RIO DE JANEIRO - When a former peanut vendor and radical union leader with little schooling became Brazil's president in 2003, many believed Latin America's underperforming giant had shot itself in the foot once again.

Brazil's financial markets had plunged over the previous year at the thought of Luiz Inacio Lula da Silva leading the economy, and Wall Street experts feared there could be worse to come.

Lula's response was to remind investors in his trademark folksy style that not everyone with scruffy facial hair was a communist.

They forget that Jesus Christ had a beard, he said.

Seven years on, Lula takes his place at a summit of top emerging powers in Russia next week with few disputing his role as a savior for Brazil's economy and its global standing.

At home, his conservative economic policies long ago won over panicky investors while social programs that helped lift around 19 million people out of poverty have ensured approval ratings above 80 percent, the envy of many other leaders.

A five-year economic boom fueled by commodities exports, skillful diplomacy, and Lula's gruff charm that plays as well at world summits as in Rio de Janeiro slums have helped Brazil become a diplomatic heavyweight and a developing-world leader.

In an interview with Reuters on Wednesday, Lula reeled off a list of countries he had been the first Brazilian leader to visit since the 19th century, saying the goal of his active diplomacy was to find opportunities for Brazilian businesses.

In business, we have to find new partners and find opportunities that exist. We've been doing this for six years already and the result has been extraordinary, he said.

Unburdened by major security concerns, unlike fellow BRIC emerging powers Russia, India and China, the 63-year-old Lula has expanded Brazil's role seemingly without making enemies.

U.S. President Barack Obama recently called Lula my man, even as fellow developing countries increasingly look to Brazil to represent their interests against the United States and other rich countries in world trade and economic summits.

He took every opportunity that was going, said Richard Bourne, a senior research fellow at London's Institute of Commonwealth Studies and the author of a book on Lula.

He has come to be seen as a serious player, but not just him -- Brazil has come to be seen as a serious player.


It is a far cry from 2002, when some economists and fund managers said Lula would be disastrous for the economy and his opponents warned his lack of education and English language skills would be ruinous for Brazil's diplomatic stature.

The big question then was whether Brazil would go the same way as Argentina, which was in a deep economic crisis after defaulting on its debt.

By 2006, Brazil had paid off its International Monetary Fund loans early and this week it pledged to lend the IMF $10 billion [ID:nN10447422]. Lula's orthodox policies have alienated some of his Workers' Party colleagues but clearly guaranteed economic stability.

Brazil last year won coveted investment grade ratings and it has escaped the worst of the world financial crisis.

Lula has also used his magnetism, drive and compelling life story -- the seventh child of a poor, broken family who lost a finger in a factory lathe and become Brazil's first working-class leader. [nN10253747]

Brazil's problem in the past had always been, even when it was performing well, it was such an unequal country and had no moral underpinnings for its desire for some level of international influence, said Peter Hakim, president of the Inter-American Dialogue in Washington. Lula's election and his ability to govern showed the vibrancy of Brazil.

Lula has taken every advantage of the goodwill with a hyperactive foreign policy that has seen him visit 75 countries and open 33 embassies, 14 of them in Africa as he pushes a south-south agenda.

He has spearheaded developing countries' efforts to get rich countries to dismantle farm subsidies, engaged more in global climate talks, and taken a lead role in demanding more developing-country clout in the wake of the financial crisis.

World-class companies like oil firm Petrobras and miner Vale have flourished under Lula, helping spread Brazilian investments and influence in Latin America and beyond.

An equally hectic schedule in Brazil, be it visiting slums, opening public works projects or giving his weekly radio broadcast, has helped maintain his popularity.

His charisma and his ability to mobilize the poor have been remarkable, said Kenneth Maxwell, director of the Brazil Studies Program at the Center for Latin American Studies at Harvard University.


Maxwell said Lula and his team came to power fully expecting another financial meltdown given Brazil's recent history of crises, leading them to avoid grandiose projects and to stockpile foreign reserves. That left his government in good stead when a global crisis finally came last year.

After a stuttering start, when he was over-optimistic in saying the crisis would arrive in Brazil only as a ripple, Lula has since shown his ability to turn an unpromising situation to his advantage.

He has used it to take a stand against the global economic status quo, backing moves to boost the role of the broad G20 group and pushing for next week's first BRIC summit.

Critics point to Lula's failure to tackle long-standing problems that hamper Brazil such as its stifling bureaucracy, inefficient public spending, and the corruption that rocked his own government in a major scandal in 2005. [nN10396724]

He was never a man for detail -- that is one of his great weaknesses, said Bourne.

But one measure of Lula's success is that now it is the prospect of him leaving power that causes jitters. He cannot run for a third term in October 2010 elections, and none of his likely successors appear able to match his broad appeal.

Hakim said Brazil had been lucky enough to have two successive leaders who many judge the most successful elected presidents in Latin America's history. Lula's predecessor Fernando Henrique Cardoso was a widely respected leader who paved the way for Lula with crucial economic reforms.

The risk is that without a heavyweight, charismatic leader, a political system with fractious, weak parties and prone to corruption may be harder to control.

What happens when Brazil gets a normal leader? I don't know, said Hakim. Politics are very erratic in Brazil and it's very hard to manage them.

(Additional reporting by Todd Benson, Raymond Colitt, Natuza Nery and Ana Paula Paiva; editing by Kieran Murray)