Brazil Assets Face Lula Growth and Election Risk

But Brazil is not operating in a calm policy environment. The 2022 election ended in violence and the storming of the Planalto palace, and the political fault line between Lula and the Bolsonaro camp remains wide. Analysts say the opposition is again framing security as a central issue, even though the federal government has limited direct control over policing because that authority largely sits with state governments. That makes the next phase of Brazilian politics less about whether Lula has delivered economic improvement — he has — and more about whether those gains can survive renewed polarization.

For investors in Brazilian assets, that distinction is crucial. The iShares MSCI Brazil ETF, EWZ, has reflected that push and pull, with the fund trading near its 50-day and 200-day moving averages and showing a softer RSI reading after a sharp run-up earlier in the year. The U.S.-listed Petrobras preferred shares, PBR, have also been volatile, suggesting markets still want more clarity on policy continuity, fiscal discipline and the risk of political interference in state-linked companies.

Lula’s broader governing model also matters beyond Brazil’s borders. He has kept alive a foreign-policy line that favors autonomy from Washington, while preserving ties with Europe and deepening links with China. That approach can help Brazil attract trade and investment from multiple poles in a fragmented world, especially if global demand stabilizes and commodity flows remain firm. At the same time, pressure from Donald Trump’s return to the White House has raised the geopolitical temperature, and Bolsonaro-aligned forces are trying to recast Brazil’s future around closer alignment with the U.S.

That leaves investors with a familiar emerging-market trade-off: Brazil’s long-term opportunity is real, but so is its political volatility. If Lula can preserve growth, keep unemployment low and avoid a major rupture in institutions, Brazilian equities and exporters could continue to benefit. If polarization worsens, the market will quickly price in higher risk premiums. For patient investors, Brazil remains worth watching — but only as part of a diversified, long-term portfolio.