Introduction

Lula's third presidency

Taking office on 1 January 2023, Lula da Silva's third presidency has been characterised by moderate economic stability, a reduction in Amazon deforestation and Brazil's return as a regional and international player. Lula's administration – confronted by a dominant centre/centre-right Congress – has prioritised reducing inequalities, eradicating poverty and hunger, and promoting social inclusion. Unlike his predecessor, he achieved a substantial reversal in Amazon deforestation, which dropped by 38 % in the first half of 2026 compared with the same period in 2025, reaching a 10‑year low. Regarding polarisation, Brazilians are divided regarding Lula's performance. He has a disapproval rating of about 50 %, while 48 % believe he is performing well. By way of comparison, when Lula left office at the end of his second term in 2010, he was one of the most popular leaders in the world, with an approval rating of 80 %.

Brazil's economic performance is largely robust: since 2022, Brazil has recorded annual economic growth of 2 % to 3 %. According to the IMF, Brazil's economy grew by 3.2 % in 2023 and 3.4 % in 2024. Growth then slowed to about 2.3 % in 2025, with the slowdown continuing into the beginning of 2026. The average economic growth for LAC in 2025 was approximately 2.4 %, according to the Economic Commission for Latin America and the Caribbean (ECLAC). In comparison, the EU's GDP grew by 1.5 % in 2025, up from 1.1 % in 2024.

Brazil's unemployment rate is relatively low. By December 2025, unemployment had fallen to 5.3 %, a record low in the relevant series, before rising modestly to 5.5 % in April 2026. The World Bank estimates that Brazil's international poverty rate stands at historically low levels: 20.3 % in 2025, down slightly from 20.6 % in 2024. However, inequality remains high. With a Gini index of 50.2 in 2025, Brazil remains one of the more unequal countries in the world.

Analysts take a critical view of Brazil's fiscal challenges. The IMF estimates Brazil's gross public debt at approximately 98 % of GDP in 2026, up by nearly 14 percentage points over four years. It projects debt continuing to rise before eventually stabilising. The budget deficit is near 8.5 % of GDP. Inflation is relatively high, having peaked at 5.5 % in April 2025 before dropping to 3.8 % in February 2026. Similar to other countries, the rise in global energy prices due to war in the Middle East has hampered efforts to reduce inflation.

Although public security has not deteriorated overall, organised crime is Brazil's central security issue and one of voters' main concerns. The two largest gangs, the First Capital Command (Primeiro Comando da Capital) and the Red Command (Comando Vermelho) are significantly involved in international drug trafficking as well as arms and contraband trafficking. Observers criticise Lula for not having prioritised public security and the fight against the illegal drug trade. However, in September 2026, Europol reported the dismantling of a major drug trafficking and money laundering network. Brazil's major ports make it a primary departure point for cocaine shipped to Europe. According to InSight Crime, another source of violent crime are militias, largely comprised of current and former police officers, which extort whole neighbourhoods and carry out killings. Human Rights Watch reports that police killed 5 920 people between January and November 2025 – many as a result of illegal use of force. Conversely, homicides fell by 10 % in 2025 compared with 2024. According to a recent report by Global Witness, after Colombia, Brazil is the second most dangerous country in the world for land and environmental defenders, with 26 recorded killings in 2025.

The return of Brazil as an important player on the regional and global stage and in multilateral forums after years of international isolation under Jair Bolsonaro is considered a success of Lula's presidency. Active non‑alignment, engaging with different powers according to Brazil's own economic, political and security interests, has been at the forefront of Brazil's foreign policy agenda under Lula. This development has been particularly evident in the hosting of key multilateral forums, such as the G20 Summit in 2024, the 17th BRICS Summit in 2025 (both in Rio de Janeiro) and the COP30 UN Climate Change Conference in 2025 in Belém. President Lula also took part in a series of multilateral meetings abroad, including the EU-CELAC Summit in Colombia (2025), the G7 in Canada (2025) and the G20 in South Africa (2025). The signing of the EU-Mercosur agreement, which President Lula called for, has the potential to boost relations between the two blocs.

Counterbalancing this is Lula's controversial stance towards Russia and Ukraine. Although Lula condemned the violation of Ukraine's territorial integrity by Russia, Brazil has neither applied sanctions against Russia nor responded positively to the Western alliance's call to provide weapons to Ukraine (as with most LAC states). He has criticised the Western emphasis on military spending and repeatedly argued that diplomacy should play a larger role. Observers suspect that Brazil's dependence on Russian fertilisers could help explain Brazil's refusal to participate in economic sanctions.

Lula's position on Israel and Gaza is strongly critical of the Israeli government's conduct in Gaza, while formally supporting Israel's existence and a two-state settlement. Relations between Brazil and Israel deteriorated significantly in 2024, after Lula compared Israel's war on Gaza to Hitler's treatment of Jews.

The United States (US) and Brazil have historically maintained robust political and economic ties. The Congressional Research Service points out that while working-level cooperation on security and other areas of mutual interest appears to have continued during the second Trump administration, disagreements have emerged over the Brazilian judiciary's prosecution of former President Bolsonaro, Brazil's regulation of social media content and US trade policy. Tensions have escalated since July 2025, when President Trump announced his intention to increase tariffs on imports from Brazil to 50 % and the US Departments of State and Treasury imposed sanctions on some Brazilian Supreme Court justices. President Trump and President Lula met at the White House in May 2026 and held constructive talks on economic relations between both countries. However, in July 2026, the Trump administration imposed a 25 % tariff on certain goods from Brazil plus an additional 12.5 % tariff on Brazilian goods, arguing that the country had failed to address forced labour practices in its supply chains. Brazilian exports such as beef, coffee and aircraft parts were exempted. Although the US remains the biggest foreign investor in Brazil and the second-largest trading partner in goods, trade declined by almost 13 % in the first half of 2026 compared with the same period in 2025. The US share of Brazil's total trade fell to a record low of 11.1 %.

