Brazil: Lula victory could deepen fiscal risks - Societe Generale

Societe Generale analysts Brendan McKenna and Dev Ashish outline scenarios for Brazil’s 2026 election, assigning a 65% probability to President Lula winning a fourth term and 30% to Flavio. They argue another Lula administration would feature loose fiscal policy, rising debt and continued state intervention, with congress composition crucial for Brazil’s debt trajectory and broader macro stability.

Election scenarios and fiscal trajectory

"We believe Brazil will push back on Latin America’s broad shift to the political right and President Lula will secure a 4th term in office."

"Base Case (65%): Lula capitalizes on resilient local economic and markets trends as well as slowing opposition momentum."

"Flavio Wins (30%): Would need to be cleared of alleged connections to local scandals and/or for Lula to make a policy mistake."

"Lula 1st round win (5%): Allegations surrounding Flavio intensify and a replacement candidate is chosen too late in the electoral cycle."

"Another Lula administration is likely to resemble prior terms: loose fiscal, rising debt and state intervention across the economy."