Brazil’s real currency and stock market surged on Monday after far-right President Jair Bolsonaro outperformed polling and clinched his place in a tense runoff vote, denying leftist Luiz Inacio Lula da Silva an outright victory in the first round.
The unexpectedly strong showing by Bolsonaro on Sunday dashed hopes for a quick resolution to the deeply polarized election in the world’s fourth-largest democracy. It also revitalized the president’s campaign, setting the stage for a highly competitive and tense run-off on Oct. 30.
Local markets cheered the result, in expectations that it may force Lula to move to the center and limit his room for dramatic policy changes. Brazil’s real strengthened roughly 3% against the dollar in morning trading, while the Ibovespa stock index also rose 3%.
State-run companies led the gains on Brazil’s main stock index, with shares in oil giant Petrobras and lender Banco do Brasil jumping more than 7%.
With 99.9% of electronic votes counted, Lula had taken 48.4% of votes versus 43.2% for Bolsonaro, prompting the runoff as neither garnered a majority.
The race has proven tighter than most surveys suggested, giving momentum to Bolsonaro, who had insisted the polls could not be trusted. If he pulls off a comeback, it would break with a wave of victories for leftists across the region in recent years, including Mexico, Colombia, Argentina and Chile.
Capital Economics said in a note that Lula was still the favorite to be elected. But it said Bolsonaro and his allies’ “surprisingly strong performance” will provide severe obstacles to governing Latin America’s biggest country.
“That should help to temper fears of a sharp shift to the left,” it wrote.
On Sunday night, Bolsonaro sounded confident that victory was within reach and did not repeat recent criticisms of Brazil’s voting system. In the run-up to the vote, he had made baseless attacks on the integrity of the electronic voting system and had suggested he may not concede if he loses.
“I plan to make the right political alliances to win this election,” he told journalists, pointing to significant advances his party made in Congress.
Bolsonaro’s right-wing allies won 19 of the 27 seats up from grabs in the Senate, and initial returns suggested a strong showing for his base in the lower house.
Lula put an optimistic spin on the result, saying he was looking forward to another month on the campaign trail and the chance to debate Bolsonaro head-to-head.
Inside his campaign, however, there was clear frustration that he had fallen short of the narrow majority forecast in some opinion polls, along with weak results in state races outside of his party’s traditional northeastern stronghold.
“There was a clear movement of votes in the southeast, beyond what the surveys and even the campaign managed to detect,” a campaign source said on condition of anonymity.
Support for distant third- and fourth-place finishers also fell short of recent surveys, suggesting some of their backers may have shifted to Bolsonaro when it came time to vote.
Centrist Senator Simone Tebet, who drew 4% of votes, and center-left former lawmaker Ciro Gomes, who secured 3%, both said on Sunday night they would announce decisions about endorsements in the coming days.
With the momentum in Bolsonaro’s favor, Lula may need all the help he can get.
“Clearly Bolsonarismo was underestimated,” said Senator Humberto Costa, an ally of Lula’s Workers Party.