The shift to the right across South America has been stopped. One of President Trump’s key regional allies has been defeated. The global left, and most of the centre, has been celebrating the victory of President Lula over Flávio Bolsonaro in a closely fought election this weekend. There is just one problem. As the brutal sell-off of financial assets demonstrated, Brazil has also voted for economic chaos. That rarely ends well.

The election may tip Brazil into a full-scale crisis

The election may tip Brazil into a full-scale crisis

While the left were toasting victory on Monday morning, investors were furiously dumping Brazilian equities and, more importantly, debt. On Monday the Bovespa – Brazil’s main stock market index – fell by over 15 percent. The Brazilian real lost as much as a tenth of its value, its worst trading day since 1999. Meanwhile, the ten-year local bond yield jumped from 13 percent to more than 15 percent in a single session. Amid the rout, the country cancelled two debt auctions. It was ugly, and shows little sign of calming........

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