RS Elections: The fiscal risk adding to the national instability scenario

The race for Rio Grande do Sul's two Senate seats in 2026 begins at a critical moment when local economic policy ceases to be an isolated event and becomes an inseparable component of country risk. With 54 seats at stake in the Federal Senate, the gaúcho election gains relevance not only due to its ideological composition, but because of the direct impact that candidates' fiscal proposals will have on the perception of the State's solvency, which already faces severe structural challenges. The market, attentive to the trajectory of the commercial dollar, which has risen 2.12% over the last 7 days, reaching R$ 5.2236, is cautiously observing any sign of electoral populism that could further compromise budgetary discipline. The current macroeconomic scenario is tight, with the Selic rate fixed at 14.00% per year, remaining unchanged over the last 30 days. This rate, which serves as an anchor for the cost of credit and the pricing of risk assets, acts as a stabilization brake in an environment where the 12-month accumulated IPCA, at 4.44%, shows an accelerating trend from 4.23% compared to seven days ago. Investors must understand that the gaúcho election, inserted into this context of high interest rates, tends to be priced through the risk premium demanded for state public bonds and local corporate debt issuances, which react negatively to any sign of fiscal deterioration. This is the seventh consecutive alert issued by Clareza Capital regarding the impact of the 2026 regional elections on the stability of Brazilian assets, following the pattern previously observed in Paraná, Minas Gerais, Bahia, and Ceará. Applying the lens of credit and liquidity cycles, we perceive that we are in a phase of forced deceleration driven by restrictive monetary policy, where the scarcity of capital available for productive investments makes voters and the market extremely sensitive to excessive public spending proposals. Economic history demonstrates that, during periods of liquidity contraction, the promise of fiscal expansion by campaigning politicians frequently results in an immediate and negative reassessment of local financial asset prices. The root cause of electoral risk in 2026 lies in the attempt to balance public accounts under a Selic rate of 14.00% per year, which exponentially increases the cost of debt. If Senate candidates from Rio Grande do Sul opt for spending expansion platforms, the market will respond with an even sharper devaluation of the local currency, pushing the dollar above current levels of R$ 5.22. The risk for investors is real: electoral volatility is not just political noise, but a quantifiable variable that alters the present value of any future cash flow projected for companies with exposure to the gaúcho market. Over the next 30 days, the expectation is that the market will monitor candidates' positioning regarding the current fiscal framework, with the dollar serving as the main barometer of confidence. In a 90-day horizon, volatility is expected to increase as coalitions are defined, impacting the risk premium of NTN-Bs and private credit bonds. For a 180-day term, it is projected that the focus will shift from electoral rhetoric to the real viability of the proposals, with the 12-month IPCA functioning as the fundamental benchmark for maintaining or reducing the Selic rate, provided the external scenario suffers no additional shocks.