On October 4, 2026, more than 150 million Brazilian voters will cast their votes in first-round elections for a new president and all state governors, and will also elect all members of the House of Deputies, two-thirds of the Federal Senate, and state-level representatives. Brazil is the second-largest democracy in the Western Hemisphere, behind only the U.S. Its general election will have significant impact to businesses and investors.
At first glance, the structure of Brazil’s democracy is similar to that of the U.S.—a federative republic with three branches of government, a bicameral Congress, a president elected every four years, and states led by governors. There are, however, three key differences that substantially change the Brazilian political dynamic.
First, House members are elected on the basis of state-level at-large districts by proportional vote, instead of on a first-past-the-post basis on an individual district basis. The result is a multiparty system that peaked at around 30 parties and has been gradually reducing this number since a reform was approved in 2017. Nonetheless, this multiparty system ensures that no president is able to have full control of Congress at all times—and makes it nearly impossible for the president’s party to have an absolute majority. There is always a need to negotiate a post-election congressional coalition.
Second, Brazil’s Constitution is lengthy, detailed and prescriptive in many policy areas. This was a safeguard established after 21 years of dictatorship, but means that any administration can only really govern if it forms a congressional coalition large enough to be able to sporadically amend the Constitution. In practice, presidents need at least three-fifths of the votes in both the House and the Senate to be able to fully implement their policy program.
Third, both the House and the Senate have leaders elected by peers. Both the Speaker of the House and the President of the Senate are members of Congress and have broad agenda-setting powers. As the president’s party never secures an absolute majority in any of the chambers, the president’s chance of controlling the top post in the House or the Senate is dim.
These unique features lead to a de facto two-tier political dynamic. At the presidential level, the election is a bipartisan dispute between the main candidate on the left against the main candidate on the right. At the congressional and state levels, votes are dispersed through a number of different parties, a significant number of which have little to no ideological affiliation.
Moreover, the fact that the president needs to always negotiate a large post-election congressional coalition creates a dynamic that is a hybrid between a presidential and a parliamentary system. This is why Brazil’s political system is characterized as a “coalition presidentialism.”
In the last decade, this coalition presidentialism has evolved to also incorporate a more influential Supreme Court, that often decides on polarizing political and policy matters; and a Congress more willing to increase its own policymaking power by gradually limiting the president’s prerogatives, particularly when it comes to the federal budget.
Since the 2018 general election, Brazil’s presidential dispute is polarized around two key names—President Luiz Inácio Lula da Silva and his Workers’ Party (“PT”) on the left and former president Jair Bolsonaro and his family on the right. These political forces are respectively known as “lulismo” and “bolsonarismo.” The past two presidential elections—2018 and 2022—were a showdown between them.
As lulismo and bolsonarismo each commands between 25% and 35% of the votes, and the presidential election has a runoff if no candidate is able to secure an absolute majority of the votes in the first round, it is challenging for any third-party candidate to go to the second round and win.
When it comes to Brazil’s five census-designated regions, lulismo is dominant in the less developed Northeast while bolsonarismo is stronger in the South and Center-West regions, part of Brazil’s agribusiness heartland. The only two regions that are split (although with a larger share of bolsonarismo) are the North, where most of the Amazon rainforest is located, and the Southeast, Brazil’s manufacturing belt and financial hub, representing about one-third of the country’s GDP.
The fact that most of the regions lean towards the right creates a large and nominally conservative majority that tends to dominate Congress. Since Brazil’s return to democracy in 1985, the left has never had a congressional majority, and since 2011 the large conservative one has been organized around a loose but politically effective coalition of center-right to hard-right parties collectively known as “Centrão.”
President Lula will run for reelection in October in an attempt to secure a historic fourth presidential mandate.
The opposition to him is largely split in two groups. On one hand, there is the Bolsonaro family. As former president Jair Bolsonaro is under house arrest due to a conspiracy to overturn the election in 2022, he blessed his son, Senator Flávio Bolsonaro, as the candidate. On the other hand, opposition governors from relevant states in regions that lean towards the right are trying to position themselves as alternatives to Flávio. There is also an outlier opposition candidate, Renan Santos, running on a policy program focused on public safety and security.
Given the political polarization and regional distribution of President Lula’s and Senator Flávio Bolsonaro’s votes, the likely scenario is that the presidential election will be decided by a small group of independent voters in the rich and populous states of the Southeast. It is worth noting that one of them, Minas Gerais (“MG”), is considered Brazil’s bellwether state. Since Brazil’s return to democracy in the 1980s, no candidate has ever won the presidency without winning in MG—and the state is currently governed by the right.
While the presidency will continue to be a dispute between lulismo and bolsonarismo, with President Lula currently in the lead, Congress will likely continue to be dominated by a large conservative majority led by the Centrão parties, which will probably maintain their grip on the offices of the Speaker of the House and the President of the Senate.
Despite these established patterns, Brazil’s political dynamic has been impacted by a large corruption scandal involving Banco Master, which has been implicating politicians on the left and right, and by U.S. tariff and non-tariff measures targeting Brazil.
Whoever wins the presidential race will face a difficult economic scenario in 2027. President Lula is ending his third term in office with reasonable GDP growth and record-low unemployment, but also with a very high benchmark interest rate and growing public debt, despite his administration’s efforts to enact more than 30 tax- and revenue-increase measures. In addition, there are record bankruptcy rates and high household debt. This scenario points to a key problem—a lax fiscal policy that overburdened the country’s monetary policy and kept the economy growing in large part by unsustainable government spending.
Therefore, it is likely that the next president will have to pursue another round of fiscal adjustment, this time focused more on spending cuts than tax hikes, as the political tolerance for the latter has reduced in the past few years. To do so, the next president will probably have to rely on Centrão votes in the House and the Senate in order to pass amendments to the Constitution, forcing the negotiation of a congressional coalition with the center-right and hard-right parties.
If President Lula wins, there are no signals that point to a drastic change of course. Even if he has to pursue a fiscal adjustment in the first year, as he did after two of his previous victories—in 2003 and 2023, respectively—, it is unlikely that his next administration will abandon the economic strategy of a lax fiscal policy combined with state capitalism-type measures and regulation of digital companies. While a fourth Lula administration will continue granting concessions for roads, railroads, port terminals, and energy projects, it will also avoid privatization of state-owned companies or large-scale, pro-business reforms.
On the other hand, if Senator Flávio Bolsonaro or one of the opposition governors wins, there will likely be a push for economic reforms, including a corporate and payroll tax reform, a new round of reforms to social security and social programs, and/or a so-called administrative reform to adjust government human-resources-related spending. All these reforms would require constitutional amendments. Moreover, a new Bolsonaro administration would likely revive Brazil’s privatization program and target some of the key state-owned companies.
In any scenario, if Centrão keeps its control over the congressional agenda, it is likely that the cycle of pro-business reforms initiated in 2016 and led by Congress will continue. They include the 2017 labor-law reform, the 2019 social security reform, and the 2023 tax reform. The congressional leadership will also probably continue to approve new and updated sector-specific legal frameworks, including on artificial intelligence and critical minerals.
If reelected, President Lula will probably continue to pursue a balancing foreign policy strategy, trying to accommodate President Donald Trump’s priorities while reinforcing Brazil’s ties to the European Union and the BRICS countries. On the other hand, if Flávio Bolsonaro wins, Brazil will probably move closer to the U.S. due to his family ties with President Trump and the American conservative movement. And if one of the opposition governors wins, there is a chance that foreign policy will become less relevant, as they are focused on domestic reform.
If you have any questions concerning the materials discussed in this update, please contact the following members of our Brazil Initiative team.
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