This chapter discusses institutional deepening and the subsequent economic and political outcomes in the two terms of Lula and first term of Dilma. It also advances three main arguments. First, markets, as evidenced by exchange rate movements, did not anticipate the smooth political transition process from Cardoso to Lula. High uncertainty about a Lula presidency was the norm. After the initial shock resulting from the electoral results, Lula drastically reduced uncertainty by providing credible evidence that his administration would not abandon fiscal and monetary orthodoxy. Second, the new beliefs and institutions effectively constrained political and economic elites in their interaction, thereby enabling competitive processes in the political and economic arenas. The established political institutions locked-in and reinforced the direction of change by affecting the incentives facing individuals, organizations, and politicians.