Lula needs a miracle.

SAO PAULO, BRAZIL

Up until this presidential election, there were only three things that assured Brazil a place in the international news: half-naked women dressed in shiny costumes and parading on a float in Rio during Carnival, a star-studded soccer team winning the World Cup for the nth time, and a severe economic crisis usually ending in a huge International Monetary Fund (IMF) bailout. This year, it's added a fourth.

His name is Luiz Inacio Lula da Silva. "Lula," as he's commonly known, is a former metalworker and the presidential candidate for Brazil's leftist Partido dos Trabalhadores (P.T.), or Workers Party. He's not new to politics or the country. In fact, this is the fourth time he's run for president. With the possible exception of Venezuelan President Hugo Chavez, Lula has done more to upset the balance of power in the region, and perhaps the hemisphere, than any Latin American politician in the last twenty years.

But Lula is facing a formidable opponent. Not Jose Serra, the handpicked successor of President Fernando Henrique Cardoso. Not Ciro Gomes, a former Cardoso aide who is also mounting a strong leftwing challenge. No, Lula's chief opponent is the world financial community. Every time he has gone up in the polls, the country's currency has dropped in value, and its bonds have been downgraded. Goldman Sachs even created a "Lula-meter" to quantify the effect of the candidate's rise in the polls, which has been making almost as many headlines as the country's fifth World Cup title. As George Soros, the former Hungarian currency speculator turned author and philanthropist, told a reporter from a leading Brazilian daily, Folha de S. Paulo, "In Ancient Rome, only the Romans voted. In modern global capitalism, only the Americans vote, not the Brazilians."

Lula has spent his whole career taking on an unforgiving economic market. He represents an entire region where frustration with finicky foreign investors and international banks is building like pressure inside a volcano. Argentines went through five presidents after their economy collapsed late last year. Uruguayans went straight to the stores and started looting after Argentina's woes spread north. In Peru and Paraguay, protesters blocked privatizations of state-run companies earlier this year. In Venezuela, Chavez continues to openly defy the international community by leading OPEC in curbing production and maintaining high oil prices. Bolivia almost elected a coca-picker as its president. And Marxist forces in Colombia have relied on the economic despair the model has created to grow exponentially. Even in Brazil, the pro-market Cardoso publicly chastised investors following a huge run on the Brazilian currency in early August.

The first round of the election is October 6, and the second round runoff is set for October 27.

Lula may not win, but he articulates the region's cry for self-determination, and his popularity speaks volumes about the rising level of anger against the new world economic order. He and Soros, who has become an outspoken critic of the free market that he benefited from for years, actually see eye to eye: As the multimillionaire recently wrote in the Financial Times, "If international financial markets take precedence over the democratic process, there is something wrong with the system."

The first time I saw Lula speak, he was at his second home of sorts. His former colleagues at the metalworkers' union had organized a presidential rally at a soccer stadium in Sao Bernardo, a suburb of Sao Paulo. Sao Bernardo and six adjoining towns make up what's called the "ABC," the industrial hub of the city where car manufacturers such as Volkswagen, Mercedes, and Ford have had factories since the 1960s. Lula lost a finger making motors in the ABC, then helped turn the metalworkers into the strongest labor union in the country.

The stadium, called "May Day," was the site of dozens of rallies during the waning years of Brazil's military dictatorship in the late 1970s. One longtime union member told me that during strikes 200,000 people would fill the seats of May Day while military planes would do fly-bys to intimidate the crowd. Later, the military police threw Lula and other labor leaders into jail. But it was the dictatorship's last gasp. In the early 1980s, as the metal workers and other sectors formed the P.T., the military gave way to democratic elections.

Today, Lula doesn't look like a metalworker. As he stepped onto the stage in front of the few hundred people gathered on that overcast day, the short and stocky leader wore a dark-blue cotton suit, a gray cardigan, and a French blue button-down. He'd trimmed his beard and fixed his teeth. With white streaks in his hair, he gave the appearance of an elder statesman. He's also hired a fancy P.R. firm and a Playboy photographer to shoot a sparkling image of him, which is now displayed on billboards across the country.

