Lula Won, but Brazil Elected ‘A Divided Government,’ Analyst Says
A conservative Congress, fiscal strain and disputes with Washington and Israel will test the Brazilian president’s fourth term.
By Gabriel Colodro / The Media Line
Flávio Bolsonaro was already in the United States by Tuesday, two days after losing Brazil’s presidential election. Back home, leaders of his own party had accepted President Luiz Inácio Lula da Silva’s victory. Bolsonaro had not, and Brazilian markets were still digesting a result for which many investors had not prepared.
Voters gave Lula 51.79% of valid ballots, a margin of more than 4.4 million votes. That was enough to keep the left in the presidential palace, but not to give it control across Brasília. Lula will begin his fourth term facing a stronger conservative presence in Congress, strained public finances and fresh trouble with President Donald Trump’s administration. The vote also made a rapid repair in relations with Israel less likely, despite Bolsonaro’s campaign promise to deliver one.
The final count was 64,256,232 for Lula and 59,826,041 for Bolsonaro. Lula trailed in the first round, making the runoff result both a comeback and a reelection. The congressional vote told a different story. Bolsonaro’s Liberal Party won 121 seats in the lower chamber and 28 in the Senate. Gilson Schwartz of the University of São Paulo calculates that the wider right now holds about 59% of the Chamber of Deputies.
“Brazil has therefore elected not a left-wing political regime, but a divided government,” Schwartz told The Media Line in written responses. He said the split reflected an electorate less ideologically consistent than the country’s polarization suggests. Voters backed Lula for social protection, institutional stability, and his personal political standing, while supporting conservative congressional candidates on crime, taxes, regulation, and cultural issues, Schwartz explained.
That division will likely hinder the president’s domestic agenda. Congress can block large spending packages and sweeping institutional changes, but it can also demand money for lawmakers’ districts and favored projects. Igor Barenboim, a former Brazilian secretary of economic policy who holds a doctorate from Harvard University, rejected the notion that a conservative legislature would automatically impose fiscal discipline.
“Congress likes to spend. That’s what they do,” Barenboim told The Media Line. Lawmakers have strong incentives to send money to their constituencies, he said, regardless of whether they sit on the right or the left. Even so, he expects Lula’s long experience with coalition politics to produce a workable arrangement with the center and moderate right.
Monday’s selloff was severe. The Ibovespa closed 13.88% lower after trading was temporarily halted, and the dollar gained more than 8% against the real. Barenboim’s reading of the move was less dramatic than the closing numbers. He said money had flowed into Brazilian assets after Bolsonaro led the first round, and traders who had bet on a change of government rushed to unwind those positions once Lula won.
For Barenboim, the harder numbers are in the public accounts. He estimated that government debt rose from about 72% to 83% of gross domestic product during Lula’s third term. Brazil’s potential growth is still around 2% a year, while the primary deficit is close to half a percentage point of GDP. Once high real interest rates are included, he puts the nominal deficit at roughly 9%. The government’s demand for credit then makes money scarcer and more expensive for private companies, he said, leaving fewer investments worth undertaking.
Lula campaigned on expanded public programs, leaving investors waiting to see which promises survive the election. Naming a market-friendly finance minister would help calm sentiment, Barenboim said, but personnel will matter less than the president’s decisions. “What matters is what the president wants to do. And we don’t know,” he said.
Barenboim expects Lula to pursue limited consolidation, probably by withdrawing tax breaks that the government classifies as tax expenditures rather than through dramatic spending cuts. His central scenario is one of “muddling through,” with Lula doing enough to prevent fiscal disorganization but stopping well short of the adjustment sought by many investors.
The political pressure is not confined to the budget. Bolsonaro refused to concede Sunday and initially said he would seek to annul the election because voting was extended at some polling locations following transportation problems and severe weather. His campaign had also requested additional voting time in affected areas. Only about 34,300 ballots were cast after the original closing time, far below Lula’s winning margin, and Bolsonaro’s Liberal Party later recognized the result announced by the Superior Electoral Court.
Bolsonaro subsequently shifted his argument, saying he would seek to disqualify the Lula ticket over alleged abuse of political and economic power. By Tuesday, he had traveled to the United States after failing to surrender his passports as ordered in a separate money-laundering investigation. Bolsonaro denies wrongdoing in that case. A senior US official said he and his family would be granted visas, although Washington did not announce that he had received asylum.
Schwartz said the legal challenge appeared weak but warned that questioning the election could still keep Bolsonaro’s supporters mobilized through Congress, social media and allies abroad. His departure may reduce his ability to manage the opposition day to day while strengthening his symbolic position among its most radical members.
“The danger is the emergence of a kind of transnational opposition operating simultaneously through Brazil’s powerful conservative congressional bloc and political networks in the United States,” Schwartz said. Whether Bolsonaro can lead it from abroad, he added, will depend on whether governors, senators and party officials continue accepting his family’s leadership after another presidential defeat.
President Trump has questioned the Brazilian result without presenting evidence of fraud. His administration’s willingness to admit Bolsonaro and his family has added another point of friction to a relationship already strained by trade disputes and Washington’s interest in Brazil’s critical minerals. Schwartz said Brasília should distinguish between legitimate US economic interests and interference in Brazilian institutions. “Sovereignty is the red line,” he said.
Neither Schwartz nor Barenboim expects the argument with Washington to end in a diplomatic or commercial break. Barenboim described Brazil as a relatively closed economy whose exports are concentrated in products such as soybeans, corn and coffee. Washington has an interest in Brazilian rare earths, he said, but little incentive for a confrontation on a scale that would seriously damage both countries. His principal caveat was the banking system: US financial sanctions would be far more consequential than a political quarrel or another round of tariffs.
Messages from the region offered Lula an early measure of room to maneuver. Presidents José Antonio Kast of Chile, Keiko Fujimori of Peru, Daniel Noboa of Ecuador and Abelardo de la Espriella of Colombia all acknowledged his victory, although each governs from the right or center-right. Their governments still need Brazil on border security, energy, infrastructure, migration and the Amazon. Schwartz said those interests make practical cooperation more likely than an effort to divide South America into rival ideological camps.
A Bolsonaro administration would have changed Brasília’s posture toward Israel almost immediately. He had pledged to move the Brazilian Embassy from Tel Aviv to Jerusalem, receive a new Israeli ambassador and expand defense cooperation. Lula offers no such opening. He has accused Israel of genocide in Gaza, supported Palestinian statehood and intervened in South Africa’s case against Israel at the International Court of Justice. Neither country currently has an ambassador posted in the other’s capital.
The diplomatic chill has not stopped cargo from moving. According to Schwartz, Brazil sold about $569 million in goods to Israel in 2025 and bought roughly $1.3 billion. Food, fertilizer, machinery, technology and medical equipment remained part of that exchange. Brazilian agricultural sales to Israel from January through September 2026 had already passed the figure for all of 2025.
Brazil and Israel may enter 2027 without ambassadors, but not without business to conduct. Fertilizer, food, machinery and medical equipment continue to move even as official channels remain diminished. For Lula, the more revealing test will be whether he can turn that stubborn commercial connection into political access, defending Palestinian statehood without allowing Brazil’s criticism of the Israeli government to become a refusal to engage with Israel itself.
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