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Brazil’s election race heats up

Brazil’s presidential election race has started to take centre stage as incumbent Jair Bolsonaro has narrowed the gap in the polls with front-runner Lula. Investors’ concerns about a shift to looser fiscal policy have faded but, with neither candidate likely to pursue the reforms needed to restore long-term debt sustainability or boost growth, the risk premium on Brazilian financial assets is more likely to rise than fall further this year.

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