It is part of Lula's new, debt-paying image. Brazil is facing down a staggering $265 billion public debt, an incredible 55 percent of the country's annual gross domestic product. When Lula got started in politics, he said Brazil shouldn't pay the debt. A few years ago, he said there should be a "moratorium." Finally, during this campaign, he's said the government should "renegotiate." You could almost hear him choking on the words as they came out of his mouth. The debt issue is illustrative of the difficult balance Lula must strike between his two clashing worlds: While his critics outside the party say his old views are still costing him with the financial community, his new views put him at odds with many hard-core members of the P.T.

In Sao Bernardo that day, a few hundred of these stalwarts piled up towards the front of the stage carrying pro-P.T. placards; others sat in patches around the oval stadium spreading out ABC Metal Worker banners. They dressed like Lula used to dress for his political rallies--jeans and T-shirts. Some of them were drunk. Most were trying to find a little bit of enthusiasm for an event they'd probably seen replayed a dozen times, save for Lula's new costume. A few of Lula's cohorts gave militant speeches about "fighting for Brazil," and not letting the international community dictate the terms of the country's future. The crowd then revved it up a few notches with a chant, "Uuump, ABC!" to the tune of the old rap song "Whoomp, there it is!"

Lula smiled at the cheers, then gave a short, somber talk about the bad old days. "In my time, it was a war," he told the crowd with his customary lisp, the part of his personality he can't dress over. "To have a strike, we would have to stand out in front of the factory and just push people around until it happened. Just to bring in the union newspaper, you had to put it in your sock."

Lula was born in the northeast state of Pernambuco. The northeast is Brazil s Haiti: Poverty levels rival that of the hemisphere's poorest nation and political influence is bought and sold like tuna. Lula's first presidential opponent in 1989 was Fernando Collor, whose family comes from the neighboring state of Alagoas. Many believed it was Lula's best chance to win. But Collor had a large war chest, a fleet of Lear jets to help him campaign, and an effective way to traffic influence through one of the family businesses, television. During the second round of the elections, the largest media conglomerate, Globo, held a series of television debates between the two candidates. The networks nightly newscast highlighted the worst of the oft-scraggly Lula and the best of the GQ-like Collor. Lula lost by just six percentage points. Collor went on to empty the coffers until Congress impeached him in 1992.

Lula's family moved to Sao Paulo in the early 1950s, when masses of rural poor from the northeast migrated south to look for work in the burgeoning industrial sector. It was Brazil's first attempt to become a developing nation (many more would follow, leading to a famous Brazilian saying, "Brazil, the country of the future, always has been and always will be"). The government began a strategy of "import-substitution"--lowering tariffs for heavy machinery and increasing them for consumer goods in an effort to develop the local economy. The car manufacturing area of the ABC was the epicenter of this strategy.

Lula got his first job in the metal factories in the ABC when he was fourteen. He joined his first union in the mid-1960s, but tragedy befell him. He lost his first wife and child as she was giving birth. He later remarried and returned to the union, and between 1975 and 1978 he was the head of the ABC Metalworkers. Black and white pictures on the P.T.'s flashy web site show a paunchy young leader on a skinny platform surrounded by workers. It was the heyday of the car-manufacturing era. There were 140,000 metalworkers in the ABC alone, and 80 percent of them formed part of the union. Today, that work force has been cut in half, as has the union. But it's still the vanguard.

On a typically hazy day in Sao Paulo, I caught a bus at the edge of the city to visit the ABC union headquarters. To an outsider like myself, Sao Paulo is an endless string of ten-story apartment buildings, six-lane avenues, and more cars than I could fathom. There are ten million people in the city and five million automobiles. The vast majority are foreign models manufactured in Brazil, the result of the import-substitution policy of the 1950s. For a while, the strategy worked: Industry grew at staggering rates but so did the country's foreign debt. As the payments mounted, the government's feverish attempts to pay them did, as well. Inflation began to spiral out of control. The economy would falter, then the government would ask for more loans. It's a pattern that has proven difficult to break.

