports a strong private sector. If he wins, Brazil could participate in the Trump administration’s Shield of the Americas regional security initiative, which Lula declined to join.
Regardless of who comes out on top, however, economic necessity will require the next president to maintain ties with both China and the U.S., which are both major markets for Brazilian commodity exports, including beef, soybeans, and iron ore. That said, a Bolsonaro victory would create an opportunity to increase American investment in Brazil’s minerals and energy sectors. Brazil has vast reserves of critical minerals, and securing access to those resources is in America’s interest.
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Financial markets clearly favor a Bolsonaro victory. Brazil’s Bovespa stock index jumped almost 10% when he emerged as the favorite to become the next president. The Brazilian currency also rose 4% when the first-round results were announced.
Investors anticipate that a Bolsonaro administration would pursue a more economically orthodox agenda, support private enterprise, and reduce state interference in the economy. In such a scenario, a Bolsonaro victory would be good for Brazil and the U.S.
James Rogan is a former diplomat who later worked in law and finance for over 30 years. He writes a subscription-based daily note on markets, economics, politics, and social issues. His email is [email protected].