Lula 2026: Approval Crisis, Election Race, Brazil’s Balancing Act

RioTimes Deep Analysis | Series: Lula Government Guide

President Luiz Inacio Lula da Silva enters the final stretch of his third term facing the tightest reelection battle of his career. At 80, he has confirmed a fourth-term bid with Geraldo Alckmin as his running mate, but sliding approval ratings, a resurgent right-wing opposition led by Flavio Bolsonaro, and a series of domestic controversies have made the October 4 vote a genuinely contested race.

Approval Ratings and the Polling Trajectory

Datafolha’s April 2026 survey shows Lula’s personal approval at 45% against 51% disapproval, a deterioration from the 49%-48% split in December 2025. His government rating stands at 29% positive versus 40% negative. The trajectory tells a stark story: after collapsing to an all-time low of 24% in February 2025, the worst across all three of his presidencies, Lula recovered toward year-end 2025 only for the rebound to stall and reverse.

The demographic fractures are revealing. For the first time, women disapprove of Lula more than they approve, at 48% versus 46% according to Quaest. Evangelical voters register 52% disapproval, and those earning over 10 minimum wages reach 58%. Even Lula’s strongest base, the Northeast, has eroded from 49% approval to 41%. Roughly 59% of Brazilians say he does not deserve four more years.

The 2026 Election Race

Senator Flavio Bolsonaro has consolidated as the unified right-wing candidate after Sao Paulo Governor Tarcisio de Freitas decided to seek reelection as governor rather than run for president. Flavio has closed a 12-point deficit in roughly four months, gaining about 3 percentage points per month in second-round simulations. His father, Jair Bolsonaro, remains in prison serving a 27-year sentence and is barred from running until 2060, but his endorsement energizes the Bolsonarista base.

Lula confirmed his candidacy on March 31 with Alckmin as running mate, with the formal pre-candidacy launch set for the PT’s 8th National Congress on April 24 to 26 under the theme “Soberania, Reconstrucao e Futuro.” Both candidates carry nearly identical rejection rates of around 48%, signaling deep polarization. If Lula were replaced by Finance Minister Fernando Haddad, Flavio would lead outright at 40.1% versus 37.6% according to AtlasIntel.

Economic Policy and Fiscal Challenges

The Central Bank cut the Selic rate by 0.25 percentage points to 14.75% per year on March 18, the first reduction in nearly two years. The cut came under Governor Gabriel Galipolo, Lula’s appointee, and was unanimous. PT deputies have opened a formal debate to revise the Central Bank’s autonomy law, arguing it removes monetary policy from democratic accountability, but Camara Speaker Hugo Motta has blocked the initiative.

The 2026 budget targets a primary surplus of R$34.5 billion, or 0.25% of GDP, but this excludes R$57.8 billion in court-ordered payments. Including those, the real projection is a deficit of 0.17% of GDP. Gross debt as a share of GDP has risen more than 10 percentage points since Lula took office in 2023.

The 6×1 Reform

Lula’s declared centerpiece campaign promise is abolishing the 6×1 work schedule, reducing the working week from 44 hours to 40 without pay cuts, with a phase to 36 hours over four years and two consecutive rest days. On April 14, he submitted the bill under urgent constitutional status requiring a vote within 45 days. New institutional relations minister Jose Guimaraes is steering it through Congress as his primary assignment.

Consignado Credit

The flagship payroll-deduction credit program, extended to 47 million private-sector workers, doubled its stock to R$83 billion by January 2026 with monthly originations growing 257%. But interest rates on the product jumped from 44% per year at launch to 57%, the opposite of the program’s intended effect. Default rates actually improved, falling from 7.5% to 5.6%, making the rate increases harder to justify. The Finance Ministry is proposing measures to cap rates, potentially using FGTS as collateral.

Scandals and Controversies

The INSS Fraud and Lulinha

A massive fraud at Brazil’s social security institute diverted at least R$6.3 billion from retirees through fake nonprofit organizations. The INSS president and Social Security Minister Carlos Lupi were both removed. The scandal deepened when a congressional inquiry found that Lula’s son, Fabio Luis Lula da Silva, known as Lulinha, moved R$19.5 million across 1,531 transactions between 2022 and 2026. Federal Police are investigating whether diverted INSS funds paid for his international travel. The inquiry’s final report recommended indicting 212 people and named Lulinha for four crimes including money laundering and corruption, but the government coalition voted 19 to 12 to reject the report.

The Betting Ban Reversal

In what critics call the most visible policy contradiction of Lula’s term, the government is moving to ban the online sports betting industry it created just 15 months ago. PT’s congressional caucus filed a bill calling for complete repeal of the Bets Law, with fines up to R$2 billion and prison terms of 2 to 8 years. Lula said he would have “already” closed the betting companies, citing growing family indebtedness. Analysts view the move as election positioning, part of the government’s “BBB” campaign rhetoric targeting bankers, billionaires, and bets, rather than genuine policy intent given fiscal constraints.

