Porto Alegre, Brazil

Left-wing criticism of Lula, including from respected, long-time militants and parliamentary deputies, is already dogging the new administration. Some of it is less serious, but expressive. At a news conference in Porto Alegre, a woman claiming to represent "Bakers without Borders" gave current PT president José Genoino a cream pie in the face to protest Lula's attendance at the Davos meeting. On the opposite front, the PT's proximity to the militant land-reform movement may cost it some middle-class support; while Lula triumphed nationwide, the PT lost its governorship of the state of Rio Grande do Sul, of which Porto Alegre is the capital, some say in part because of backlash from farmers. By satisfying the most militant, Lula will always alienate part of his coalition, as in the fight over pensions. Balancing these competing interests will require real skill and the maintenance of a high level of overall credibility.

Some critics clearly expect that to occur, pointing, for example, to the PT's openness to negotiate with the Bush White House on the US-initiated Free Trade Area of the Americas. Until recently some 500 Brazilian products, including all its key exports such as steel, coffee, citrus and soy, were excluded from easier import into the US market. Now reports indicate a possible willingness by the Bush Administration to lower tariffs on some of those items if Brazil sings the FTAA tune. The devil, of course, is still in the details.

These critics suggest that the moderate middle doesn't exist under current circumstances. In a foot race with a speeding automobile, some say, it doesn't matter how many gold-medal sprinters you have on your team. If Brazil's debt is in fact unpayable, the prospect of default could threaten the banking system and bury Lula's dreams for good. Indeed, at an evening soiree a few hours after his moving address in Porto Alegre (an industrial city of 1.3 million that has been run by the PT for the past fourteen years), an NGO activist and PT sympathizer predicted that the Lula administration "won't be any different from its predecessor." Zero Hunger, said this dissident, is mere "marketing" to neutralize the left opposition and distract attention away from the plans to proceed with business as usual and solidify all sorts of nefarious alliances. In this view, Lula cannot and will not resist whatever Washington and the IMF overlords dictate.

But Frei Betto, reflecting the low-key optimism of Lula's circle, argued that the forty-year social process that produced Lula is a source of great strength that may not be immediately apparent. "How is it possible to elect a lathe operator to the presidency of the republic?" the friar said with a smile. "Those who ask that question don't understand how over forty years we have built up this popular movement." Brazil, he said, can exercise enormous moral suasion, and the figure of Lula is symbolically compelling.

Furthermore, driving Brazil into bankruptcy is hardly an attractive prospect for some of the biggest banks in the world, like Citigroup, whose exposure here amounts to 10.2 percent of its total equity. If Brazil is pushed beyond its limits and tanks, investors are also liable to take a nasty hit. Twenty percent of all US exports go to Latin America, and US direct investment in the region amounts to $163 billion. The idea of watching Brazil nosedive, taking half the continent's GDP along with it, can't be comforting, even for Republican right ideologues put off by the Lula entourage. And this at least partially explains why Lula has--so far at least--found Washington far more accommodating than Salvador Allende did.

So for every sworn enemy, for every commentator already comparing him to Fidel, Lula has plenty of allies in the world of business, among them many members of the financial press. Conservative writers suggest that he might be capable of combining reform with stability, which is increasingly undermined by the ever-grosser inequalities Lula wants to address. Bad alternative examples abound, such as bankrupted Argentina, polarized Venezuela and the new populism in Ecuador, embodied in recently seated President Lucio Gutierrez, a politically untested former army officer. The conservatives' cautious, wait-and-see attitude reflects a grudging recognition that the orthodox models, while good for quick profits, have failed to resolve the continent's long-term structural problems. Brazil might provide, mused Britain's Prospect Magazine, "a social democratic model for Latin America."

One area where Lula, the IMF, the World Bank and Wall Street may find themselves in harmony is on the new government's determination to revamp Brazil's demented retirement system, termed by the newsweekly Veja as "Robin Hood in reverse." The country's coffers are currently drained of some $2 billion a year to cover the growing deficit caused by the civil service elite's pension arrangements. While private-sector retirees may get $100 a month, public servants average $650, military officers over $1,000 and federal judges $4,200. Lula and the PT's announcement that they would go after this system's skewed priorities immediately raised howls of protest from the vested interests. But the PT will be backed on this one by its erstwhile foes at the IMF, albeit in the name of cutting back government spending and "making markets work."

At the Porto Alegre cocktail party, the Lula skeptic had few takers for his business-as-usual analysis. Instead, all the others seemed sympathetic to the new government. "When Lula talks, it gets to you," said one partygoer, while others nodded in agreement. "He has a knack for touching a chord, and it's not calculated. His awkwardness, if anything, makes it more real." Said another Lula supporter, anthropology professor Veriano Terto, "People don't expect miracles, but there is a hopeful atmosphere, a change in mentality." If the PT makes gains at the next municipal elections, he said, its skill at administering innovative projects at the local level would generate important new support.

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