Lula wins Brazilian election, takes over divided nation

Leftist former president Luiz Inácio Lula da Silva defeated rightwing incumbent Jair Bolsonaro in a tight runoff election on Sunday and will return to power on January 1, when he will once again lead a polarized society while a center-right congress seeks to curtail his political agenda.

With nearly all votes counted, Lula obtained 50.88% of the votes to Bolsonaro's 49.12%. The difference of only 2.09mn votes in a country of 215mn people elicited fears of Bolsonaro supporters contesting the election, as the president himself had warned in the campaign that only election fraud would cause him to lose the vote, though he changed his tune right before the runoff, saying he would respect the results.

"I will rule for 215mn Brazilians," Lula said in his televised victory speech. "This country needs peace and unity. It's necessary to rebuild this country in all its dimensions, in politics, in the economy; rebuild institutional harmony and international relations."

Nevertheless, Lula may have a hard time implementing a hard shift to the left after four years of Bolsonaro's aggressive pro-business and anti-regulation agenda. 

"We will have a new president from January with much less support than if he had won in the first round," Lucas Fernandes, a political analyst at consulting firm BMJ Consultores Associados, tells BNamericas. "This reinforces the fact that Lula will face a more divided scenario under his administration." 

In the October 2 general election, rightwing and center-right political parties won control of a congress that is unlikely to play ball with the incoming Lula administration. 

"If we look at the fiscal side, there is little room for him to maneuver to expand social programs considerably," Fernandes adds. "We will see in 2023 a scenario that is not very common for a new government, which will be a congress from the beginning with a more antagonist profile, as the center-right and conservative parties will dominate."

With the election of Lula, the months of November and December will be marked by a transitory administration, where members of Lula's workers' party (PT) will have access to information from the Bolsonaro administration. Historically, such a transition period is marked by tranquility, but experts are expecting tensions.

"Lula's relatively small margin of victory opens room for Bolsonaro try to contest the election results," Luis Otavio Leal, chief economist at Banco Alfa, tells BNamericas. 

"We should expect very troubling moments in the coming weeks, with inflammatory speeches and even with negative reflections on the price of Brazilian assets. But little by little, tensions will cool down through the end of the year. I don't see a chance of reversing the result." 

US President Joe Biden was quick to congratulate Lula. "I send my congratulations to Luiz Inácio Lula da Silva on his election to be the next president of Brazil following free, fair, and credible elections. I look forward to working together to continue the cooperation between our two countries in the months and years ahead," he said in a statement. 

This is the first time since Brazil returned to democracy in the 1980s that a sitting president has lost reelection. Bolsonaro's image suffered severely during the Covid-19 pandemic, when he criticized social distancing measures defended by global health experts and state governors.

CAMPAIGN PROMISES

In the hopes of gaining centrist support, Lula, who ruled from 2003 to 2010, published a nine-page letter right before the runoff, promising to adopt the same sound fiscal policies of his first two terms, including slashing public debt, controlling inflation and increasing the central bank's foreign reserves.

"Responsible fiscal policy must follow clear and realistic rules, with multi-year commitments, compatible with facing the social emergency we are experiencing and with the need to reactivate public and private investment to lift the country out of stagnation," the leftist candidate said via a letter published on the PT website.

"The tax system must not put investment, production and industrial exports in an unfavorable situation, nor must it penalize workers, consumers and the lowest income people. It is possible to combine fiscal responsibility, social responsibility and sustainable development – and that is what we are going to do, following the trends of the main economies of the world."

However, Lula also underlined plans to strengthen the role of state-owned companies in the economy. "State run banks, especially BNDES, and companies that promote growth and technological innovation, such as Petrobras, will play a key role in this new cycle," he said.

An increasing role for BNDES and state-owned companies in the economy is a point of contention with center-right forces, which deem it fiscally irresponsible.

During the government of Dilma Rousseff – Lula's anointed successor who ruled from 2011 to 2016, when she was impeached – state-run banks drove economic activity through subsidized financing to the private sector. Over time, this strategy had negative consequences, as the treasury was forced to inject funds into these banks.