Brazil stocks plunge after Lula's re-election as investors worry about debt

Brazilian financial markets plunged in early overseas trading Monday after President Luiz Inácio Lula da Silva won re-election, with an ETF tracking Brazilian equities falling up to 16 percent and currency derivatives signaling a potential 10 percent drop against the dollar. Investors had favored right-wing challenger Flávio Bolsonaro, viewing him as more likely to pursue tighter fiscal policies and lower corporate taxes. Brazil's public debt has risen above 82 percent of GDP during Lula's current term, while less than 8 percent of the federal budget is adjustable, limiting spending cut options. The country faces high interest rates at 13.75 percent and inflation above target, with nearly 84 million Brazilians behind on debt payments. Conservative congressional control may complicate reforms, while investors await signals on fiscal discipline when domestic markets reopen.