Lula's fourth term tests balancing social agenda with fiscal stability in hostile Congress

Lula's re-election has triggered market fears of high public debt, social spending, and a hostile Congress, causing a 30-minute trading halt on the B3 stock exchange on Monday. Analysts say his fourth term faces the challenge of balancing social agenda with fiscal stability. Economists warn that Lula must prove social protection and public investment can coexist with credible debt stabilization. Projections show the risk premium rising, with the dollar returning to R$5.50-R$5.70, the Ibovespa falling 6-10%, and gross debt potentially reaching 95% of GDP by 2030. The new government will need intense negotiation with a right-leaning Congress, especially the centrist bloc, to pass spending controls or revenue measures. Key early tests include appointing economic leadership, financing promised social programs, and demonstrating fiscal execution within the first year.