Brazil's Lula faces market pressure after surprise election win

Brazil's left-wing President Luiz Inácio Lula da Silva won a historic fourth term in an October 25th runoff, defeating rival Flávio Bolsonaro by nearly four points despite trailing in the first round. The surprise victory triggered a market panic, with the real slumping 7% against the dollar and the Bovespa stock index falling 14%. Investors fear Lula will continue high-spending policies that have left Brazil with a budget deficit over 9% of GDP and public debt projected to hit 97% of GDP this year. The right-wing opposition was weakened by its association with Jair Bolsonaro, a former president serving a 27-year sentence for plotting a coup, leaving Lula to face limited credible alternatives. Lula, who turns 81 on October 27th, must now name a trusted finance minister, implement fiscal reform, and pass a spending cap to stabilize debt. He also faces pressure to make impartial appointments to key vacancies, including four Supreme Court seats, to avoid triggering a fiscal crisis and deep recession.