Brazil's trade relationship with China, on the other hand, reached historic highs in 2025 with an 8.2 % increase compared with 2024, reinforcing the country's position as Brazil's largest trade partner. The top exports from Brazil to China include soy, crude oil, iron ores and concentrates, while the main imports from China are vehicles and parts, machinery and electrical equipment. Purchases of electric vehicles from China have surged over the last five years. Reuters reports that Brazil became the world's top destination for Chinese investment in 2025 with US$6.1 billion, a 45 % increase in capital compared with 2024. Chinese state-owned enterprises increasingly dominate Brazil's energy, infrastructure and mining sectors. During Lula's visit to China in 2024, the two governments elevated relations to a strategic partnership, namely a 'community with a shared future for a more just world and sustainable planet'. A series of cooperation agreements in areas such as trade, investment, energy, mining and finance were signed. However, despite the rapprochement of Brazil and China in recent years, Brazil has kept to its foreign policy concept of active non‑alignment by, for example, opting not to join China's Belt and Road Initiative.

2026 presidential race

The polarisation of Brazilian society is reflected in the presidential race, which is dominated by two candidates: the incumbent, Lula da Silva, and his opponent, Flávio Bolsonaro. The presidential election on 4 October is expected to be closely contested. Depending on the polling institute, Lula leads in first-round voting intentions, with support ranging from 36 % to 43 %, compared with approximately 31 % to 37 % for Bolsonaro. Anti‑establishment candidates Augusto Cury and Renan Santos and alternative candidates from the right-wing or liberal-conservative parties, such as Romeu Zema and Ronaldo Caiado, lag considerably behind, polling below 10 %. However, as none of the candidates is projected to get an absolute majority in the first round, a run-off on 25 October between Lula and Bolsonaro is the most likely scenario. It is at this stage hard to predict who will become Brazil's next president. In recent months, Bolsonaro has gained ground, and observers forecast a neck-and-neck race with run-off scenarios (from September), projecting narrow victories for either Lula with 46 % (over 44 % for Bolsonaro) or Bolsonaro with 42 % (over 40 % for Lula). Public security and corruption are among voters' key concerns.

Congress

Following the 2022 general election, the Brazilian National Congress has been characterised by a complex political landscape and considerable fragmentation, with dozens of political parties holding seats in the 57th legislature (2023‑2027). There are three main currents: the pro-government coalition, the right-wing opposition and the powerful Centrão , a loose coalition of centrist political parties without a specific or consistent ideological orientation. While Bolsonaro's right-wing PL has 98 seats in the Chamber of Deputies, 16 seats in the Senate and is the biggest political group, no single party holds a majority in either chamber. In the Chamber, Lula is supported by the parliamentary group Federação Brasil da Esperança (FE Brasil), a progressive political coalition formed by the Workers' Party, the Communist Party of Brazil and the Green Party. Together they account for 82 seats. In the Senate, the pro‑governmental parliamentary bloc (with 11 senators) is the Bloco Pelo Brasil, which consists of the Democratic Labour Party and the Workers' Party. But Lula's government has support from senators belonging to other parties, and support can vary according to the legislation. However, the real power lies with the Centrão which accounts for 46 % of seats in the outgoing Congress. It can form parliamentary alliances with either the government or opposition depending on the issue, making it a key actor in coalition-building and legislative governance. The bloc currently has 272 deputies in the Chamber – 15 more than the 257 seats needed for a majority. Observers predict that the Congress is likely to remain dominated by a large conservative majority led by Centrão parties.

Outlook

The upcoming elections are decisive for the future of Latin America's biggest country. Will Brazil continue to be governed by the political left or will the political pendulum swing back to the right and the Bolsonaro family? The election will not merely determine the country's domestic social and economic policy direction, but also whether the country aligns more closely with the US and distances itself from China and the BRICS, or continues its foreign policy of strategic non-alignment aimed at maximising national sovereignty.

In view of the ratification of the EU-Mercosur agreements (EMPA and iTA) and the pending legal opinion of the Court of Justice of the EU, how Brazil performs in terms of climate policy and Amazon deforestation could be of particular interest for the European Parliament, which will soon decide whether to give its consent to the agreements.

Following the presidential election victories of centre-right and right-wing politicians in Ecuador (Daniel Noboa on 13 April 2025), Bolivia (Rodrigo Paz on 19 October 2025), Honduras (Nasry Asfura on 30 November 2025), Chile (José Antonio Kast on 14 December 2025), Costa Rica (Laura Fernández Delgado on 1 February 2026) and Colombia (Abelardo de la Espriella on 21 June 2026), it remains to be seen whether Brazil will follow this shift to the political right in Latin America. Regardless of who wins the race, the next president of Brazil is likely to face a highly fragmented Congress and the need to build alliances to govern the country. The centrist political forces of the Centrão are expected to once again play a decisive role over the next four years.