Real Gains Capped as Political Realities Limit Reforms

Written by Sandra Leggero

Sandra Leggero has a background in financial markets, having spent more than 9 years in commodities trading for several European and Asian companies. She holds a degree in Economics from the University of Pavia and specializes in emerging markets.

, | Updated: October 6, 2026

Key Moments

The Brazilian Real strengthened about 4% as USD/BRL declined from 5.2 to 5 on F. Bolsonaro’s election lead, according to Commerzbank’s Norman Liebke.
Despite advances by Partido Liberal (PL) and other conservative parties, the PL still falls short of an outright majority and must rely on alliances.
Uncertainty around the implementation of market-oriented reforms is tempering early optimism over Real-positive policies.

Market Reaction to Election Developments

Norman Liebke of Commerzbank reports that the Brazilian Real (BRL) appreciated by about 4% as USD/BRL moved from 5.2 to 5, a move he links to F. Bolsonaro’s lead in the election. The currency’s strength reflects investor expectations that a Bolsonaro victory and a more conservative legislature could support policies perceived as favorable for markets and the Real.

Parliamentary Landscape and Power Constraints

Liebke emphasizes that, although the Partido Liberal (PL) and other conservative forces gained seats, the PL by itself does not command an absolute majority. As a result, any administration led by F. Bolsonaro would still need to depend on coalitions and agreements with other parties to pass legislation.

In Liebke’s assessment, a potential President F. Bolsonaro would operate in a more supportive parliamentary environment than that of his father, Jair Bolsonaro. Nonetheless, he notes that it would be inaccurate to characterize such a scenario as one of unconstrained governing power.

Reform Prospects and Political Hurdles

Despite the initial positive reaction in BRL, Liebke warns that the political realities in parliament raise questions about the government’s capacity to deliver on reform pledges that are considered constructive for the Real.

“Market participants’ early optimism should therefore be taken with a grain of salt. A nominally more conservative parliament is no guarantee of smooth economic policymaking. First, the right-conservative bloc outside the PL remains fragmented.”

“Reforms will therefore likely continue to require political compromises. Second, there is always the risk that market-oriented initiatives lose priority as political pressure increases. Even with the new parliamentary balance of power, it remains uncertain whether the reforms announced by F. Bolsonaro would actually be implemented if he wins the election.”

Liebke also underscores that, because the election results do not provide the PL with an outright majority, the party’s reliance on other factions will continue, even if conservative allies have expanded their representation.

“However, these results still fall short of an outright majority. The PL therefore remains dependent on alliances and agreements with other parties, even though other conservative parties also gained seats. A potential President F. Bolsonaro would thus face a more favorable environment than his father Jair Bolsonaro did, but there can be no talk of governing without constraints.”

Implications for Both Runoff Candidates

The analysis highlights that the challenges are not limited to a potential Bolsonaro presidency. Should Lula prevail in the runoff, Liebke expects an even more difficult backdrop for advancing his legislative agenda in the current parliamentary configuration.

“Conversely, if Lula were to win the runoff election, he would face an even greater challenge in advancing his own political agenda. In the meantime, until the runoff, market participants are likely to focus on signals from the third-placed candidates and react to whichever of the two candidates they choose to endorse.”