I got out at the last bus stop in Sao Bernardo. Towering on a hill across a multilane avenue was the five-story union headquarters. A white ABC Metalworkers sign adorned the top. Inside, it was well organized and clean. The ABC union had a health clinic, a small library, and an education center. "We can't just stay in the factory," union leader and P.T. militant Francisco Duarte told me as we sat down in his office. "We have to go to the neighborhoods and organize."

There were, however, problems. A P.T. mayor was murdered earlier this year in Santa Andre, one of the ABC cities, under mysterious circumstances. Initial investigations point to infighting following a kickback scheme. And then, of course, there was the lingering question of what to do about the public debt. Francisco told me he was a pragmatist on the debt question. "I don't think that we have to sell Brazil to pay the debt," he began. "But I can't understand this idea of not paying." He added that the majority of the union was with Lula. "But the party is big .... [and] there are some who think that even negotiating is ridiculous."

The debt is certainly Lula's Achilles' heal, but it's inflation, or the threat of it, that may determine the outcome of this election. When I first visited Brazil in 1993, inflation was at about 30 percent per month. It was a dizzying way to live. People spent money as fast as they could get it and prayed their salaries kept pace with their rent.

It's only within this context that you can understand President Cardoso's popularity and the Brazilians' fear of anything that may shake the system he created. Cardoso, with help from one of Lula's two opponents, Ciro Gomes, started the so-called Plano Real, a currency control system that slowed inflation to a mere 10 percent per year and reinvigorated the economy. The Brazilians were so content with the Plan they elected Cardoso once, then changed the constitution so they could elect him again, all the while ignoring the fact that Cardoso's obsession with keeping inflation under control had created a series of other problems. High local interest rates forced many small businesses into bankruptcy. Public spending--much of which was going toward exorbitant pensions and social security-was out of control. Wealthy Brazilians were deftly avoiding taxes by falsifying their earnings and putting their money into offshore accounts. In 1999, investors made a run at Brazil's currency, the real, which suffered its first major tumble when the government stopped propping up its value.

Since then, things have only gotten worse. Brazil's foreign reserves have dipped to dangerous levels, and the country's credit rating has sunk. Scariest of all, Cardoso's baby, the real, has slipped to three to one versus the dollar--its lowest level since Cardoso launched the Plan. This has sparked fears that hyperinflation may be on the horizon again.

In a remarkable bit of spin, the administration began saying that Brazil was headed for an Argentine-style crash if it elected an "incompetent president" (read: Lula). The news media complied with images of wealthy Argentines eating chicken feet instead of filet mignon. The international banks were quick to follow. First came the "Lula-meter," then Soros's comments, then the P.T. candidate dipped in the polls. The strategy, it seemed, was working.

Lula has tried to respond to what he's calling "economic terrorism." I saw him speak to a powerful business association in Sao Paulo, the Insituto Ethos, which was hosting talks for all the candidates. The meeting took place in a posh conference hall laced with mahogany and overrun with white-coated waiters serving pastries. Wearing a gray silk suit, a light blue button-down, and a dark blue tie--the Armani look, some have said--Lula took his place in front of the businessmen. He didn't seem nervous, even though the group in front of him represented a hefty chunk of the country's gross domestic product.

At the podium, Lula immediately struck a conciliatory tone. He spoke of the need to create an alliance with the business community. "We need a miracle," he began. "With your business sense and our political disposition, we can achieve it." He then went on the counterattack. "If you want to continue with the same thing that's already there," he said, "working every day to generate a trade surplus, tending to the needs of the IMF, then the P.T. doesn't need to win."

After Lula's speech at the Instituto, some business leaders told me they were not convinced that Lula or his party had really changed. "I was impressed, but he's not the candidate. The party is the candidate, and the party is very radical," one of them told me. He was referring to the former Trotskyites and Communists who have a vocal minority in the P.T. "He's definitely changed," Henrique Dias, a major coffee producer, said to me. "He knows that the world isn't Castro anymore. The country is also much more mature. But he's like a three dollar bill. You know, the one that doesn't exist."

While Lula the debt-payer makes his rounds with the country's business leaders, Lula the P.T. stalwart is scrambling to keep the party together, especially as it continues its spectacular rate of growth. The P.T. currently has 188 mayors, five governors, eighty-eight state deputies, eight senators, fifty-seven congressmen, and more than 2,500 city councilmen. Lula likes to say his party governs fifty-one million of Brazil's 175 million people. One of its strongholds is the country's southern-most capital, Porto Alegre, in the state of Rio Grande do Sul.

