Brazil, Buoyed by Oil and Agriculture, Becomes a Global Power

BRASILIA, BRAZIL—For decades, this well-endowed country was ritually dubbed the country of tomorrow, and yet the long-promised greatness of Brazil never materialized. Military dictatorships, wanton public spending, corruption, a chasm of income inequality, and an enervating pace of change all checked its rise. South America's largest country—both in terms of people and land—grew comfortable in the demure art of punching below its weight class. "Brazil," Charles de Gaulle once reportedly remarked, "is not a serious country."

Under President Luiz Inácio Lula da Silva, Brazil's economy is booming, including construction in vibrant São Paulo.

Nowadays, though, de Gaulle would be sorely mistaken. Years of stable democracy and economic policy—and a lot of good luck—are awakening the slumbering giant of South America and pulling it into the ranks of the world's big emerging powers. "We put our house in order," says Rubens Barbosa, former ambassador to Washington. Adds Brazilian Paulo Sotero, who directs the Brazil program at the Woodrow Wilson International Center for Scholars in Washington, "I think we have found the groove."

Serendipitous events have shaped Brazil's past year, particularly offshore finds of oil and gas that should vault it into the top 10 oil exporters a few years from now. It has also been commanding lofty prices for agricultural and other commodities like iron ore and copper. And financial institutions have blessed its debt with the coveted "investment grade" status, confirming Brazil's position as a solid destination for foreign capital. Brazil, says its president, Luiz Inácio Lula da Silva, has arrived at a "magical" moment.

On the ground here, growing optimism is reflected in various ways. Construction cranes sprout across the financial center, São Paulo. Credit is now far easier to get, and sales of cars, TVs, and cellphones have hit a torrid pace. One result: The traffic jams of São Paulo and Rio de Janeiro are now the stuff of lore.

Doubts over whether Brazil really belonged in the group of big emerging economies known as the BRICs—Brazil, Russia, India, and China—have passed. "Brazil is now worthy of being called a BRIC," says Riordan Roett, a Brazil expert at Johns Hopkins University. "It's turned a corner."

A foundation of Brazil's surge has been the consolidation of democracy after years of the military strongman rule that gripped much of Latin America. After the generals ceded power to a civilian government in 1985, the state began easing its hold on economic life. Moderation in government became a guiding instinct, with the hard left and right both marginalized. And compared with the other BRICs, Brazil has avoided stewing in nationalistic resentments aimed at others.

Economic stability. That moderation found a popular voice in Lula. A child of the working class with a fifth-grade education, the former union leader led his left-leaning Workers' Party to victory in 2002. But rather than launch the anticipated populist backlash against the economic reforms of his predecessor, the pragmatic Lula held on to them, consolidating the country's macroeconomic stability.

Brazil's old nemesis—a chaotic hyperinflation that used to range into four digits—has been vanquished. Laggardly growth has given way to 5 to 6 percent annual gains. Manufacturing has grown more diverse, and dynamic Brazil-based multinational companies are making waves. They include the world's No. 3 airplane maker, Embraer; oil giant Petrobras; the construction firm Odebrecht; mining concern Vale; steelmaker Gerdau; and beef processor JBS, which has acquired U.S.-based Swift. "This is a brand-new phenomenon," says Barbosa. "It's a revolution." Brazilian-managed beer giant InBev is even trying to buy America's iconic Budweiser.

On the edge of debt default just six years ago, Brazil became a net creditor for the first time this year. Stocks have been buoyant, with a historic upswing of foreign investment. "The banks love Lula, and business gets along with him quite well," says David Fleischer, a political analyst and professor emeritus at the University of Brasilia.

But Lula has also managed to reduce poverty in the nation of 190 million. Extreme poverty has been cut in half, and 20 million have advanced to the middle class. Under Lula, tax breaks and a program of direct subsidies to low-income families known as Bolsa Familia are credited with helping millions eat and keep a roof over their heads. The subsidies require that children attend school and receive their vaccinations. Deep into his second term, Lula is basking in 70 percent approval ratings.