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Brazilian Presidential Runoff Results Impact Markets
Brazilian assets, particularly the iShares MSCI Brazil ETF, fell nearly 20% overnight after President Luiz Inácio Lula da Silva defeated Senator Flávio Bolsonaro in Sunday's runoff. The result, with Lula receiving 51.8% of valid votes, led to pressure on the real currency. Investors were concerned about public spending and debt, with government debt increasing by more than 10 percentage points during Lula's term, exceeding 82% of gross domestic product. The market reaction put Brazil's public finances under scrutiny, with conservative parties' control of both congressional chambers potentially complicating legislation affecting taxes and government revenue. Economic pressures also affect households and businesses, with Brazil's benchmark interest rate at 13.75% and annual inflation at 4.6%, exceeding the central bank's upper tolerance limit of 4.5%. Nearly 84 million people and 9.3 million businesses are behind on debt payments.