By Simone Iglesias and Andrew Rosati
(Bloomberg) — Luiz Inacio Lula da Silva won Brazil’s presidential election in a dramatic comeback for the left-wing politician who was languishing in a jail cell just three years ago on corruption charges.
He defeated the incumbent Jair Bolsonaro with 50.9% to 49.1% of the votes in Sunday’s runoff vote, according to the official tally. It signals a change in direction for Latin America’s largest economy after a heated campaign that showed extreme polarization among the electorate, and marks the first time a sitting president in Brazil has lost a reelection bid.
___STEADY_PAYWALL___US President Joe Biden quickly congratulated Lula, saying elections were “free, fair, and credible.” China, Brazil’s largest trading partner, also complimented the president-elect in a Twitter post by its local embassy. Brazil’s lower house Speaker Arthur Lira, a Bolsonaro ally, wrote on social media that the “will of the majority must not be challenged,” while Senate chief Rodrigo Pacheco praised the country’s electronic voting system.
The incumbent, however, has yet to concede or comment on the results. Lula told supporters he hasn’t received a phone call from Bolsonaro and O Globo newspaper said he’s been unavailable even for his closest allies. The president’s reaction will be closely watched by investors.
Social Tension
The 77-year-old president-elect returns to the helm at a moment of acute political and social tensions in Brazil, with concerns about rising levels of poverty in an economy that’s yet to fully recover from the damage wrought by the pandemic. Internationally, Brazil is under pressure to reverse Bolsonaro policies that contributed to deforestation in the Amazon and affirm rights for the LGBTQ community and other minorities that Bolsonaro frequently ridiculed.
Lula Needs to Broaden His Government Coalition: Analyst React
As much as an endorsement of Lula, the outcome is a repudiation of Bolsonaro’s four years in office, including his erratic handling of the pandemic that left 700,000 Brazilians dead and his constant clashes with institutions such as the electoral authorities. The president consistently struggled with female voters, who make up almost 53% of the total.
“What defines this election is a rejection of Bolsonarismo,” said Christian Lynch, a political scientist at the State University of Rio de Janeiro.
Lula’s victory continues a trend of wins by left-wing candidates in Latin America over the past 18 months, most prominently in Chile, Colombia and Peru, as voters punished incumbents that were in charge during the Covid-19 outbreak.
But it also showcases Lula’s sharp political skills, particularly his ability to come back from the corruption scandal that marred his legacy. Lula was a wildly popular president before accusations of wrongdoing and fiscal mismanagement resulted in the impeachment of his hand-picked successor, Dilma Rousseff in 2016. By 2019, Lula was behind bars and facing a long prison sentence amid accusations he steered billions of state contracts to allies. Released on a technicality, it cleared the way for him to run last year after the Supreme Court quashed his convictions.
While today many Brazilians see him as a symbol of corruption, he remains revered by others for launching social programs that lifted millions out of poverty. Confronting Bolsonaro’s authoritarian bent, Lula campaigned as a defender of democracy.
Alliances, Cabinet
Brazilians voted against the incumbent despite an improving outlook for the $1.8 trillion economy, with unemployment falling for seven consecutive months, easing inflationary pressures and the costs of borrowing steady after an 18-month tightening campaign by the central bank.
That’s an encouraging setup for Lula as he takes over the reins after forming alliances during the campaign, most notably with Senator Simone Tebet following the first round, that should bolster his support in a center-right leaning congress. It sends a positive sign to investors as it means he can move faster on the reform front and addressing economic challenges, according to Adriana Dupita, a Sao Paulo-based economist at Bloomberg Economics.
“Lula’s victory brings the sense of an end of a cycle and the beginning of a new phase,” she said. “His third term comes amid very different circumstances than the first two, politically, globally, economically as well.”
Investors will be watching closely to see who Lula appoints as his finance chief after refusing to specify a name from the dozens of economists who advised him during the campaign. Former central bank chief Henrique Meirelles and ex-Health Minister Alexandre Padilha have emerged as two strong candidates for the job, three people with knowledge of the matter told Bloomberg News before the vote.
Early in his campaign, Lula reached out to a broad coalition comprising 10 parties and tapped a centrist former rival, Geraldo Alckmin, as his running mate. While the multi party alliance amplifies the reach of the new government, some experts warn that the different priorities within the coalition could be a weakness at the moment of taking decisions.
There are also questions about how an older Lula, who is a cancer surviver and said he will only serve one four-year term, will tackle a more complex and divided country than when he first came to power two decades ago.
“Lula’s main challenge will be to reconcile the divergent interests from the broad group that supports him,” said Paulo Gama, a Sao Paulo-based political analyst with brokerage firm XP Inc.
–With assistance from Julia Leite, Beatriz Reis, Aline Oyamada and Daniel Carvalho.
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