Brazil’s post-election transition is increasingly centered on the formation of President Luiz Inácio Lula da Silva’s fourth government, a deteriorating economic outlook and the struggle for control of the Senate. Lula has publicly committed to fiscal responsibility but has not yet announced concrete adjustment measures, while internal negotiations continue over the future leadership of the Finance Ministry. At the same time, the opposition is organizing around Senator Rogério Marinho’s candidacy for the Senate presidency, with amnesty for Bolsonaro supporters and possible impeachment proceedings against Supreme Federal Court (STF) justices among its priorities. Economically, the Central Bank halted its interest-rate cutting cycle with the Selic at 13.75%, while economists increasingly warn of stagnation or recession in 2027 and a worsening public-debt profile. The STF, despite viewing Flávio Bolsonaro’s electoral defeat as a temporary reduction in political pressure, considers the February Senate election decisive for its institutional position.
This Content Is Only For Subscribers
To unlock this content, subscribe to INTERLIRA Reports.
Lula Prepares the Next Government
Lula used his first televised address after reelection to emphasize fiscal responsibility, sustainable social policies, and the need to create conditions for lower interest rates. He acknowledged concerns over public debt and high interest rates but did not announce concrete measures. According to the articles, the economic team is preparing proposals ranging from targeted adjustments to structural measures, but Lula has resisted actions that could conflict with campaign commitments or affect social rights. The measures and the composition of the economic team are expected to be discussed after his international travel in November.
The future of the Finance Ministry remains uncertain. Piauí Governor Rafael Fonteles, previously considered a strong candidate, has faced internal resistance within the PT, partly because accepting the position would require him to resign as governor. Vice President Geraldo Alckmin has consequently gained support, while Camilo Santana has also been mentioned and current Finance Minister Dario Durigan is attempting to consolidate his position. The economic team considers approval of the 2027 budget and fiscal measures before the end of the year more urgent than the ministerial dispute itself.
Lula also indicated that institutional and public-security reforms will form part of the next administration’s agenda. He defended an urgent debate on political and judicial reform, called for judges who are ethical, impartial and free from conflicts of interest, and committed to creating a Ministry of Public Security through a provisional measure following approval of the Public Security constitutional amendment. He also criticized the role of major technology platforms during the election.
The Opposition Prepares for 2027
The PL is attempting to transform its strengthened presence in the Senate into an institutional base for opposition to Lula. The party, which will hold 29 of the Senate’s 81 seats, launched Rogério Marinho as its candidate for Senate president. Marinho, who coordinated Flávio Bolsonaro’s presidential campaign, also has support from the three elected Novo senators and said during his launch that he could obtain more than 40 votes.
Marinho says his objective is not to paralyze Lula’s government but to modify proposals and provide greater resistance to the Executive. He continues to defend amnesty for people convicted over the attempted coup and has said that impeachment of STF justices will not be his only priority, but that he would not ignore such requests if he considered that a minister had committed a crime of responsibility. Flávio Bolsonaro, from the United States, has endorsed Marinho’s candidacy.
The opposition, however, is not yet unified. Senator Tereza Cristina (PP-MS) is also seeking the Senate presidency. She and Marinho say they intend eventually to converge behind whichever candidacy proves more viable against Davi Alcolumbre, while Tereza is attempting to attract support from the women’s caucus, agribusiness and centrist senators.
Economic Pressure Increases
The Central Bank unanimously maintained the Selic rate at 13.75% on November 4, interrupting a cycle of five consecutive 0.25-percentage-point cuts. The Copom cited increased uncertainty, higher inflation expectations, and stronger-than-expected economic activity, and removed language suggesting that monetary easing would continue. The committee’s inflation projection rose to 5.6% for 2026 and 4.7% for 2027, above the target ceiling for next year.
The outlook for 2027 has also weakened considerably. Forecasts from the Ibre-FGV, banks and consultancies point to GDP growth of approximately 1%, while a preliminary Ibre scenario indicates that cyclical sectors—including commerce, manufacturing and services—could contract by 0.5%, potentially leaving overall GDP stagnant. Fecomercio-SP explicitly raised the possibility of recession, while Itaú reduced its growth forecast to 0.5%.
