With a big lead, Lula may win a third term. But will he be the pragmatic and investor-friendly president who governed Latin America’s largest economy from 2003 and 2010? Or more of a leftist?

Brazil became a country of double digits this year. Inflation is 12%, the benchmark interest rate is 12.75% and unemployment is 10.1%. That’s bad, of course. But another high number is bringing cheer to a large share of the electorate in the run-up to the October presidential election. Luiz Inácio Lula da Silva, a former two-term left-wing president, has a double-digit lead over right-wing incumbent Jair Bolsonaro in most opinion polls. That may be enough for him to win an all-out victory in the first round on October 2.

If he does win, the question is: which Lula will return to power?

Will he be as pragmatic and investor friendly as he was 20 years ago when he won his first presidential election? Or will he adopt more radical policies after a spell in prison and four years of Bolsonaro’s right-wing rule?

Image: Luiz Inácio Lula da Silva

The early signs may be confusing. Lula himself has been sending strong messages to his sympathizers. Many of them are in favor of his proposed government interference in state-run companies, like the oil giant Petrobras. They’re also against privatizations and are fretting about high fuel prices at a time of equally high inflation.

Lula, 76, has a proposal on how to respond. Instead of increasing prices in line with international benchmarks, Petrobras should be “at the service of the Brazilian people and not of the big foreign shareholders,” he said recently. The candidate lamented the state oil company’s sale of assets, including service stations, offshore oil fields, refineries and gas pipelines, and its pullback on investment in building new oil refining capacity. He also lashed out at the Bolsonaro government for selling energy assets “for peanuts,” calling it an “anti-patriotic crime” that will cost the country its energy sovereignty.

Lula’s other targets are the labor reform and budget spending cap implemented by previous governments to enforce fiscal discipline and avoid a spiraling increase in the debt-to-GDP ratio. He said that the country’s economic and political elite preach about the importance of these policies to keep poor people from getting increases in education, health and social benefits. “They want to make sure that bankers keep receiving things that the government owe them,” he said on radio recently.

The rhetoric is bolstering his chances for a third term, but will his proposals work?

Claudio Couto, a political scientist from the Getúlio Vargas Foundation, thinks they will. “Capping fiscal expenditures would indeed mean that you cannot implement effective countercyclical policies,” he says.

Antonio Corrêa de Lacerda, one of Lula’s economic advisers, is also adamant that changes in the priorities for economic policy are needed.

“The assumption that market forces would kick-start economic activities thanks to the ‘confidence factor’ alone did not work,” he says in reference to Bolsonaro’s rule over the past four years.

Instead, “investment incentives, public and private, and making financing and credit available at reasonable costs are very important towards this end, as well as the adoption of industrial policies,” Lacerda adds. “You would need to go beyond measures such as interest rate hikes to fight inflation. And the time has come to review the inflation target regime, which is excessively based on the headline figure.”

Lula’s team is also in favor of injecting more public financing in the economy through state-owned banks, such as the development bank BNDES. This has led to fiscal slippage and corruption in the past, however. On the other hand, Bolsonaro, 67, and his economy ministry, Paulo Guedes, have made use of BNDES to finance infrastructure concessions, such as water and waste management and transport logistics.


Whatever the pre-election discourse, Lula has shown in the past that leaning toward the center is crucial to wining the hearts and minds of a majority of the electorate – and, hence, the election.

“Lula has always been very pragmatic. He has a sense of survival. He avoids radical policies, unlike Cristina Kirchner did in Argentina,” Marcelo Giufrida, CEO of Garde Asset Management in São Paulo, says in reference to the former leader of Brazil’s southern neighbor from 2007 to 2015 and now its vice president.

Lacerda believes that Lula’s track record will help convince voters. “Lula successfully completed two presidential mandates. There was economic growth, fiscal responsibility, and inflation was under control,” he says. “Now that the Brazilian economy runs out of steam against a difficult international background, Lula’s return should shore up the confidence of the market and citizens.”

It’s not looking easy for whoever wins the election. According to Bradesco, a local bank, Brazil’s economy is expected to grow only 1.5% this year and 0.5% next year, far less than global growth of more than 3% per year.

Twenty years ago, Lula managed to smooth his image by sending a formal letter to the Brazilian people. He also pledged to respect contracts and implement moderate policies if elected. By way of demonstration, he chose textile industry captain, the late José Alencar Gomes da Silva, as his running mate.

For this race, Lula pulled has played a similar card by picking Geraldo Alckmin, a conservative politician whom he defeated in the 2006 presidential run-off, to join him on his ticket.

“It was a clever move by Lula. It is a way to say, ‘I am the third way,’” says Gesner Oliveira, a partner at consultancy GO Associados and former CEO of the São Paulo water and waste management company Sabesp.

It was also a big shift for Alckmin himself, who abandoned his former party and embraced someone who has been its major rival until 2018, Oliveira adds.

The move was praised by some investors, including 40-year-old former banker Gabriel Galipolo, who decided to join Lula’s campaign team.

“This signals a posture of collaboration,” says Octavio de Barros, a former bank executive turned consultant. He says that Lula also has had recent contacts with high-profile economists, such as the former central bank governors Pérsio Arida and Armínio Fraga, who are part of the economic team of centrist candidate Senator Simone Tebet.

The talks and alliances with market-friendly officials are seen as a guarantee that Lula will not implement radical choices if elected.

“If he does win, there will be no exchange rate shock,” says Claudio Fritschtak, a partner at Inter B. consultancy.

Oliveira thinks much the same. “Lula’s victory would have a moderate negative impact on capital markets, but there is no sense of panic towards Lula,” he says. “In 2002, investors were very much afraid of him. Not anymore.”

But some members of the São Paulo financial community still take the alliance with Alckmin with a pinch of salt.

“It was not well received in Faria Lima,” Oliveira says in a reference to São Paulo’s investment banking district.

Couto at the Getúlio Vargas Foundation also sniffs some skepticism and suggests that what will happen after the election is still hard to forecast.

“Some in Faria Lima are still not convinced this is for real,” he says of Lula’s potential to win.

“Economic policy is not yet clearly defined. There are lots of people talking at the same time and not really saying the same thing.” LF