Brazilian voters are choosing between President Luiz Inácio Lula da Silva and Senator Flávio Bolsonaro in a closely contested presidential runoff that could materially change the policy outlook for Latin America’s largest economy.
Bolsonaro entered the second round after receiving 47% in the first-round vote, compared with 45% for Lula.
The final Datafolha poll before Sunday’s vote showed Bolsonaro with 51% of valid votes and Lula with 49%, but the two remained statistically tied because the survey’s margin of error was two percentage points.
The election matters to markets because the candidates offer different approaches to economic policy, relations with the United States and the role of the state.
Brazil is a major global exporter of oil, iron ore, soybeans and other commodities, while its domestic financial markets are among the largest in emerging economies.
Changes in fiscal policy, trade relations and state involvement in major companies can therefore influence the real, Brazilian equities and government bonds.
Relations with Washington are another variable.
The campaign has unfolded against disagreements between Lula’s government and the United States over trade and security policy, while Bolsonaro has positioned himself closer to the Trump administration.
Domestic economic concerns have also played a major role, including household debt and the cost of living.
The political environment could remain complicated regardless of who wins.
Right-leaning parties strengthened their position in Congress during the first round, potentially improving Bolsonaro’s ability to advance legislation while creating additional constraints on Lula if the incumbent wins another term.
Legal disputes surrounding the campaign could also continue after voting.
For markets, the immediate focus will be the final result, the winning candidate’s fiscal signals and the reaction of the Brazilian real, equities and sovereign debt when markets reopen.
