Brazil Lula backs court reform amid Moraes dispute

In an interview with TV Globo, Lula said the far right wants Moraes removed not only because of suspicions tied to Banco Master, but because he ordered the arrest of Bolsonaro, who was sentenced to 27 years and three months in prison for plotting a coup after losing the 2022 election. Lula also called for a full probe into the Banco Master affair, saying all suspects should be investigated regardless of political ties.

He argued the controversy has opened the door to a broader debate over the Supreme Federal Court’s structure, including whether justices should serve fixed mandates and whether potential conflicts of interest should be barred for lawyers with firms active before the court. While Lula did not present a specific legislative proposal, his remarks add pressure for institutional change at a time when the court is already under intense political scrutiny.

The political stakes extend beyond Brasília. A Datafolha poll released Thursday showed Senator Flávio Bolsonaro at 47% in a hypothetical runoff, versus 45% for Lula, a slight narrowing from the previous survey. The numbers suggest the legal and institutional fight around Moraes and Bolsonaro is still reverberating through the presidential race, even as Lula frames the issue as a defense of the judiciary rather than a political concession.

For investors, the story feeds into Brazil’s broader risk premium. Political instability, judicial confrontation and uncertainty over institutional rules tend to hang over local assets, and they land at a sensitive moment for Brazilian markets already watching fiscal policy, governance and the durability of reforms. EWZ, the iShares MSCI Brazil ETF, has risen to $41.83, well above its 50-day moving average of $37.66, but technical readings show the fund remains overbought, with RSI at 75.5.

Petrobras has also been strong, with PBR closing at $26.00 and trading above both its 50-day and 200-day moving averages. Still, the rally in Brazilian equities leaves them more vulnerable if the Lula-Moraes standoff intensifies or if the Banco Master probe spreads to more political and financial figures.

The immediate watchpoints are whether Congress takes up any judicial overhaul, whether new details emerge in the Banco Master investigation and whether Bolsonaro’s conviction continues to reshape the 2026 political field.