What a friend of mine calls "tweed Communists"--academics, white collar professionals, and militant students--have run Porto Alegre for the last fourteen years. During that time, the city has built a reputation throughout Brazil as an organized, safe, and extremely democratic city. Shortly after it took over, the P.T. pioneered the "participatory budget," a process whereby citizens decide on where between 10 to 15 percent of the budget goes. It's by far the most popular thing about the government.

When I visited the city, one of the P.T. community organizers, Marlene Stefen, took me to see a couple of the projects. We went to see a sewing cooperative in an outlying neighborhood. The government was "renting" out a space in a refurbished building for the cooperative for five dollars a month as part of the "participatory budget" project. There, I started to get the sense of how the party might be divided over things like the debt.

The head of the cooperative, a thin, curly-haired woman named Neusa Nespolo, and five others were making T-shirts and uniforms for unions, political parties, and church groups. Some of the shirts had team names on them, others anti-free-trade slogans. "We know the U.S. is the one that benefits from these agreements," Neusa explained to me as her colleagues spray-painted a design on one of the shirts. "We can't talk about these things as if everyone were equal because we're an underdeveloped country." Neusa was against paying the debt. "We can't give up what got us here just to have a chance to win," she told me, referring to Lula's new "renegotiation" stance. Marlene nodded in agreement.

Later that day, Marlene and I joined a P.T. march through central Porto Alegre. Lula was in the city, and Tarso Genro, the new face of the party, was launching his campaign for governor of the state. Genro was a former city mayor, a lawyer, and a pragmatist. "The left must have the humility," he once told a journalist, "to realize that it lacks a socialist project capable of winning over a broad majority, of achieving hegemony over them." It was this type of position that was alienating the Neusas and Marlenes of the party. But when P.T. leaders screamed their slogans--"We don't believe in your polls. We've got militants who fight and win"--Marlene got goose bumps.

The march culminated at the central plaza. As party leaders took the stage, the crowd of about 5,000 people roared, and P.T. flags rolled back and forth. Lula, the old guard, was standing with Genro, the new: the radical side-by-side with the moderate. On stage, both leaders were chummy. But in the end, it was Lula who gave way to Tarso. "I'm not here to talk about my campaign," he'd said earlier in the day, "only Tarso's." As the rally picked up steam, Lula stepped aside, swallowed hard, and let the pragmatist of the party speak.

The P.T. still tries to be careful not to anger anyone with deep pockets, but sometimes party leaders just can't help themselves. It's no fun being held hostage by the world financial community. Every little presidential comment affects the price of milk. Every time your central bank president sneezes, the value of your house goes down. With every visit from the U.S. Treasury Department representative or an IMF executive, you have to watch the news in front of a bank machine lest anyone say something that might send your currency tumbling again. The last P.T. rep who went to Washington was party president Jose Dirceu--a former Communist militant who was arrested during the dictatorship, then became one of the prisoners exchanged for the kidnapped U.S. ambassador in 1969. When he returned, he told Folha that the P.T. asked investors for a "cease fire" on the debt issue. When the reporter pressed him about what that meant, he fired back, "Not to attack Brazil, not cut Brazil's credit off, let Brazil decide who its president is."

Yet, the world financial community continues to play a dominant role but may not be getting the desired results. In early August, the IMF announced a $30 billion bailout package, the biggest in the IMF's history, for Brazil, with three quarters of the money to arrive after the election. Ironically, the IMF pact was designed to help Serra and the party in power. Serra, who was running a distant third, did go up a bit in the next poll. But something unexpected also happened: Lula jumped a few points himself, and the seemingly impossible seemed possible again. If he keeps this up, Lula might even beat the half-naked carnival woman onto the front page, and Brazil could become the country of the future again.

Steven Dudley is a freelance journalist based in Colombia. He wrote "?Adios Presidente? Will Chavez Go the Way of Allende?" in the April issue. He's currently finishing a book on the war in Colombia to be published by Routledge.