World - Lula's Way

By TIM PADGETT AND ANDREW DOWNIE
With their endless string of pearl beaches, heavenly climate and sensual bossa nova culture, Brazilians consider themselves uniquely blessed. So when the first of two gigantic oil fields was discovered off the coast near Rio de Janeiro last fall, President Luiz Inácio Lula da Silva saw it simply as further proof of a celestial bond. "God," Lula gushed, "is Brazilian."
That kind of good fortune, divine or not, has helped Lula, 62, a former steelworkers' union leader and high school dropout, become Brazil's most popular President in a half-century. The oil find could make Brazil one of the world's largest crude producers, but even without that bounty, the economy has been growing as vigorously as a guava tree in the Amazon rain forest, allowing Brazil to start reducing its epic social inequality. Economic strength has also allowed the country to flex its diplomatic clout as the hemisphere's first real counterweight to the U.S. Lula led the creation of a bloc of developing nations, the G-20, to thwart U.S. and European hegemony in global trade talks. "I believe implicitly that Brazil has found its way," Lula told Time at the Planalto presidential palace in Brasília.
Now Lula is aiming for membership in the world's most exclusive club, the group of nations with permanent seats on the U.N. Security Council, part of his effort to "change the world's political and commercial geography." Brazil, the world's fifth most populous country, has begun lobbying more ardently for membership, and in his speech to the General Assembly in New York City on Sept. 23, Lula argued that the council's "distorted representation is an obstacle to the multilateral world we desire."
That may be a dream too far for the bearded, gravelly voiced President, but Lula's self-confidence is understandable: he has pulled off other unlikely feats. When he was first elected in 2002, many feared that Lula and his leftist Workers' Party would trash Brazil's emerging economy by pursuing socialist policies. Instead, Lula shrewdly embraced fiscal sobriety, strengthening Brazil's currency, the real, and reforming a bloated civil service pension system. Those policies and a windfall in commodities fueled a boom--the economy will grow 5% or more again this year, and inflation is historically low. Even his rivals acknowledge that despite his firebrand image, Lula has been a deft political operator. "The danger with Lula is that he can be rather messianic," says Rubens Ricúpero, a Finance Minister in the 1990s, when Lula opposed the market reforms he now backs. "But he's one of the most intelligent politicians in the world."
Just as important, Lula has steered Brazil between the Scylla and Charybdis of the right-wing Bush Administration and left-wing Venezuelan President Hugo Chávez, whose clashes have rocked Latin America. In Washington, Lula is seen as an important ally. "Our relationship is solid--there are lots of points of convergence," says Christopher McMullen, Deputy Assistant Secretary of State for Western Hemisphere Affairs. But while Lula bonds with Bush over biofuels--Brazil is a global pioneer in that area--he's also huddling with Chávez over plans to turn South America into an integrated economic bloc along the lines of the European Union. Lula, in fact, is one of the few leaders both Bush and Chávez will listen to. "I joke with them and tell them their fight is very weird," Lula says, "because oil makes them so dependent on each other."
Lula's biggest challenge, though, has been bridging the huge chasm between Brazil's rich and poor--a gap that makes the country look more like the feudal monarchy it was in the 19th century than the modern democracy it wants to be in the 21st. Lula, who as an impoverished kid shined shoes on the streets of São Paulo, has pumped more than $100 billion into social projects ranging from microfinance to grants for families who keep their kids in school. As a result, 52% of Brazil's 190 million people are now designated as middle class, up from 43% in 2002. At the same time, he hopes to make Brazil more business friendly with a $280 billion Growth Acceleration Program to boost infrastructure and cut taxes. "It's called doing things right," Lula says, "allowing the rich to earn money with their investments and allowing the poor to participate in economic growth."
For all his successes, though, some of Brazil's oldest maladies have proved stubbornly resistant to Lula's ministrations. Official corruption remains rampant; Lula blames a fetid political culture "that has been there for centuries," but that's an old excuse. One of his election promises was to clean up Brazilian politics, and with two years to go--rules forbid him to seek a third consecutive term--he'll have to start wielding the broom vigorously. The education system, despite increased funding and access, is still an embarrassment: Brazilian students continue to score at the bottom on international math and reading tests. Taxes are exorbitant, Amazon deforestation is rising again, and Brazil has one of the world's most wasteful public bureaucracies. To fix all those problems in two years would require much more divine intervention.