On Monday, Lula promised high-level social spending, including an extension of the fuel tax exemption–both movesBrazilian markets responded with the Sao Paulo stock market index shedding 3.24%, according to Reuters, and a 6% loss for Petrobras. The real currency saw its value shaved by 1.5%.
Last week, Lula picked his political ally, Jean Paul Prates, as the new chief of Petrobras. Prates had accused the current state-run oil company leadership of driving Petrobras “off a cliff” by its singular focus on oil and gas and its meager attention to the energy transition,Under Prates, the new goal of Petrobras is to become a renewable energy giant–a notion that has not gone over well with investors.
Lula’s return to the presidency sees him replace populist far-right president Jair Bolsonaro, whose administration was mired in controversy. Lula’s own government was brought down by in Petrobras, which led to the impeachment of his hand-picked successor in 2016. Lula’s return sparks investors' fears not only of interventionist policies, but also of a re-run of the endemic corruption that crippled Petrobras.