# Lula adopts a fiscal-discipline message for Brazil's October 25 runoff as polls show a tie with Flávio Bolsonaro

The president will argue that a fourth term would allow interest rates to fall, while his rival proposes a constitutional overhaul of the courts, and a federal judge has let one betting operator keep working despite Lula's ban.

- Published: 2026-10-09T05:18:28.882Z
- Canonical: https://polylog.news/2026-10-09/lula-adopts-a-fiscal-discipline-message-for-brazil-s-october
- Publisher: Polylog (Global desk)
- Section: macro
- Sources: [Folha de S.Paulo](https://www1.folha.uol.com.br/mercado/2026/10/lula-deve-passar-a-defender-equilibrio-das-contas-e-campanha-apontara-furos-de-flavio-na-area-fiscal.shtml), [MercoPress](https://en.mercopress.com/2026/10/08/flavio-bolsonaro-proposes-constitutional-reform-to-overhaul-the-courts-and-lower-the-criminal-age?utm_source=feed&utm_medium=rss&utm_content=main&utm_campaign=rss), [InfoMoney](https://www.infomoney.com.br/politica/justica-federal-de-sp-autoriza-bet-a-operar-ate-25-de-outubro-apos-mp-de-lula-vetar/)

President Luiz Inácio Lula da Silva [is expected to add a defense of balanced public accounts to his speeches](https://www1.folha.uol.com.br/mercado/2026/10/lula-deve-passar-a-defender-equilibrio-das-contas-e-campanha-apontara-furos-de-flavio-na-area-fiscal.shtml), Folha de S.Paulo reports. The goal is to show that a new Lula government would create the conditions for lower interest rates. His campaign also plans to point out gaps in the fiscal proposals of his opponent, Senator Flávio Bolsonaro.

The race is close. Polls by Datafolha and AtlasIntel [show a statistical tie](https://www.band.com.br/politica/bomba-fiscal-datafolha-aponta-empate-tecnico-entre-lula-e-flavio). Lula's approval has risen to 48% in the Datafolha poll, helped by a 15% increase in Bolsa Família payments. Critics say the new spending, added to a deficit already projected at R$86 billion, leaves a fiscal hole of more than R$100 billion for the next government.

Flávio Bolsonaro says that if he wins, he will use his Liberal Party's bloc in Congress to pass [a constitutional reform that would change the judiciary and lower the age of criminal responsibility](https://en.mercopress.com/2026/10/08/flavio-bolsonaro-proposes-constitutional-reform-to-overhaul-the-courts-and-lower-the-criminal-age?utm_source=feed&utm_medium=rss&utm_content=main&utm_campaign=rss). Brazilian investors have mostly read his lead in the first round as a reduction in fiscal risk, while his court proposal adds a source of conflict between branches of government.

The courts are also part of the economic picture. A provisional measure signed by Lula has banned sports-betting companies from operating since October 5. A federal court in São Paulo [has authorized one operator to keep working until October 25](https://www.infomoney.com.br/politica/justica-federal-de-sp-autoriza-bet-a-operar-ate-25-de-outubro-apos-mp-de-lula-vetar/), the day of the runoff. For foreign investors, the case shows that a whole regulated sector in Brazil can be closed by executive decree and partly reopened by a court within days.

## What this means

The market's question is not who wins but which candidate can get a credible fiscal rule through Congress. Lula's sudden emphasis on balanced accounts admits that rate cuts depend on that. Bolsa Família increases are permanent spending, while promises of discipline are not binding. Flávio's market-friendly reputation rests on fiscal expectations, but his court reform would use up the political capital in Congress that a fiscal package would also need. The Brazilian real, long-term local interest rates, and bank shares are the assets most exposed to the outcome. Brazil's 2002 election offers a precedent: markets sold off before Lula's first victory, then recovered once he committed to fiscal targets in his letter to the Brazilian people. The desk's read is that a narrow result for either candidate produces volatility in the real in the weeks after October 25, and that the direction of long-term rates depends on whether the winner presents a binding spending limit within its first months. A clear win followed by an early fiscal package would shorten that period of volatility.

## What to watch

- Whether Lula commits to a specific spending rule or primary surplus target before the runoff. A specific number would be more credible to investors than a general promise.
- The final round of polls before October 25. A margin wider than the error band would reduce the uncertainty now priced into the real.
- Further court rulings on the betting ban. These show how far the courts will limit the use of executive decrees to close a sector.