Brazil will hold a closely contested vote on Sunday, officially kicking off the presidential election campaign, but the outcome of these elections is likely to have an impact that extends far beyond Brazil's borders.
Voters will go to the polling stations to decide whether the current president, Luiz Inácio Lula da Silva (Luiz In á cio Lula da Silva, commonly known as Lula), will continue in office, or whether he will be replaced by one of the other 12 candidates.
If no candidate receives more than 50% of the votes in the first round of voting on Sunday, the two candidates with the most votes will proceed to the final runoff on October 25th.
Polls show a close race, with leader Lula and Jair Bolsonaro (Fl á vio Bolsonaro) almost tied in voter support rates.
If the left-leaning Lula wins, it will mean he will enter his fourth presidential term; if Bolsonaro succeeds, it is expected that Brazilian politics will once again shift towards the right-wing camp represented by his father.
Lula vs. Bolsonaro
Lula's center-left Workers' Party (PT) has always been a pioneer of social programs, aiming to help millions of people escape poverty, but the party has also been tainted by corruption scandals. Lula himself spent 18 months in prison for receiving a seaside property from a construction company involved in a corruption investigation known as the "Car Wash" scandal. Lula succeeded his predecessor, Dilma Rousseff (Dilma Rousseff), who left office in 2010, and Rousseff was impeached in 2016 on charges of manipulating the budget.
Flavio Bolsonaro is a senator and the son of former president Jair Bolsonaro ( Jair Bolsonaro ). The latter is currently under house arrest. Jair Bolsonaro was sentenced to 27 years in prison for plotting a coup after losing the 2022 presidential election to Lula.
It is generally believed by the outside world that Jair Bolsonaro is the political successor to his father, and his policy agenda tends towards privatization, cost-cutting, and maintaining close alignment with the United States. Over the past 12 months, such policies have achieved some success in certain regions of Latin America, with conservative leaders coming to power in Bolivia, Chile, Colombia, and Peru.
At the same time, Lula placed Brazilian sovereignty at the core of his campaign. He also promised to shorten Brazil's traditional six-day workweek, reduce taxes for low-income earners, and promote police reform.
The relationship between this president and the Trump administration has not been very smooth; the latter once regarded Jair Bolsonaro – colloquially known as “Trump of the Tropics” – as a close ally. In July 2025, U.S. President Donald Trump announced the imposition of a 50% tariff on Brazil, citing what he referred to as a “witch hunt” trial against Jair Bolsonaro.
Relations between Brazil and China
Otaviano Canuto, a non-resident senior fellow at the Brookings Institution ( The Brookings Institution ) and former Executive Director for Brazil at the International Monetary Fund ( IMF ), stated to CNBC that this election is a "pivotal one" for a broader region, especially in the United States and against the backdrop of so-called "Dong Romanism" ( Donroe Doctrine ) – where the Trump administration is showing greater interest in Latin America.
Brazil is the largest economy in the region, and if we consider the entire region as a whole, then currently all 20 republics in [Latin America] are governed by right-wing leaders, he said. "Of course, if Jair Bolsonaro wins, it will deepen the strategic alignment of the region with Donald Trump's 'America First' agenda. On the contrary, if Lula wins his fourth term, it will thwart Washington's attempts to dominate the surrounding region and will curb China's influence."
Brazilian economist and former Vice President of the New Development Bank of BRICS countries, Paulo Nogueira Batista II ( Paulo Nogueira Batista Jr ), stated to CNBC that the election results will have a "significant impact on all aspects of Brazilian life" because the positions of the two leading candidates are "completely different".
“Jair Bolsonaro has made it clear that he has close ties with Donald Trump, which could affect relations between Brazil and China – and China is our main trading partner,” he explained. “If Bolsonaro wins, there will be significant changes in Brazil’s geopolitical situation; if Lula is re-elected, things will largely continue as they have been in the past few years.”
Canuto stated that Brazil's attractiveness to the U.S. government partly stems from its rich supply of key mineral resources.
"Trump has been very proactive in trying to ensure access to key minerals, and Brazil has the second-largest reserves of rare earths in the world, second only to China," he said.
Therefore, Sino-US competition has also extended to the acquisition of key minerals and rare earths. As we know, all the signals coming from Washington point in one direction: demanding that countries in the region impose restrictions on China's resource acquisition, and so on.
Economic pressure
Another major focus of this election is Brazil's continuously accumulating debt burden.
Global investors are closely watching this vote, with the outside world constantly questioning whether the new government will be able to come up with a credible fiscal plan.
In recent years, Brazil's debt has continued to rise, reaching 82.9% of its Gross Domestic Product ( GDP ) as of August.
At the same time, Brazil's budget deficit reached 9.48% of GDP, which has exacerbated market concerns about whether the next government will be able to maintain fiscal discipline and make the country's finances more controllable.
However, despite the broader economic pressures and inflation hovering above 4%, with the government also lowering its economic growth forecasts, Brazil, as a net oil exporter, has also benefited from higher oil prices.
"From an economic perspective, the Iran war has brought trade benefits to Brazil by driving up oil prices," Canuto told CNBC. "Of course, nothing comes for free, and the price shocks have ultimately also posed challenges for Brazil in controlling inflation."
He added that no matter who wins, they must propose a plan to control public finances.
"There is no [immediate] crisis in the short term, but the nominal debt level reflects high interest rates, which in turn reflect fiscal vulnerability. Over time, these factors will move towards an unsustainable trajectory. The market will see this and demand a higher risk premium and higher interest rates, which will make the situation worse."
Brazilian assets are attracting attention.
The latest yield on Brazil's benchmark 10-year government bonds is around 14.16%. In contrast, the yield on U.S. 10-year government bonds hit a record high of 5.3338% on Thursday, the highest in 24 years.
"The fact is that Brazil, like other countries in the region, must go through some kind of fiscal adjustment process, and this will be a challenge in the context of a divided congress," added Canuto.
However, Kristen Reed ( Christine Reed ), who manages the Ninety One Emerging Markets Fixed Income Portfolio, believes that as the presidential campaign becomes more closely contested, the risk-return ratio of Brazilian assets is improving.
"We believe that the risk-return asymmetry of domestic currency interest rate assets is most favorable: The tightening of public opinion surveys has increased the likelihood of fiscal adjustments in 2027, while a tighter monetary policy and the cancellation of pre-election stimulus measures will drag down economic activity and support a decline in inflation. This means that there is still room for further interest rate cuts regardless of who is elected," she stated in an email.
"The Brazilian real should continue to benefit from higher interest rate spreads, tight monetary policies, and improving public opinion surveys; however, in terms of hard currency debt, fiscal fundamentals remain the main risk for Lula's re-election, and the current interest rate spreads do not take this risk into account," she added.
Bartista II also agreed that the new leader must address Brazil's economic difficulties. He told CNBC that the ideal situation for Brazil would be to have a president who "would not act recklessly, but would recognize that we must face a difficult macroeconomic situation."
"If elected, both candidates will have to take measures to control spending and may also need to increase taxes," he said – but he also warned against rushing into overly broad reforms too quickly.
"Anyway, I would not recommend making tough, drastic fiscal adjustments in the first year of a government's term, as that would harm the already weak economic activity," he said. "According to recent forecasts, the growth rate of GDP this year has dropped below 2%, so the economy is not growing well – and I think it would be a [worst-case] scenario if the new government suddenly implements extremely tight fiscal policies."
– CNBC’s Thomas Da Graca Barlow has also made contributions to this article.