Foreign Policy: Balancing Washington, Beijing, and Brussels

Lula opened Hannover Messe 2026 alongside German Chancellor Friedrich Merz on April 20, signing 10 bilateral agreements covering defense, artificial intelligence, clean energy, and the bioeconomy. He forcefully defended Brazilian biofuels as key to the energy transition, telling the audience: “We are tired of being treated as a poor country.” The visit highlights the Mercosur-EU trade deal entering provisional force on May 1, creating a market of 720 million people after 26 years of negotiations.

With the United States, Lula is pursuing what analysts call a “portfolio strategy,” expanding diversification rather than choosing between Washington and Beijing. A $565 million rare earth deal with the U.S. and Vice President Vance’s Americas Critical Minerals Alliance sit alongside a February rare earths pact with India and deepening BRICS engagement. Brazil holds 23.3% of global rare earth reserves and 90% of world niobium production, giving Lula leverage that raw political alignment cannot match.

On Venezuela, following Maduro’s capture by U.S. forces in January 2026, Lula has sought a path for Petrobras to return through a debt-for-assets swap of Venezuela’s $1.8 billion in BNDES loans. He has told Reuters that Maduro should be tried in Venezuela, not abroad, maintaining Brazil’s non-intervention principles while pragmatically seeking U.S. consent for the Petrobras deal.

Coalition Politics and the Road to October

At least 15 ministers have left the government to run in the October elections, triggering a cabinet reshuffle. The government’s congressional arithmetic depends on the centrist Centrao parties, whose support costs R$40.8 billion in mandatory parliamentary amendments in the 2026 budget. Loyalty is fluid as Lula’s approval declines and elections approach.

Internal contradictions are surfacing. On the import tax on small international packages, Lula called it “unnecessary” and a burden on low-income families while Vice President Alckmin publicly defended it, creating an open government split with the Finance Ministry. The divide reflects the broader tension between economic orthodoxy and electoral politics that will define the remaining months of the campaign.

On the environment, Amazon deforestation fell 50% across Lula’s term to an 11-year low, but the achievement sits alongside the approval of Petrobras drilling licenses at the Amazon riverhead and plans to upgrade the BR-319 highway through intact rainforest. With COP30 held in Belem in November 2025, Lula presented himself as a rainforest champion while simultaneously expanding offshore oil exploration.

What to Watch

• The PT’s 8th Congress on April 24 to 26, which formally launches Lula’s pre-candidacy and defines the government platform for 2026
• The 6×1 work schedule vote, which must pass within 45 days under urgent status and is Lula’s primary legislative bet for the campaign
• Flavio Bolsonaro’s polling momentum: a continuation of 3 points per month gains would put him ahead by mid-year
• The Mercosur-EU trade deal entering force on May 1 and its economic impact on Brazilian exporters
• Whether the INSS scandal and Lulinha investigation produce new revelations ahead of the October vote

This article is part of The Rio Times’ guide series, offering in-depth analysis for investors, expats, and analysts tracking Latin America. This article does not constitute investment advice.

The government has entered the campaign with a narrow but stable polling lead. Datafolha puts Lula six points ahead of Flávio Bolsonaro, and a BTG/Nexus survey shows the same ordering in a runoff scenario. The official campaign period opened in mid-August with both camps already committed to their tickets.

Fiscal policy is the pitch to markets. Deputy finance minister Dario Durigan has promised a fiscal squeeze if Lula wins a further term, and the outline of a post-election package for 2027 is already circulating among investors. On trade, Lula and Trump have agreed to reopen tariff talks, easing one of the government’s larger external risks.

Not everything is running the government’s way. Prosecutors have asked that investigations into Lula’s son be moved out of the Supreme Court, a procedural fight that keeps a familiar line of attack in circulation through the campaign. Brussels is the other open front: Lula has asked the European Commission to protect Brazilian chicken exports, a file that touches farm-state politics as directly as it touches trade policy.

President Luiz Inácio Lula da Silva's government faces mounting challenges in mid-2026, with his approval rating dropping to 47% amid persistent inflation and a corruption scandal involving a close aide. The economy contracted by 0.2% in the second quarter, marking a technical recession, while the administration struggles to pass key fiscal reforms through a fragmented Congress. In a cabinet reshuffle, Finance Minister Fernando Haddad was replaced by Planning Minister Simone Tebet in an effort to restore market confidence.

• Lula's approval rating falls to 47% as Brazil economy slips into recession
• Brazil's Lula replaces finance minister in cabinet reshuffle to shore up confidence
• Corruption scandal engulfs Lula's inner circle as key aide resigns
• Brazil GDP contracts 0.2% in Q2, entering technical recession

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