World
• Analysis
Lula's Fourth Term Challenges: A Hostile Congress, Debt and Tariffs
Re-elected days before his 81st birthday with 51.7 percent of the runoff vote, Brazil's Lula da Silva begins a fourth term without a congressional majority, with public debt above 80 percent of GDP, and under pressure over security and US tariffs.
By Haut Monde Post
• October 26, 2026
• 3 Min Read
Lula da Silva begins a fourth term with the election won but the governing barely started. The runoff victory over Flavio Bolsonaro, 51.7 percent to 48.2 percent, came days before the president's 81st birthday, and it hands him a country where the organized right, high borrowing costs and a trade fight with Washington all sit waiting.
No majority in Congress
The new legislature does not answer to him. Bolsonaro's Liberal Party emerged as the leading force in Congress, holding 121 of 513 deputy seats and 28 of 81 Senate seats.
To pass anything, Lula must bargain with the 'Centrao', the bloc of center-right parties, and that bargaining is becoming harder, says political scientist Mayra Goulart. Her point is structural: lawmakers now decide the fate of an ever larger share of the federal budget, which gives them more independence from the executive.
The fiscal squeeze
Economist Mauro Rochlin of the Getulio Vargas Foundation puts it bluntly: Brazil's three big problems are "the fiscal problem, the fiscal problem, and the fiscal problem". The state spends more than it collects, and public debt exceeds 80 percent of GDP.
"Could very quickly turn into an economic crisis."
That is Rochlin's warning if adjustment fails, while the central bank keeps one of the world's highest interest rates to contain inflation. The adjustment he describes requires unpopular measures and confronting very powerful lobbies within Congress - the same Congress where Lula lacks a majority. It may also collide with his flagship welfare programs, which he expanded during the campaign, drawing fierce criticism from the opposition.
Security on the agenda
Security dominated the campaign, and the pressure now lands on the incoming term: criminal groups and militias control territory in several cities, and Lula is expected to tackle them.
On the trail, he said he would support lowering the age of criminal responsibility from 18 to 16 for heinous crimes; the right wants the threshold at 14.
Trump, tariffs and the region
Abroad, the trade file is open. Trump imposed tariffs on Brazil last year in retaliation for the legal proceedings against his ally Jair Bolsonaro, and followed them with another 25 percent tariff on some products this year. Around the region, right-wing leaders aligned with Trump in a trend dubbed the "Orange Wave".
Ideology matters less than it looks, argues Oliver Stuenkel of FGV, citing Brazil-Argentina relations: "Deep down, the substance of the relationship hasn't changed that much" - this despite Argentine leader Javier Milei's insults toward Lula.
The result confirmed a divide that has split Brazil for a decade, with Bolsonarism still strong even as its leader serves a 27-year prison sentence for attempting a coup. The report names no next step; the fiscal arithmetic is the nearest horizon, and Rochlin's warning stands over it.
