Bolsonaro’s departure from the scene tends to deepen differences on the right, says Genta

The arrest of former president Jair Bolsonaro added a new layer of uncertainty to the Brazilian political environment and should have a direct impact on the economy in the coming months.

The assessment is from Fernando Genta, chief economist at XP Asset, for whom the isolation of the former president tends to deepen internal differences on the right and open a new dispute over the definition of the 2026 candidacies.

“It is a fundamental electoral campaign, and this process tends to be noisy,” he stated.

Despite still being far from the election, polls show a level of approval for the government that historically favors re-elections — a figure that, although not very predictive at this moment, helps to shape expectations.

At the same time, issues such as corruption and violence, intensified after the operation in Rio de Janeiro, returned to the center of public debate and expose vulnerabilities in federal management in these sectors.

In the fiscal field, Genta projects that the government should change the target of state-owned companies to accommodate a larger deficit, a move that, in practice, also adjusts the Union’s fiscal target.

Other than that, the economist does not expect any relevant movements in Congress until the end of the year, reinforcing the perception of a more closed political environment.

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Inflation continues to surprise positively

Among economic factors, inflation continues to surprise positively, especially in food and industrial goods — benefiting from the more favorable exchange rate and deflation exported from China.

XP maintains a projection of 4.5% for the Broad National Consumer Price Index (IPCA) of 2025, but Genta warns that the current scenario is the result of a “perfect combination”, difficult to repeat in the following year.

One of the components that has pulled the cores downward is the drop in mandatory car insurance, which has accumulated a decline of 9.5% in three months. “It is a historically stable item and this drop should not be repeated indefinitely”, he considered. According to him, the Central Bank itself has a similar perception and assesses that the improvement is temporary.

Slow disinflation postpones interest cuts

The reading that disinflation is occurring at a slower pace than expected also gained strength. The president of the BC, Gabriel Galípolo, has already stated that the variables are heading “in the right direction, but at a slower speed than desired”.

For XP, given this situation and the uncertainty regarding the replacements for directors Joe Glenn and Renato Gomes — who will leave Copom in December — an interest rate cut in January has become unlikely.

The combination of political noise, fiscal uncertainty and more complex inflationary dynamics reinforces analysts’ caution.

For Genta, the country enters 2026 in a more challenging scenario, in which political decisions will have a decisive impact on the mood of the markets and the trajectory of the economy.