Brazilian assets are stumbling into the new year as skepticism over President Luiz Inácio Lula da Silva's fiscal repair skills continues to grow.

What Happened: The Brazilian real has dropped nearly 22% against the U.S. dollar this year, according to Bloomberg.

The country's central bank, which spent some $20 billion in reserves over the course of two weeks to boost the currency,  met again on Monday and sold about $1.8 billion in a spot sale.

The real briefly perked up by just 0.4%, while government bond yields hit heights not seen since former Brazilian President Dilma Rousseff was removed from office in 2016.

Also, the Ibovespa equity index, the benchmark stock market index for the Brazilian Stock Exchange, is lagging behind almost all major peers.

Why It Matters: Lula da Silva's budget deficit has ballooned to a whopping 10% of gross domestic product. In other words, Brazil's government is spending significantly more than it earns in revenue.

This is not just a Brazilian problem. Emerging markets, for the most part, are currently grappling with geopolitical drama, and the wildcard of U.S. President-elect Donald Trump's upcoming policies.

Lula da Silva, who took office in 2023, does not have broad support. Pew Research estimates that 48% of Brazilians have a positive view of the 79-year-old politician.

It's unclear whether his pick for central bank chief, Gabriel Galipolo, will improve his favorability. Galípolo will begin his term as president of the Central Bank of Brazil on Jan. 1.

Brazilian equities are tracked by the iShares MSCI Brazil ETF (NYSE:EWZ), which jumped by 0.42% at last check Monday afternoon.