High household debt is another vulnerability. Brazil reached a record 84.2 million delinquent consumers in September, representing 51.1% of the adult population. The articles also project that unemployment, estimated at around 5.6% in 2026, could approach 7% in 2027 as cyclical economic activity loses momentum.
The structure of public debt has also deteriorated. The share of floating-rate securities among debt maturing within 12 months almost doubled from 32.5% to 58.7% between September 2025 and September 2026. The Treasury will have to refinance approximately R$1.8 trillion over the next 12 months, while total public debt increased from R$8.12 trillion to R$9.38 trillion. The effective coverage provided by the Treasury’s liquidity reserve fell from 9.3 to 7.7 months of maturities, increasing sensitivity to market volatility and interest rates.
The STF Remains Under Pressure
STF ministers viewed Lula’s reelection and Flávio Bolsonaro’s defeat as providing temporary political relief, but they consider the election for Senate president decisive for the court’s future. Opening impeachment proceedings against a Supreme Court justice depends on the Senate president, while removal requires 54 votes. Alcolumbre has historically resisted pressure from Bolsonaro-aligned senators to advance such proceedings, which explains the court’s interest in his reelection.
Ministers nevertheless expect the STF to remain central to political disputes, particularly as a stronger Bolsonaro-aligned bloc enters Congress. They also anticipate renewed attention to the Banco Master investigation once Federal Police reports containing references to Supreme Court members are completed.
The court is also becoming central to the government’s attempt to ban online betting. The Lula administration hopes the STF will declare unconstitutional the 2018 law that legalized betting, which would eliminate the need for another difficult congressional dispute over the provisional measure prohibiting the activity. The opposition is seeking to preserve at least sports betting.
Justice Luiz Fux publicly defended banning online betting during a Supreme Court hearing and said he intended to vote in favor of criminalizing the exploitation of gambling and establishments dedicated to the activity. Government agencies and the CNC supported prohibition, while football clubs and betting-sector organizations opposed it, citing economic and revenue consequences.
Dispute for Control of the Senate
The February 1 Senate presidency election is developing into a three-way contest between Davi Alcolumbre, Rogério Marinho and Tereza Cristina. A candidate needs at least 41 of the 81 votes in a secret ballot. Alcolumbre and Marinho are estimated to have between 30 and 40 senators in their most reliable bases, leaving approximately 10 to 15 centrist and right-wing senators as the decisive group.
Alcolumbre enters the race with broader institutional resources and alliances across the political center and government coalition. His camp includes figures from PP, PSD, União Brasil, the governing wing of the MDB and senators from parties allied with Lula. His position as incumbent also gives him influence over committee leadership, important legislative reports and negotiations involving government and regulatory-agency positions.
Marinho’s allies claim he has 38 “solid votes” and therefore needs three additional senators to reach the required 41. His strategy is to consolidate Bolsonaro-aligned senators, mobilize their electoral bases to pressure them against supporting Alcolumbre and encourage right-wing senators to publicly disclose their vote despite the secret ballot. Tereza Cristina, meanwhile, hopes to combine opposition votes with support from women senators and parts of the political center.
Analysis:
The transition to Lula’s fourth term is increasingly dependent on two interconnected issues: fiscal credibility and the political balance in the Senate. Economically, high interest rates, worsening debt conditions, increased household indebtedness, and the possibility of stagnation or recession in 2027 create pressure for the government to define a credible fiscal strategy without abandoning the social commitments emphasized during the election.
Institutionally, the Senate presidency will influence not only Lula’s ability to advance his legislative agenda but also the level of pressure on the STF. An Alcolumbre victory would preserve a leadership that has resisted impeachment proceedings against Supreme Court justices, while a victory by Marinho or another opposition-backed candidate could give the strengthened right greater influence over judicial, legislative and amnesty-related disputes. For corporate security and political-risk monitoring, the evolution of fiscal policy, economic activity, Senate negotiations and Executive–Judiciary relations will therefore be particularly relevant entering 2027.
Sources: Folha de SP [1], [2], [3], [4], [5], [6], [7], [8].
