The Brazilian presidential race is proving to be more contested than expected, which has been causing a strong increase in speculation on the country's stock exchange. Investors appear divided between the two main candidates, Lula and Bolsonaro.
However, regardless of who wins the elections, investors are mainly interested in controlling Brazil's public debt. This concern with fiscal sustainability surpasses the markets' political preferences.
In the medium term, investors' sentiment towards Brazilian assets will depend on the ability to revive the economy without this implying a surge in public expenditure. In other words, economic recovery and fiscal discipline are seen as equally important.
This situation reflects the tension between the need for economic growth and the sustainability of public finances, a balance that will be crucial for the country's financial future, regardless of the electoral outcome.
