Lula's re-election brings political continuity; however, a stronger conservative Congress and increasingly autonomous institutions will constrain his fourth term. For businesses, understanding how power is distributed across Brazil's political system will be essential to anticipating policy and regulatory outcomes.
President Luiz Inácio Lula da Silva was re-elected on 25 October with 51.79% of valid votes, defeating Senator Flávio Bolsonaro in a closely contested runoff. His unprecedented fourth term begins alongside a Congress that has shifted further to the right, with Bolsonaro's Liberal Party (PL) emerging as the largest party in both houses.
Last July, Speyside argued that Brazil's presidential election would leave the country's increasingly fragmented distribution of power largely intact. The results reinforce that assessment, while creating a more challenging political environment for Lula.
A Congress with greater leverage
Constitutional and budgetary changes over the past decade have transferred substantial spending authority to Congress. Parliamentary amendments now account for close to a quarter of discretionary federal expenditure, giving legislators greater financial autonomy and reducing their dependence on the Executive.
The new political configuration compounds this shift. Centrist parties remain essential to securing legislative majorities, but their support is likely to require greater influence over ministerial appointments, government priorities and senior institutional positions. Lula will have to accommodate these demands while preserving enough authority to maintain a coherent policy agenda.
The Senate presents a particular challenge. The PL will hold 29 of its 81 seats, compared with ten for Lula's Workers' Party (PT). With responsibility for confirming Supreme Court justices, Central Bank directors and other senior officials, the chamber has considerable leverage over the administration. Its rejection of Lula's nominee Jorge Messias to the Supreme Federal Court (STF) in April demonstrated the limits of presidential influence even before the new Congress was elected.
Fiscal policy: an early test of governability
The 2027 budget will provide an immediate test of the government's capacity to negotiate competing priorities. Submitted before the final stages of the campaign, the proposal envisages a modest primary surplus but does not fully account for the fiscal consequences of measures subsequently announced or adopted, including debt relief for microentrepreneurs, expanded social programmes and the prohibition of online betting.
Without compensating measures, these commitments could turn the projected surplus into a deficit, increasing pressure on the administration to reconcile electoral promises with fiscal discipline.
With limited room for additional spending and a Congress resistant to new revenue measures, Lula will face difficult choices over which commitments to prioritise and how to secure political support for the necessary adjustments.
Technology, critical minerals and national capabilities
Technology featured prominently in Lula's victory speech, with commitments to regulate digital platforms, develop Brazilian artificial intelligence and expand domestic data centre infrastructure. These priorities build on the recently enacted Redata framework, which links tax incentives to domestic processing capacity and investment in research and development, while the proposed AI regulatory framework (PL 2338/2023) remains under consideration in Congress.
The same emphasis on technological sovereignty and domestic value creation underpins the National Policy on Critical and Strategic Minerals, enacted in September. The legislation introduces incentives to promote mineral processing and industrial transformation within Brazil, seeking to move the country further along strategic supply chains rather than relying predominantly on raw-material exports.
Implementing these ambitions will require substantial private investment, regulatory coordination and political support. The AI bill faces disagreements over regulatory obligations, while the data centre and critical minerals policies will depend on infrastructure, financing, detailed regulation and the development of domestic capabilities. Their progress will illustrate the challenges of translating industrial and technological priorities into commercially viable projects.
Presidential authority within institutional constraints
Other major policy areas will continue to operate within established institutional frameworks. Brazil's consumption tax reform follows a constitutional timetable extending to 2033, while the Central Bank's independent mandate and staggered leadership terms limit direct presidential intervention in monetary policy.
State governments also retain considerable authority over infrastructure, healthcare, public security and economic development, requiring federal initiatives to accommodate regional interests that frequently cross party lines.
These arrangements leave Lula with significant influence over policy priorities, public investment and regulatory implementation, although the scope and pace of change will depend on cooperation among institutions with their own powers and incentives.
Conclusion
Lula enters his fourth term with extensive political experience but fewer instruments of direct control than those available during his earlier presidencies. The stronger Congress, institutional tensions and competing fiscal demands will require a combination of durable political agreements and coalitions negotiated around individual policy priorities.
For businesses, the implications extend beyond the continuity of the government's economic and regulatory agenda. Assessing political risk will increasingly require understanding where authority resides, which actors can influence or obstruct decisions, and how political agreements translate into regulatory action.
Speyside works with companies and investors to navigate this environment, mapping the institutional relationships and political coalitions that shape policy outcomes across sectors.
