The War On Poverty

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The carnival celebration that sambas through the streets of Rio de Janeiro this week is traditionally a showcase of coordinated public spirit. Class divisions give way to elaborate, egalitarian parades involving millions of people and months of preparation. But this year even Carnival became a reminder of Brazil's poverty-driven violent crime, as drug gangs spread terror through Rio's streets last week on the eve of the big party, killing at least 10. It was one more loud warning that to maintain order over the long term, Brazil has little choice but to tackle its epic social inequality, which is the worst in Latin America, if not the world.

Brazil's fractious and venal political system is usually the last place to look for real leadership on this or any other issue. But these days, alongside images of the Rio bloodshed, there's an uncommon sight that even Brazilian politicians apparently can't ignore: the nation's World Cup-champion football team Sporting Fome Zero (Zero Hunger) T shirts in support of leftist President Luiz In á cio Lula da Silva's ambitious antipoverty program. The team's gesture reflects, for the moment anyway, a rare sense of unified national purpose in Brazil. Last week's headlines also included all 27 of the country's state governors pledging to help Lula and his Workers' Party (PT) achieve crucial tax and pension reforms that will make it easier to fund his social projects — and even Brazil's dysfunctional Congress looks poised to cooperate. "I have to prove I'm capable of doing what previous Brazilian Presidents couldn't," said Lula, who took office Jan. 1. Lula's challenge is to make Brazilian government — which oversees Latin America's largest economy and the world's tenth-largest — work. If he can make that happen, he'll achieve something even more remarkable: a leftist Latin American government that works.

Lula, 57, is pursuing his own, more poverty-focused version of the Third Way, the socialist-capitalist hybrid once touted by European leaders like British Prime Minister Tony Blair. His ultimate goal is to improve the lives of the poor as well as the rich — something the free-market reforms that swept Latin America in the 1990s failed to do — and he's betting that fiscal responsibility will yield more wherewithal to fund a Brazilian "New Deal" that includes everything from hunger eradication to land titles for squatters. This mix of ideologies is also evident in Lula's cabinet. The President himself is a high school dropout, former metalworker and labor union leader, but his handpicked Central Bank president, Henrique Meirelles, is a Harvard graduate and former president of BankBoston. Welfare Minister Benedita da Silva rose from a squalid Rio de Janeiro favela, or slum, and was Brazil's first black female Senator, while Vice President José Alencar is a textile multimillionaire from the right-wing Liberal Party. Culture Minister Gilberto Gil, a pop music star, sports dreadlocks; Chief of Staff José Dirceu wears power suits and helped guide Lula from labor socialist to the more centrist "Brazilian Blair," as Brazilian and Wall Street pundits have taken to calling him.

So far the mix of social crusade and fiscal discipline has won Lula an 84% approval rating — even though he has yet to score a real achievement — and unexpected applause from Wall Street, where frantic fear of him during last year's election campaign helped push Brazil's currency, the real, down by more than 50% against the U.S. dollar. "The left in Brazil has learned the hard way," says Meirelles, referring to decades of populist economic catastrophes that were finally halted by Lula's predecessor, Fernando Henrique Cardoso.

While the markets are now more cheerful about Lula, the PT's radical wing (more than a quarter of the party) seems devastated by his move to the center. They've groused especially loudly about Meirelles and Finance Minister Antonio Palocci, a physician who, as a PT mayor in the '90s, engineered a very unsocialist privatization of local utilities. Both men have pledged to adhere to strict economic targets that the International Monetary Fund set last year in return for a $30 billion loan to Brazil. Senator Heloísa Helena, part of a PT group that wants Brazil to default on its $208 billion foreign debt, says she is "sad and disillusioned" by the government. "Did we win," she asks, "just to be the good little boy for international bankers?"