🗳 Election Observatory: Jun. 23

— by Paulo Abrão, executive director of the Washington Brazil Office

The Banco Master scandal has become a window into how Brazil's 2026 election is taking shape. What began as a liability for Flávio Bolsonaro's candidacy has now reached the government, as investigators turn to Senate Government Leader Jaques Wagner, one of President Luiz Inácio Lula da Silva's closest allies. 

The case underscores how tightly corruption, campaign finance and electoral competition will remain bound together through the race. Recent polling, meanwhile, suggests the early damage to Flávio Bolsonaro has leveled off, leaving the contest tightly fought.

The economy has moved back to the center of the campaign. Congress has passed measures carrying high fiscal costs, and the government and opposition are sharpening a dispute over rival claims to fiscal responsibility, growth and governing competence. Improving economic sentiment and rising consumer confidence have handed Lula a more favorable backdrop, even as questions over inflation, interest rates and fiscal sustainability persist.

Flávio Bolsonaro, intent on staking out a positive agenda and casting himself as a candidate of policy, has begun rolling out his platform. His proposals so far include a public-security plan built around expanding prison capacity, a suspension of the tax reform's rollout, a more aggressive privatization push and a two-percentage-point cut in the fiscal deficit as a share of GDP, achieved by de-indexing mandatory budget spending. Lula is wagering on a continued economic upturn and on the political payoff of the policies enacted under his administration.

On the institutional front, the courts continue to expand their reach. A special election in the state of Roraima delivered an unusual result: the winner, victorious by a wide margin, remains barred from office pending a final ruling. The trial of Eduardo Bolsonaro and a review of Jair Bolsonaro's house-arrest terms are keeping the judiciary at the heart of Brazil's politics.

The digital arena is shifting as well. The Supreme Court has firmed up new rules for online platforms, while the new leadership of the Superior Electoral Court has signaled a more restrained posture on content takedowns and the policing of disinformation. Fights over free expression, the integrity of information and technology regulation are set to grow louder as the campaign nears.

With just over three months to Election Day, the race is already being fought on several fronts at once. The result will turn not only on the candidates' ability to win votes but on their capacity to shape the environment in which those votes — especially those of independent and undecided Brazilians — will be contested.

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A few weeks ago, the Banco Master scandal battered Flávio Bolsonaro's campaign. Now it has become a worry for President Luiz Inácio Lula da Silva — not because any evidence ties him to the case, but because it implicates his Senate whip, Jaques Wagner. The Federal Police raided addresses linked to Wagner last week — he is suspected of advancing legislation to benefit Master in exchange for cash.

Lula's campaign wants Wagner out as whip, but he has signaled he will not step aside voluntarily. His personal closeness to the president gives the opposition fresh ammunition for the corruption card — and, for Flávio Bolsonaro, it blunts the force of his own ties to Master.

A new Datafolha poll released over the weekend suggests the initial damage to Flávio has leveled off. Lula's lead in runoff simulations stands at 4 points — which, just over three months from Election Day, leaves the race in toss-up territory.

Speaking at an event hosted by the National Confederation of Industry (CNI), Senator Flávio Bolsonaro renewed his pledge to suspend Brazil's tax overhaul if elected president. He says he does not oppose the reform itself, but wants to revisit the rules Congress approved — rules he argues were shaped by lobbying from powerful economic sectors. 

A revision, he said, would allow him to do a “real reform” that could bring the value-added tax down to 20%.

The reform merges several consumption levies into two VATs, one federal and one local, at a rate expected to hover around 28%. The final figure depends on how Congress sets a sin tax: the more exceptions lawmakers carve out, the higher the rate climbs.

Flávio is right that many sectoral lobbies have sought exemptions, and that plenty succeeded. But it is hard to see how sending the legislation back to square one would stop them from trying again.

The first vote of 2026 came in Roraima, Brazil's northernmost state, which held a special gubernatorial election after the Superior Electoral Court (TSE) annulled the 2022 result over a cash-for-votes scheme.

It produced a clear winner, but not a settled one. Arthur Henrique, the former mayor of the state capital, Boa Vista, took nearly 61% of the vote — only to have his ballots frozen as "annulled pending appeal" while the courts weigh his candidacy. House Speaker and interim Governor Soldado Sampaio finished second with 35.72%, and the Workers' Party's Nelita Frank drew just 3.40%.

Henrique resigned as mayor on April 2, short of the three-to-six-month window the Supreme Court imposed in May. On Friday, a court panel upheld that rule, 3 to 1. He is now betting the full bench breaks his way.

With the presidential election due in October, a candidate who won 60% of the vote but is kept from office by distant judges hands the far right a tidy grievance about a rigged system.

US interference in Brazil's elections is among the gravest sources of stress for President Luiz Inácio Lula da Silva's government, and the sovereignty card has been played to exhaustion. But if the polls are any guide, an endorsement from Donald Trump would barely move the needle.

For 65% of voters, Trump's backing of a presidential candidate this year would make no difference, according to a Datafolha survey released Saturday. Just 17% said such support would make them more inclined to vote for the candidate, while 15% said it would make them less so; 3% were unsure. 

The government's real worry, of course, is not an endorsement but something more drastic: possibly linked to a recent US move to designate Brazil's main criminal syndicates as foreign terrorist organizations.

Jair Bolsonaro's house arrest is up for review. The former Brazilian president — sentenced last year to more than 27 years for plotting a coup after losing the 2022 election — was allowed to serve his term at home in late March on humanitarian grounds, as he recovered from health problems and an emergency hospital stay in Brasília. But Justice Alexandre de Moraes called the arrangement exceptional and ordered a review within 90 days, a deadline that falls on Thursday.

First, though, Bolsonaro must answer to the civil police about a firearm belonging to him that was seized during a traffic stop. The weapon was being carried by a member of his institutional security detail. His lawyers say it was headed for repair, was deactivated and that his coup conviction carried no obligation to surrender it or cancel its registration.