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."
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.
Brazil's turnaround is also underwritten by its abundance of natural resources and prowess in agriculture. In a world clamoring for more energy and food, Brazil has plenty of both.
Under the Atlantic south of Rio—and then beneath 10,000 feet of sand and rock and 6,600 feet of salt—lies an oil and gas field called Tupi, judged last year to have between 5 billion and 8 billion recoverable barrels. It was the largest global find since 2000 in Kazakhstan. Then came the icing on the cake: news of another massive, untapped offshore field known as Carioca that estimates suggest might hold as much as 33 billion barrels of oil. One official compares Brazil of the future to oil powers like Venezuela and Saudi Arabia.
Meanwhile, back on land, the news is nearly as good. Brazil has emerged as the world's leading exporter of biofuels, the result of near-ideal growing conditions for sugar cane and a decades-long national drive to develop ethanol. The country's vast savannas have also become the launching pad for Brazil to become a global agricultural powerhouse. Brazil is now the No.1 world exporter of beef, poultry, sugar, coffee, and orange juice—and is gaining in soybeans, corn, and pork. Scientific breakthroughs in tropical farming and an amount of arable land unmatched on the planet could, in time, make the country the leading global breadbasket.
Nonetheless, Brazil's new confidence is tempered with a sense that its rise remains vulnerable. Inadequate education and training mean there are too few Brazilian engineers, programmers, and other experts to sustain growth. The infrastructure of roads, railways, and ports falls well short of what an economic great power will need. The political will to fund the overhaul—and proceed with more economic reforms—is weak. High taxes and political corruption still hinder the country's rise. And intense pockets of crime—famously in the slums, or favelas, of big cities like Rio—along with outbreaks of mosquito-born dengue fever suggest the nation's ascendance has a long way to go.
Still, with its new economic clout, Brazil is edging out onto the world stage. It midwifed this year a process of economic integration among South American nations, and it is leading efforts to create a South American Defense Council. Lula is traveling the world, and Brasilia is stepping up foreign aid. "Lula is seen as a balancer for the region," says an official in Brasilia.
Warm relations. On a continent that has veered to the left—with some strident anti-U.S. notes—Brazil exerts influence that Washington welcomes. Brazil, says Thomas Shannon, assistant secretary of state for Western Hemisphere affairs, "is a natural stabilizing force in the region."
President Bush is said to count relations with Brazil as a success and, according to the U.S. ambassador in Brasilia, Clifford Sobel, Brazil has been added to a list of allies and friendly states most important to America. Says Shannon, "How we work with Brazil is going to be as important as how we work with China and how we work with India."
Bush and Lula have developed an amiable relationship—unexpectedly so, given such different ideologies and class backgrounds. Lula uses sports metaphors in private, and both joke about dealing with legislators and the news media. "They have a similar way of being very direct," says Brazilian Ambassador to the United States Antonio Patriota. "It helps to grease the relationship," adds Marco Aurélio Garcia, Lula's top foreign policy adviser.
Some officials also see a moderate but strong Brazil as a counterweight to the region's anti-U.S. antagonists, headlined by Hugo Chávez of oil-rich Venezuela. Lula appears to find Chávez's Yankee-baiting off-putting. But he and his advisers have made clear, publicly and privately, that they want no part of an anti-Venezuela front. "This is something we resist very much," says Patriota.
And discomfort with playing the role of regional leader runs deep in Brazil. It even has a cultural side. "It's un-Brazilian to proclaim leadership," says Sotero.
Lula says he aspires to lead only his own country. Brazilian officials are intent on avoiding moves that stir up populist rabble-rousing against Brazil by neighbors. Such tendencies have flared at times in Uruguay, Paraguay, Bolivia, and even Argentina. The lesson officials here take away: The neighborhood big guy needs to tread lightly. Brazil, they say, should stick with peaceable soft power.
And yet, the ever cautious Brazilians are finally permitting themselves some optimism, thinking their time may be at hand. Quips Fleischer of the University of Brasilia, "It's no longer the country of the day after tomorrow but maybe of tomorrow—or later tonight."