Brazil’s real sinks after Lula’s re-election victory

Investors react to Lula’s election victory with a sharp decline in the Brazilian real and concerns over increased spending and fiscal challenges.

Brazil’s President Luiz Inacio Lula da Silva's election win has triggered financial uncertainty as right-wing candidate Flavio Bolsonaro has refused to concede [Juan Barreto/AFP]

Brazil’s real dropped against the United States dollar on the heels of Brazil’s President Luiz Inacio Lula da Silva’s unexpected re-election after right-wing Flavio Bolsonaro, the son of former President Jair Bolsonaro, led in the first round of voting earlier this month.

Brazil’s currency dropped against the dollar by 12 percent in spot trading. Bovespa stock index futures tumbled nearly 15 percent on Monday.

list 1 of 3 World reacts to Lula’s victory in Brazil’s presidential election

list 2 of 3 Lula’s victory may be a turning point for Latin America

list 3 of 3 How did Lula beat Bolsonaro after losing Brazil’s first-round election?

“I’m not surprised the real is sinking sharply; traders are covering their bets that assume a Bolsonaro victory and tighter fiscal policy,” Rachel Ziemba, adjunct senior fellow at the Center for a New American Security, told Al Jazeera.

Brazil’s stock exchange halted trading for 30 minutes. The Bovespa index fell 10 percent from its previous close, triggering a circuit-breaker safety mechanism and reversing a rally earlier this month amid expectations of a shift to the right after Bolsonaro won the first round.

Ziemba says Bolsonaro’s refusal to concede the election has driven some financial uncertainty.

“The market pressure is also amplified by the objections raised by Bolsonaro, but the scale of the victory suggests that the result will stand,” she said.

Interest rate futures had also reflected expectations that tighter fiscal policy under Bolsonaro would allow borrowing costs to decline.

“They [investors] assume more domestic spending and higher rates in Brazil. However, the real is still likely to be supported by strong commodity revenues,” Ziemba noted.

Stocks closed on Friday almost 7 percent above their level before the first round, while the Brazilian real was nearly 5 percent stronger against the US dollar.

Interest rate futures are up 3.1 percent, rising sharply after President Lula’s win. Interest rate futures had previously reflected a tighter fiscal policy amid expectations that Bolsonaro would oust the incumbent and that he would allow borrowing costs to decline.

Lula faces an increase in Brazil’s debt and will be challenged with protecting both social programmes and investment, with investors looking for signs of whether his gradual fiscal approach can bring borrowing costs down.

Lula’s team aims to produce a budget surplus of about 1.3 percent of gross domestic product (GDP) by 2030. That would leave money to cover part of the interest bill, reducing the need for fresh borrowing. But public debt already exceeds 82 percent of GDP, while pensions and other legally required spending limit where savings can come from.

“Lula’s policies have talked about spending cuts, but he has not gone into the details of how that is going to look,” said Divya Singaravelu, head of research at Meridian 1305 Capital.

Attention will now turn to Lula’s choice of finance minister and what it signals about his fiscal approach.

投资者对卢拉的选举胜利做出反应，巴西雷亚尔大幅下跌，并担忧支出增加和财政挑战。

巴西总统路易斯·伊纳西奥·卢拉·达席尔瓦的选举胜利引发了财务不确定性，因为右翼候选人弗拉维奥·博尔索纳罗拒绝承认[胡安·巴雷托/法新社]

巴西总统路易斯·伊纳西奥·卢拉·达席尔瓦意外连任后，巴西雷亚尔对美元下跌。此前，右翼候选人弗拉维奥·博尔索纳罗（前总统雅伊尔·博尔索纳罗之子）在本月初的第一轮投票中领先。

巴西货币兑美元现货交易下跌12%。巴西圣保罗证券交易所Bovespa股指期货周一暴跌近15%。

列表 1/3：世界对卢拉在巴西总统选举中获胜的反应

列表 2/3：卢拉的胜利可能是拉丁美洲的转折点

问题 3（共 3 题）：卢拉在巴西总统选举首轮落败后，是如何击败博索纳罗的？

“雷亚尔大幅下跌我并不感到惊讶；交易员们正在平仓，因为他们押注博索纳罗将获胜并采取更严格的财政政策，”新美国安全中心兼职高级研究员雷切尔·齐姆巴告诉半岛电视台。

巴西股市暂停交易30分钟。博维斯帕指数较前一交易日收盘下跌10%，触发了熔断机制，逆转了本月早些时候博索纳罗赢得首轮选举后市场预期右倾的涨势。

Ziemba表示，博索纳罗拒绝承认败选，导致了一些金融方面的不确定性。

“博索纳罗提出的反对意见也加剧了市场压力，但此次胜利的规模表明，选举结果将维持不变，”她说道。

利率期货也反映出市场预期，博索纳罗领导下收紧的财政政策将使借贷成本下降。

Ziemba指出：“他们（投资者）预期巴西国内支出将会增加，利率也会上升。然而，强劲的大宗商品收入仍可能支撑雷亚尔汇率。”

周五股市收盘较第一轮投票前水平上涨近7%，而巴西雷亚尔兑美元汇率上涨近5%。

利率期货上涨3.1%，在卢拉总统胜选后大幅上涨。此前，由于市场预期博索纳罗将取代现任总统并允许借贷成本下降，利率期货反映出财政政策将趋于紧缩。

卢拉面临着巴西债务增加的局面，他将面临保护社会项目和投资的双重挑战，投资者们正在观察他渐进式的财政政策能否降低借贷成本。

卢拉的团队的目标是到2030年实现约占国内生产总值（GDP）1.3%的预算盈余。这将使政府有余力支付部分利息，从而减少新增借贷的需求。但目前公共债务已超过GDP的82%，而养老金和其他法定支出限制了财政节省的来源。

Meridian 1305 Capital 研究主管 Divya Singaravelu 表示：“卢拉的政策谈到了削减开支，但他没有详细说明具体会如何实施。”

现在人们的注意力将转向卢拉对财政部长的选择，以及这表明他对财政政策的哪些看法。