Brazilian Assets Slammed After Bolsonaro's Son's Comments

Flávio Bolsonaro’s announcement that he’ll run for president next year, with the backing of his father Jair Bolsonaro - the jailed former president barred from holding office - spooked markets Friday.

“It’s with great responsibility that I confirm the decision of Brazil’s greatest political and moral leader, Jair Messias Bolsonaro, to entrust me with the mission of continuing our national project,” Flavio said in a social media post Friday.

The Brazilian real weakened and equities dropped, reflecting investor concern over the prospect of another polarized election.

While the move didn’t surprise Adriana Dupita, Deputy Chief Emerging Markets Economist at Bloomberg Economics, she notes that it provides a temporary answer to two key uncertainties:

• First, whether Jair Bolsonaro would insist on keeping the candidacy within the family or would endorse someone outside it. Markets seemed to hope for the latter, given expectations that the elder Bolsonaro’s support could help a more conventional center-right name.

• Second, if the candidacy did stay in the family, who would it be? Jair’s wife Michelle Bolsonaro had emerged as a possible contender, and Flávio’s announcement may have been aimed at preempting her bid.

The market’s initial selloff on the announcement may not hold, but it reflects deeper concerns about another volatile election cycle.

With more than 10 months to go until the vote, Brazil’s 2026 race remains open — and asset prices reflect that uncertainty.

Flávio Bolsonaro Better Known — and More Rejected — Than Peers

Source: Bloomberg Economics, Genial/Quaest survey, Nov. 6-9.Jockeying for Position

Despite the younger Bolsonaro’s claims and the markets’ reaction, the electoral scenario remains in flux.

Flávio himself indicated that he could give up his candidacy - as long as his father is set free from jail and allowed to run for office.

Official candidacies won’t be confirmed until party conventions in early August. A key milestone comes in April, when executive branch officeholders who intend to run for president must resign — unless they’re running for re-election. That rule could shape the race significantly.

Four governors often cited as potential presidential hopefuls - Ratinho Jr. (Paraná), Ronaldo Caiado (Goiás), Romeu Zema (Minas Gerais), and Tarcísio de Freitas (São Paulo) - would need to make their decisions by then. For all but Freitas the opportunity cost is relatively low, as they’re finishing second terms and can’t run again for their posts. Freitas would have to give up a strong chance at re-election in Brazil’s largest and richest state.

All four have less national name recognition than Flávio Bolsonaro, but also face lower rejection rates among voters, according to public opinion polls.

On the left, President Luiz Inácio Lula da Silva is widely expected to seek re-election.

Historically, Brazilian incumbents have secured second terms, with Bolsonaro’s 2022 loss the only exception since re-election rules were introduced in 1997.

That said, Lula faces a tough road: Regional trends suggest growing support for right-wing parties, and public concern about crime and security – topics where the public evaluates right-wing politicians more favorably – may be more central to voters now, with economic conditions still relatively robust.

Referendum on Two Presidencies

In our view, a fragmented and uncertain opposition field favors Lula, as the longer it takes for the center-right to consolidate behind a viable candidate, the better the odds for the incumbent.

Still, if a Bolsonaro family member runs, the race could become another referendum on the two presidencies.

A second round with Lula and a Bolsonaro could make markets uneasy because of what each candidate means for the economy.

Investors who dislike Lula say his approach to fiscal consolidation is too gradual.

But, while asset prices rebounded when Jair Bolsonaro was elected in 2018, they had a mixed performance during his presidency, which flirted with fiscal populism and institutional friction.

Flavio's odds of winning the presidency remain low - around 10% for now - according to Polymarket...

Source: Polymarket

The selloff on Flávio Bolsonaro’s announcement shows investors are concerned about the possibility of another volatile election cycle.