Instead of caving in to the so-called imperatives of globalisation, as so many other developing nations have done, Lula has led Brazil to assert its autonomy and independence.

Time magazine has just named President Luiz Inacio Lula da Silva the world's most influential leader. Barack Obama is ranked fourth. Prime Minister Manmohan Singh is 19th (there are only four heads of state or government in the list). This is an exercise somewhat different from the traditional “Person of the Year” selection Time engages in each December, but highly revealing nonetheless. It is defined as “not about the influence of power, but about the power of influence.” Time has never selected a Latin American leader as person of the year. In India, Mahatma Gandhi made it in 1930.

Brazil, once known as “the country of the future” that would always remain as such, has come a long way. That this should happen at the close of the eight-year presidency of the leader of the Brazilian Workers party (the PT, Partido dos Trabalhadores), whose very election prospects in 2002 led to a run on the real, the Brazilian currency, and BOVESPA, the Sao Paulo stock market, is striking.

What is the secret of Lula and Brazil's success? How come a country best known until 20 years ago for its runaway inflation and rollercoaster economy has made it its present condition an investors' darling, that applies highly effective social policies, and that has positioned itself as a veto player in international affairs, one without whose acquiescence no major global initiative is viable?

With a land mass of some 8.5 million square kilometres, the world's fifth largest, comparable to the continental United States, Brazil is more a continent than country. With a population of 190 million, and growing fast, it is not quite in the same league as China and India (which is why some people said there were “only two BRICs in the wall”), but is still the fifth most populated country. More than one out of three Latin Americans is Brazilian. With a GDP approaching $2 trillion, it is the eighth largest economy.

Yet, Brazil's size has been immense ever since its independence in the 19th century, whereas its rise to the frontlines of international affairs has taken place only in the past 20 years. Why?

The answer is simple: presidential leadership. Most would be hard-pressed to name a Brazilian president from the 1960s to the 1990s. For 20 years the country was run by obscure generals, and in 1985, with the return of democracy, by lacklustre civilians, who did little to combat the runaway inflation and the deep imbalances in one of the most unequal societies in the world.

Lula has done a remarkable job, but he stands on the shoulders of his predecessor, Fernando Henrique Cardoso (1994-2002). It was as the improbable Minister for Finance of President Itamar Franco in 1993 that Cardoso, a sociologist, made his mark. He was the author of the Plan Real that brought inflation under control, and launched him all the way to Planalto, the presidential palace in Brasilia. Much like 1991 was a turnaround year in India, when under Finance Minister Manmohan Singh the country started to liberalise and open up its economy, 1993 was such a year in Brazil, and it has never looked back.

Cardoso realised that Brazil needed not just to stabilise its currency but also to open up and deregulate its economy, stifled by decades of rampant protectionism. He privatised state enterprises, opened the doors for FDI and pushed business into export markets. Whereas in 1990 foreign trade reached 11 per cent of the GDP, it is now at 24 per cent. Whereas until 1990 Brazil attracted less than $1 billion a year in FDI, today it is, after China, the country in the developing world that attracts the most, reaching as much as $40 billion a year in recent times.

By stabilising the polity and the economy (Brazil had four presidents from 1985 to 1994), Cardoso in his eight years did much to clear the underbrush for Lula. And despite all the criticism Lula had voiced from the opposition against Cardoso's alleged “neoliberal” policies, once he took office in January 2003, he realised that only orthodox economic policies would keep the ghost of inflation away. Lula appointed a conservative banker, Henrique Meirelles, head of the Central Bank, and briefed him to keep his eye on the inflation ball. As The Economist has pointed out, for a country whose average yearly inflation in the early 1990s reached 700 per cent, to have in 2006 a growth rate that was, for the first time, higher than the inflation rate was quite a feat.

Lula, a former metal worker who lost one of his fingers on the factory floor, also came up with an imaginative social policy, the Bolsa de Familia. It transfers cash income to some 11 million families, who have to meet certain conditions (including school attendance of children, and monthly visits to government agencies), and has diminished Brazil's income inequality.

As a man who cut his political teeth in the trade union movement, Lula knows all about “win-win” negotiations. He has also a remarkable ability to get along with everybody — from George W. Bush to Hugo Chávez. The PT is only one among many in the fragmented Brazilian party system (it controls only the governorships in three States out of Brazil's 27), and he leads a coalition government that includes right-wing parties, in Brazil's hard to manage “presidential coalitionism.” He has struck a delicate balance in which the private sector is the driving force of the economy, but the state plays a significant role through entities such as the Banco Nacional de Desenvolvimento (BNDES), which has a larger lending budget than the World Bank, and Petrobras, the state-owned oil company.

In a country known for its populist, demagogic traditions, Lula embodies the modern leader who believes in institutions. In a region where many presidents want to perpetuate themselves in office, he rejected the possibility of changing the Constitution to allow him a third term. His own rags-to-riches trajectory and austere personal habits have meant that the corruption scandals that affected some of his staff never seriously dented his popularity, leading to the moniker of “teflon president”. His approval ratings have reached 80 per cent. He has been mentioned for a variety of top international jobs once he leaves office on 1 January 2011— from President of the World Bank to Secretary-General of the United Nations.

Given that in foreign affairs also Lula has made a big impact, this is not surprising. With Celso Amorim as his Foreign Minister, he has capitalised on Brazil's “diplomatic GDP.”

With an outstanding Foreign Ministry — known as “Itamaraty” for the 19th century palace in Rio de Janeiro that used to house it before the capital moved to Brazilia — Brazil has exercised its diplomacy with finesse and effectiveness. On the multilateral front, its ability to build coalitions, to give direction to the international agenda, and to take on key global governance issues has stood out. It has displayed it in the WTO and the U.N., as well as in the creation of (or inclusion in) myriad acronyms such as BRICs, BRICSAM, IBSA, the G20+, the G4, the O5, and, most notably, in the G20 at the leaders level (“the steering committee of the world economy”) launched in Washington in November 2008, and whose next meeting is being held in Toronto in late June. It has also put its money where its mouth is: at a time when many Foreign Ministries have cut budgets and closed embassies, Brazil, grasping that diplomacy has become more, and not less, significant in the age of globalisation, has done the opposite. From 2003 to 2008 it opened 32 embassies abroad, and now has 134.

In Latin America also Brazil has played a key role. It has been the driving force behind new entities such as UNASUR, which has brought together all nations in South America, and the associated South American Defence Council, designed to provide an alternative to the by-now obsolete Inter-American Treaty of Reciprocal Assistance. It has taken the lead in stabilising Haiti through MINUSTAH, the first U.N. peacekeeping mission formed by a majority of Latin American troops and headed by a Brazilian general. It is willing to work with Washington, but not if that entails sacrificing principles such as democratic rule, as shown in last year's Honduran crisis.

Instead of caving in to the so-called imperatives of globalisation, as so many other developing nations have done, Lula has led Brazil to assert its autonomy and independence, setting its own conditions for dealing with an international order in flux. His is the best example of the power of agency and initiative in foreign policy and diplomacy.

(Jorge Heine holds the Chair in Global Governance at the Balsillie School of International Affairs, is Professor of Political Science at Wilfrid Laurier University and a Distinguished Fellow at the Centre for International Governance Innovation in Waterloo, Ontario. His book (with Andrew F. Cooper), Which Way Latin America? Hemispheric Politics Meets Globalization, is published by United Nations University Press.)

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