Brasilia:The Brazilian stock market experienced a substantial decline of nearly 17 percent at the opening on Monday, following the re-election of President Luiz Inacio Lula da Silva.
According to Bangladesh Sangbad Sangstha, the leftist leader secured 51.8 percent of the vote, defeating his right-wing opponent Flavio Bolsonaro, the son of the imprisoned former leader Jair Bolsonaro. This sharp decline in the Ibovespa index prompted a 30-minute suspension of trading, while the US dollar appreciated by 12 percent against Brazil's currency, the real.
The market drop activated a "circuit breaker" mechanism designed for "periods of sharp market decline," as stated in a formal announcement. Brazilian stocks had previously reached record highs after Bolsonaro's first-round victory earlier in the month, but on Monday, they fell below pre-election levels.
Historically, critical events that have triggered the circuit breaker mechanism include the subprime mortgage crisis in the United States in 2008 and the Covid-19 pandemic in 2020. As Lula concludes his third term, he is dealing with a situation of record employment rates and controlled inflation, despite increasing public spending and growing national debt.
Brazilians are expressing concerns about the loss of purchasing power, and authorities are worried about household indebtedness. The country continues to maintain one of the highest benchmark interest rates globally as a measure to control rising prices.