Lula Is Back. What Does That Mean for Brazil?

On January 1, 2023, Luiz Inácio Lula da Silva, commonly known as Lula, will be inaugurated as president of Brazil. Lula, who previously held the position from 2003 to 2010, narrowly beat right-wing incumbent Jair Bolsonaro in a tense runoff election, and his victory signals an abrupt shift in the political trajectory of South America’s largest and most influential country. Experts say he has a challenging road ahead.

What will be Lula’s biggest governing challenges?

Brazil faces a daunting set of challenges, including slow economic growth, rising poverty, high crime rates, and an education crisis.

After winning the runoff by less than 2 percentage points (about two million votes), Lula’s party, the left-wing Workers’ Party (PT), will be governing a deeply polarized country. Observers say that some of his choices so far are intended to bridge the divide, including selecting a center-right and pro-business politician, former São Paulo Governor Geraldo Alckmin, as his running mate. 

But it won’t be easy. The new administration’s first test will be making headway in an increasingly powerful Congress after Bolsonaro’s conservative Liberal Party (PL) gained dozens of additional seats in the general elections; the PL and its allies now hold a majority. “That means that [Lula] will probably need to strike deals with exactly the same political leaders who have been allied with Bolsonaro over the past two and a half years,” writes Chatham House’s Richard Lapper.

What does he propose for the economy?

In his previous terms, Lula presided over a strong economic performance that made him one of the most popular leaders in Brazilian history. Social spending rose, foreign investment increased, and poverty and hunger rates fell dramatically. Lula has pledged to tackle similar issues now, including low growth, inequality, and a growing hunger crisis. Among his campaign proposals are plans to increase the minimum wage and taxes on the wealthy, introduce a debt forgiveness program, and expand state-funded social housing.

Lula has already made some progress in negotiations with Congress. In December, lawmakers passed a constitutional amendment that paves the way for a return of Lula’s Bolsa Família program, a much-lauded initiative in which direct cash payments went to the poorest people. (Bolsonaro replaced the program in 2021.) The amendment will increase the government’s spending cap by at least $28 billion for the coming year to cover the program’s cost. However, economists worry that unfavorable global economic conditions and stubbornly high inflation could undermine Lula’s spending plans.

How might he approach environmental issues?

Conservation of Brazil’s Amazon Rainforest has long been a priority of Lula’s. His first two terms saw a more than 70 percent drop in the rate of deforestation there, and his government pushed for wealthier countries to fund climate mitigation efforts. After deforestation reached a fifteen-year high under Bolsonaro, environmentalists are hoping that a third Lula administration will turn it around.

He has pledged to reach net-zero deforestation by 2030 and create a new ministry to promote the interests of Brazil’s Indigenous people, though that decision is reportedly now up in the air. At the most recent UN climate talks, he further vowed to crack down on illegal gold mining, restore climate-critical ecosystems, and revive Brazil’s leadership role in the global fight against climate change. Already, Germany and Norway have said they will resume making payments to the Amazon Fund, created in 2008 to promote sustainable use of the rain forest. The two countries had previously paid more than $1.2 billion to the fund before Bolsonaro shelved it in 2019.

Still, there are concerns that Lula is overpromising. The Brazilian government has long offered economic incentives to clear land, including for infrastructure projects, ranching, and mining. Some policymakers argue that placing restrictions on development in the Amazon could hamper economic growth in the country, which is the world’s top exporter of beef and a leading producer of iron ore. And without control of Congress, experts say that the chances of Lula’s environmental policies passing are slim, especially given that a large portion of Bolsonaro’s political support comes from Amazon states, such as Mato Grosso and Rondônia.

How is Lula expected to work with other world leaders?

Lula has pledged to restore Brazil’s global leadership role, arguing that Bolsonaro’s opposition toward multilateral institutions and increasing isolation has undermined the country’s influence. He says he will rejoin regional forums such as the Community of Latin American and Caribbean States (CELAC) and the Union of South American Nations (UNASUR). His election could also reopen trade talks between Mercosur, a South American trade bloc, and the European Union, which have been held up for several years over Brazil’s poor environmental record. For many observers, Lula’s return likely signals an increase in cooperation between Brazil and lower-income countries, often referred to as the Global South. For instance, Lula seeks to reestablish diplomatic relations with Venezuela’s Nicolás Maduro and foster closer ties to China and African countries.

Meanwhile, with Russia’s invasion of Ukraine still dominating headlines, many observers expect Lula to continue Bolsonaro’s neutral stance on the war. While Lula has publicly criticized Russian President Vladimir Putin’s decision to invade, he has cast blame on Western leaders, including U.S. President Joe Biden, for not doing enough to prevent the conflict. Also, he reportedly opposes Western sanctions on Russia, believing that they raise the risk of escalation, and analysts say this could be an ongoing point of tension with the United States and Europe.