Brazil Runoff Enters Final Hour: Left-Right Showdown Could Reshape Latin America’s Political Balance

Brazilians began voting early Sunday in a presidential runoff, with right-wing Senator Flávio Bolsonaro and socialist President Luiz Inácio Lula da Silva statistically tied. Bolsonaro won the first round at the start of the month.

Nearly 160 million people are eligible to vote today, with polling stations closing at 1600 ET. A last-minute AtlasIntel survey for Bloomberg, released Saturday, showed Bolsonaro leading Lula 51% to 49%, largely in line with other final polls. The survey’s margin of error was 1 percentage point.

Regular readers will remember that polls showed Lula ahead going into the first round, but Bolsonaro finished ahead with 47.03% of valid votes to Lula’s 45.16%.

Goldman’s chief Latin America economist, Alberto Ramos, provides the latest in his runoff Q&A (available to pro subscribers):

“The race has tightened considerably. Polls immediately after the first round gave conservative Bolsonaro a 4- to 5-point lead over left-wing incumbent President Lula in the October 25 runoff. His lead has since narrowed to 0 to 2.5 points, with one outlier, Vox, showing Lula slightly ahead. Prediction markets still favor Bolsonaro, but the odds are less lopsided than immediately after the first round.”

Here is Goldman’s poll-of-polls, which shows Bolsonaro’s lead eroding in the final stretch (chart source: GS GIR):

And here is the full scorecard by pollster. Goldman’s average still puts Bolsonaro ahead 51% to 49%, a 2-point lead right on the edge of most surveys’ margin of error. Note how many arrows point down: in almost every poll, the senator’s lead is smaller than it was in that pollster’s previous survey.

Polymarket gives Bolsonaro an 82% chance of winning the runoff, while Lula’s odds are around 20%.

Post-Election Market Outlook:

• Photo Finish: Brazil Votes With Polls Tied, Bettors All-In On Bolsonaro, And The Market Priced For A Lula Shock

UBS analyst Kyle Duca adds more color to FX impact on election results: 

Trading and strategy see a wide two-way range for BRL around the presidential runoff, but distinguish between the likely FX and rates reactions in each outcome. 

The FX trading desk sees a Lula win pushing USDBRL toward 5.40-5.45, where the move could run out of steam as higher rates bring the carry trade back into play and encourage USDBRL selling. 

On a Flavio win, trading sees more of a rates story, with USDBRL likely moving toward 4.90-4.80 before interest to clean up emerges. A sharp rates rally and diminished carry could then leave FX consolidating around those levels. 

FX Strategy sees USDBRL at 4.70-4.80 if Flavio wins 52%-48%, with less upside for BRL if the margin is below 1%. A Lula victory would put USDBRL at 5.30-5.50.

The “Bolsonaro trade” is already gaining momentum ahead of the runoff.

The black line, Hyperliquid’s Brazil ETF perpetual, has surged to $45.16, about 6% above the iShares MSCI Brazil ETF (EWZ), which closed at $42.59 on Friday. 

By this evening, Brazilian voters will decide whether to accelerate Latin America’s rightward shift or extend a failed left-wing economic agenda that risks deeper deficits, a mounting debt pile, higher interest rates, more economic gloom, and faltering investor confidence. A Bolsonaro win would cement the continent’s rightward shift.