Lula, the contender. (Editor's Note).

Brazilian President Luiz Inacio Lula da Silva has come out swinging in the first months of his four-year term. As this month's cover story details, Lula has put forth an impressive series of initiatives in a very short time. Even the most skeptical Brazilians now want to believe in him. If only the honeymoon accorded all new politicians could last....

The previous administration left a massive public debt equal to 65% of Brazil's Gross Domestic Product. Watch closely how the new president's financial team deals with the so-called debt bomb, approximately US$17 billion of which comes due in April and May.

As tax, social security and political reforms go to Congress, support from Lula's own Partido dos Trabaihadores may splinter. His allies include the presidents of the upper and lower houses of Congress, and he has an agreement in principle with the 27 state governors in Brazil. Yet, when key issues go to vote in August and September, it's not clear whether his coalition will hold. He could end up hog-tied by opposition forces, like Chilean President Ricardo Lagos or Mexican President Vicente Fox.

The Brazilian diplomatic corps won early praise in Venezuela for resuming dialogue between the opposition and government and for engaging the United States on free trade issues. Positions in both cases have subsequently hardened. In breaking the logjam, the new Brazilian president will meet, or fall short of, the enormous expectations surrounding his administration.

Lula's upset electoral victory last year was the first in a series of surprises surrounding his presidency. A longtime political fighter, don't count him out. The former labor leader may put South America's largest country back on track to progress.

Mike Zeliner

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P.S. U.S. security measures are radically altering global transportation of goods. Learn more about the shipping sea change in our special report beginning on page 40.