PT's electoral strategy and fiscal risk: what the market is pricing for 2026

The Workers' Party (PT) strategic push toward the evangelical electorate, aiming to establish over 1,000 specific committees by 2026, signals an attempt to reverse the deep political polarization in Brazil. For capital markets, this is not just political marketing but an indicator that the government is seeking to stabilize its support base to ensure governability amid rising fiscal uncertainty. With the Selic rate at 14.00% p.a. and the dollar trading at R$ 5.16, the market remains cautious. The core concern is that extraordinary spending to fund this political structure could further pressure the primary deficit, potentially unanchoring inflation expectations—currently at 4.44% (IPCA 12-month)—and forcing the Central Bank to maintain restrictive interest rates for longer. Investors are closely monitoring the budget execution, as political dynamics remain Brazil's primary risk asset.