For more than 20 years, Luiz Inácio Lula da Silva has reigned as Brazil’s most dominant political figure. The leftist leader has been elected to three terms as president and, at the age of 80, is vying for a fourth. But Lula, as he is widely known, and his supporters were dealt a shocking setback in national elections held Oct. 4, when Lula’s leading opponent, Senator Flávio Bolsonaro, won the most votes. Conservative candidates also notched victories in Brazil’s congress, heralding a potentially dramatic rightward shift in the country’s politics.

The presidential contest was the latest indication of voters across Latin America turning away from the left, ushering in governments geared toward more market-friendly policies. Over the past year alone, right-leaning candidates, many with the backing of US President Donald Trump, have scored election victories in Chile, Colombia and Peru.

Bolsonaro won about 47% of the Oct. 4 vote, while Lula won 45.2%. Since neither candidate achieved a majority, a runoff between the two presidential candidates will be held on Oct. 25.

The results surprised many in Brazil, Latin America’s most populous country and biggest economy. Pre-election polls had pointed to a tight race, but Lula had led the 45-year-old Bolsonaro in almost every scenario.

The election pitted a left-wing stalwart focused on reducing economic inequality and protecting the environment against a right-wing lawmaker who advocates cuts to public spending and a crackdown on criminal groups and drug trafficking.

Lula has pointed to his successful efforts to lift millions from poverty during his nearly 12 years as president, due in part to a government program that gave cash directly to low-income families. Bolsonaro has blamed Lula’s policies for plunging Brazilian companies and households into crushing levels of debt.

The contest also captured tensions between voters wanting to see a continuation of Lula’s policies and those increasingly eager for change. It was the latter group that narrowly prevailed in the first round of the vote. According to analysts, many voters have come to see Lula — who previously served as president from 2003 to 2010 and again beginning in 2023 — as emblematic of the establishment they were ready to change.

Some Lula allies say his campaign advisers badly misread Brazil’s modern electorate and insisted on a strategy that failed to anticipate the strength of the conservative wave. Frustrations about persistent corruption may have added to voters’ desire for change.

A banking scandal that engulfed legislators, state governors, Supreme Court justices and the country’s business elite upended the election numerous times.

The crisis involved Banco Master, a failed lender at the center of what authorities have called Brazil’s biggest-ever bank fraud. The bank’s former owner, Daniel Vorcaro, built close ties with high-ranking officials throughout Brazil’s governing elite.

The case dented Bolsonaro’s campaign early on, after he acknowledged seeking financing from Vorcaro for , a film about his father, former President Jair Bolsonaro. Federal police are probing ties between Vorcaro and Flávio Bolsonaro, who denies wrongdoing.

Later, however, leaked messages deepened apparent ties between the banker and Supreme Court Justice Alexandre de Moraes, the judge who also oversaw Jair Bolsonaro’s conviction for attempting a coup after his loss in the 2022 presidential election.

That boosted momentum behind Flávio Bolsonaro, giving him an opportunity to paint Moraes as a close Lula ally. The revelations also sparked an internal crisis at the court that helped fuel anti-establishment sentiment, hurting Lula’s reelection bid.

Flávio Bolsonaro is a controversial candidate. His father is serving a 27-year sentence for attempting to overturn his election defeat to Lula. The case originally stemmed from investigations into riots on Jan. 8, 2023, when Bolsonaro supporters stormed government buildings in Brasilia just days after Lula’s inauguration.

Even with the elder Bolsonaro barred from office, his family has expanded its influence. In addition to Flávio Bolsonaro’s strong showing on Oct. 4, Jair Bolsonaro’s wife Michelle and his son Carlos won seats in the Senate, while his younger son Jair Renan and his brother Renato were elected to the lower house of Congress.

The right-wing family has been a key factor in Brazil’s deep political polarization since Jair Bolsonaro’s surprising ascent to the presidency in 2018. The former Army captain had long expressed affinity for Brazil’s military dictatorship, which ruled from 1964 to 1985, and has a history of anti-queer and misogynist rhetoric. As president, he became known for his combative style and dismissive approach to the Covid pandemic.

Late last year, he backed his son Flávio’s decision to run in his place in a bid to maintain power over the conservative movement he built.

Flávio at times has tried to paint himself as a more moderate version of his father. But he has pledged to free Jair, who is currently serving his sentence at home, while targeting Supreme Court justices for impeachment.

After the election’s first round, Flávio Bolsonaro pledged “build a government inspired by my father’s, an administration even better than his.”A pressing issue for Brazil is the country’s large debt load. The two presidential candidates differ in how they would tackle the fiscal situation. Brazil’s gross debt has risen by more than 10 percentage points since Lula returned to office in 2023, reaching 82.5% of gross domestic product in 2026.

The Lula campaign maintains that, if reelected, the incumbent president would pursue gradual improvement to Brazil’s fiscal situation without deep spending cuts, and he has emphasized the need to protect social programs.

Bolsonaro has indicated that he intends to cut spending, though he hasn’t outlined how he would do so. His stance generally has been welcomed by investors eager to see Brazil slash its debt and eventually bring down the country’s high borrowing costs.

Brazilian assets, including the country’s currency and stocks traded domestically and abroad, rallied after the first round of voting as investors bet on a Bolsonaro victory and the possibility of lower interest rates. The country’s benchmark Ibovespa stock index jumped 8.8% in the week following the Oct. 4 vote, the biggest weekly gain since 2020.

A Flávio Bolsonaro government is likely to seek a closer political relationship with Washington, but that wouldn’t necessarily eliminate trade disputes. Agriculture remains highly sensitive in both countries, meaning beef, ethanol and other products could continue to generate friction even under two politically aligned governments.

The US earlier this year expanded a quota for imports from Argentina, whose president, Javier Milei, is a close Trump ally. Brazil, the world’s largest beef exporter, has also benefited from a temporary easing of US tariffs, but tensions remain as Trump has criticized Brazil’s growing presence in the US beef market, and the country lacks a specific tariff quota that could permanently boost shipments.

Trump is also expected to push Brazil to reduce or eliminate tariffs on US ethanol. Brazil imposes a levy on ethanol imports that limits exports from US producers. The tariff was reinstated under Lula after his predecessor, Jair Bolsonaro, temporarily eliminated it in 2022.

Trump has been closely linked to the Bolsonaros since Jair embraced the label “Trump of the Tropics” during his successful presidential campaign in 2018. A victory for Flávio would add Brazil to the right-wing wave sweeping Latin America.

After his return to the White House in 2025, Trump sought to aid the Bolsonaro clan. The US president imposed tariffs on Brazilian goods and sanctioned Moraes, the Supreme Court judge, in a bid to help Jair Bolsonaro avoid conviction for plotting a coup.

Trump briefly made up with Lula and lifted the tariffs, before imposing new levies on Brazil in July, alleging unfair trade practices. By that point, the US also had declared two major criminal groups in Brazil as foreign terrorist organizations. The designation, announced shortly after Flávio Bolsonaro visited Trump at the White House, angered Lula, who accused the US of interfering in Brazil’s domestic politics.