Brazil’s right-wing incumbent President Jair Bolsonaro won 43% of the vote in last weekend’s general elections, surprising pollsters who had projected a landslide—and a possible first-round win—for left-wing former president Lula da Silva. Bolsonaro’s allies also performed much better than projected in congressional and local elections, raising the prospect of a fragmented congress that could frustrate Lula even if he wins the second round.
Markets and businesses alike were optimistic about the prospect that a strong right wing would force Lula—still expected to win in the runoff—to moderate his policy goals, as seen with left-wing leaders in Chile, Peru and Colombia. In response to the results, the benchmark Ibovespa index rose 3.7%, with state-run oil producer Petrobras rallying 8%, Bloomberg reports.
As most currencies across emerging markets continued to slump versus the supercharged dollar, the Brazilian real surged 5% on Monday, adding to recent gains. Only the real and Mexico’s peso outperformed the dollar in September.