On Sunday, 4 October, Brasil is holding a general election

Michael Roberts is an Economist in the City of London and a prolific blogger .

Cross-posted from Michael Roberts’ blog

The most important election in South America takes place tomorrow. Nearly 159 million Brazilians are eligible to vote in the first round of the election for President. The presidential vote takes place alongside elections for state governors, federal deputies, and the national congress.

Brazil accounts for approximately 31% of Latin America and the Caribbean’s total gross domestic product (GDP), and is a founding member of South America’s Mercosur trade bloc , as well as the Community of Latin American and Caribbean States and the Organization of American States.

There are many candidates in the first round, but if none get 50% of the vote, a second round will be held in three weeks between the top two in the poll. The incumbent ‘centre-left’ President Luiz Inácio ‘Lula’ da Silva is in a very tight contest with Flávio Bolsonaro, the son of former ‘hard right’ President Jair Bolsonaro. Lula is leading most of the polls for the first round, but the race appears too close to call in the event of a runoff between them.

Lula is seeking a fourth term as president at the age of eighty-one. The Brazilian constitution allows for this: it does not impose any limits on how long one person can be in office, so long as they do not serve more than two consecutive terms. After his first victory in 2002, Lula went on to complete two terms. His government lifted millions out of poverty with social programs like Bolsa Familia and greatly expanded Brazil’s education and health care systems. Conditional cash transfers, rural electrification and regular pension increases allowed the ‘underproletariat’ to expand their consumption beyond necessities and stimulated local economies in small and medium municipalities. Lula left office in 2010 with an 87% approval rating.

But that was in a period of a boom in commodity prices for Brazilian agricultural and energy exports, which allowed some leeway for Lula to make improvements for working people. After two terms, Dilma Roussef took over in 2010 just as the global commodity boom petered out and Brazil’s economy took a downturn.

Roussef had to deal with a hostile Congress, endemic corruption and the economic slowdown. She turned to neoliberal policies in attempting to overcome the decline in growth and rising public sector debt. A programme of austerity was introduced that restricted workers’ access to unemployment insurance and tightened the rules for social security benefits. Government spending cuts led to a 32% fall in public investment. Working class support fell away and a hostile pro-business Congress was able to impeach her in a ‘soft coup.’ A pro-capitalist President Temur was appointed by Congress before new elections in 2018.

Lula was prepared to run again in the 2018 presidential election, but the Lavo Jato (“car wash”) corruption inquiry resulted in his arrest on ‘trumped up’ charges of corruption. With Lula barred from running, the far-right candidate Jair Bolsonaro defeated the Workers’ Party candidate Fernando Haddad. “Tropical Trump” Bolsonaro took over, determined to roll back al the gains for working people achieved under Lula.

Under Bolsonaro, the economy weakened badly. Annual GDP growth between 2015 and 2022 averaged just 0.3%. And the experience of the pandemic slump when over 750,000 Brazilians died, was so searing that, apart from his base among evangelical Christians and petty-bourgeois business people, Brazilians turned away from Bolsonaro back to the Workers’ Party and (narrowly) re-elected Lula. Bolsonaro is now in jail because of his role in a failed coup and prohibited from seeking political office. His son Flavio pledges to get his release if he wins the presidency.

Brazil experienced substantial economic and social gains during the first three years of Lula’s third term. Commodity prices rose and economic growth accelerated outpacing most South American peers.

Employment expanded,unemployment fell to historically lows and real (inflation-adjusted) wages increased. These improvements, together with real increases in the minimum wage and expanded social support, enabled large reductions in poverty and food insecurity levels. The poverty rate fell from 31.6 percent in 2022 to 23.1 percent in 2024 — a decline of about 27percent — while extreme poverty fell by more than 40 percent. Severe food insecurity declined by roughly 22 percent between 2023 and 2024. In 2025, Brazil was removed from the Food and Agriculture Organization’s Hunger Map those Brazilians with chronic undernourishment fell below 2.5 percent. But even so, over 20% of the population still live below the official poverty level.

While those at the very bottom did better for a while during Lula’s latest term, that was less so for those in formal jobs. Many Brazilian voters remain concerned about the cost of living. Some 33 percent of Brazilians say their income did not rise at all in the last year and 21 percent say it rose but did not outpace cost-of-living increases, according to a September Quaest survey .

Brazil’s central bank has kept interest rates very high, well above inflation, to ensure bond holders benefit. Household debt service costs rose from 25.8 percent of monthly income in 2023 to 28.9 percent by June 2026. In 2024, borrowers earning up to two times the minimum wage had to devote 35.9 percent of their income to debt service, roughly twice the 17.8 percent among those earning more than 10 times the minimum wage.

At a campaign rally earlier this month Lula said: “ To ​create jobs, the economy needs to grow, and for the economy to grow, the government needs to invest. And for the government to invest, we need to stop this nonsense about generating fiscal surpluses and maintaining ​strict fiscal controls. Brazil’s biggest debt problem is the interest rate we pay. ” But he does not make the ‘independent’ central bank cut rates. Instead, Lula wants to raise taxes on the rich to provide more government revenues. Lula’s supposed backing for more government spending is also under question. Lula’s advisers are privately considering reductions in healthcare ⁠and to benefits for the elderly and disabled. Of course, Bolsonaro openly calls for significant cuts in social spending and public investment, combined with privatizations of state assets.

The reason that both candidates are talking in terms of austerity is that, despite the improvement in living standards in the first three years of Lula’s term, those gains have begun to dissipate in the last year. Economic growth has slowed to under 2% a year and manufacturing and industry are declining fast.

Industrial output fell 0.5% yoy in July and manufacturing activity has turned negative.

Lula and Bolsonaro offer different visions for Brazil’s foreign policy. Lula has brought Brazil closer to China.The two countries have signed dozens of agreements on issues including trade, technology, and environmental protection.

The Lula government has prioritized engagement with the Global South, strongly participating in the the BRICS group and advocating a more multipolar international system. In contrast, Bolsonaro, wants a stronger relationship with Trumps’s US, Milei’s Argentina and Israel—and has said he would end Brazil’s membership in BRICS.

Lula and the Workers Party have never challenged the rule of capital. Like Chavez in Venezuela, Lula has tried to redistribute national income towards the weakest in the country – but was successful only when the Brazilian economy was doing well. When the economy turned down, like Maduro in Venezuela or Roussef in her presidency, measures of austerity were introduced.

The Workers Party has done nothing to end the grip of foreign multinationals, the banks and big business over Brazil’s economy. Poverty may have been reduced in Lula’s third term, but Brazil still has the highest level of inequality in income in the world, second only to South Africa.

And Brazil’s capital sector still fails to invest productively.

Marxist analysis suggests that the decline in the profitability of Brazilian capital has played a key role in the slowdown in investement since 2010. In 2010, the last year of Lula’s second term of office, the average profit rate was still higher than in the early 2000s. However, the profit rate started to decline after 2010 to a low in 2015. The rate has recovered since the pandemic, but it is still below the peak of 2006.

The reality is that Brazil remains vulnerable to the vicssitudes of global capitalism. If the world economy heads into a new recession in the next four years, Brazil’s economy will dive and voters will suffer severe losses in income and employment. Past gains will evaporate.

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