Brazil's Financial Markets Jolt After Lula's Victory... Stock Market Plummets 17%

Financial markets in Brazil are experiencing severe volatility, marked by plunging stock prices and the value of the real, along with soaring interest rates, following the victory of President Luiz Inácio Lula da Silva securing his fourth term.

On the 26th local time, Brazil's Bovespa index plummeted 17% right at the market open, triggering a circuit breaker for the first time in six years and seven months since the COVID-19 pandemic.

The foreign exchange market also suffered massive turbulence.

The exchange rate of the real against the dollar surged 10.26% from the previous session to trade at 5.498 reals per dollar, and at one point during the session skyrocketed 12.37% to 5.604 reals, recording its highest level since December 2025.

The shock in the financial markets extended to the bond and interest rate futures markets, with the deposit interest rate futures (DI) maturing in January 2027 rising by 0.3 percentage points and the rate for those maturing in January 2031 surging by 3.07 percentage points.

With President Lula's extended rule confirmed, market concerns rapidly surfaced that the national debt-to-GDP ratio would worsen due to expanded subsidies and populist fiscal spending, and Brazil's country risk indicator (CDS premium) also spiked by 22% on the morning of the same day.

(Photo: AP, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.