Lula faces pressure to deliver credible fiscal adjustment plan

Brazilian markets reacted negatively to President Luiz Inácio Lula da Silva's re-election, with stocks falling, future interest rates rising, and the dollar surging, forcing Treasury intervention. Tension eased slightly, but uncertainty persists over the country's fiscal outlook. Lula's campaign piled on spending promises without addressing costs, and public debt has grown 11.2 percentage points during his term, reaching 82.9% of GDP in August. Election measures could cost nearly R$300 billion, requiring R$53.7 billion in new funds for the 2027 budget. Analysts say gradual measures are insufficient, and Lula must present a credible fiscal adjustment plan to stabilize debt. His policies linking benefits to minimum wage increases and expanding social programs are seen as key drivers of the chronic fiscal crisis.