LONDON – In Recife one can see the real abomination of Brazil. Over the last 30 years I’ve watched this north eastern city’s population grow like a fungus. A quarter of the people of Brazil’s fourth largest city live in the crime-ridden, extremely violent, favelas (shanty towns), many of them without sanitation. After I walked these filthy, mud-laced streets and returned to stay at the house of the local Catholic priests deep inside one favela lines of a Kipling poem turned in my mind, “Chance-directed, chance-erected, laid and built on the silt/ Palace, byre, hovel- poverty and pride- side by side/ And, above the packed and pestilential town, Death looked down.”

Last year the newly elected president, Luiz Inacio da Silva, “Lula”, brought his cabinet here. He was waylaid with placards reading, “Lula, only you can save us”.

Can Brazil move from Third World to First World? Can it rid itself of its appalling differential between poor and better off, which is holding back the pace of economic growth? Can Brazil, the world’s second most successful country in terms of growth of the twentieth century and its ninth largest economy, repeat this achievement in the twenty first?  Some would say, after the dismal debt-ridden, inflation-consumed performance of most of the last twenty years, with a currency adding zeros faster than the printing presses could turn, probably not. However, a growing number would say it can, if it can off-load the albatrosses that hold Brazil down.

Thanks to the purging economic discipline of Brazil’s last president, Fernando Henrique Cardoso, combined with the sober thriftiness of Lula’s administration, Brazil looks set again for a growth rate of 3.5%. According to ex finance minister Ciro Gomes and today Minister for National Integration responsible for the poverty-struck northeast, “we have to get it above 5% if we are to start to improve our income distribution”. But this, many economists say, is impossible given Brazil’s present biases and structures.

According to David Ferranti, the vice president for Latin America of the World Bank, “before transfers, the richest one percent of the population receives the same ten percent share of total income as the poorest fifty percent, one of the worst income distributions in the world.”  “Brazil is not a poor country”, he adds in an interview in Brasilia. “The poverty gap is only 1.6% of national income. Brazil spends more than ten times this on various forms of social spending”. The trouble is that much of it is misspent, notably 100% pensions for public sector workers and a disproportionate share of state handouts to university students from well-to-do families.

At last the international financial institutions are beginning to make the same kind of arguments Lula has been making for the best part of 30 years, since he was worker and later a union leader in a car factory- “There is increasing evidence that inequality adversely affects growth, undermines social cohesion and increases crime”, states a recent World Bank report.

Brazil has made great strides in extending primary education in the last decade, just as it has in reducing dramatically the infant mortality rate. These days 96.5% of all children go to school. But for the workforce to be globally competitive the schools need better paid teachers, more resources and a sharp increase in the numbers attending secondary school, and the universities have to widen their intake from the privileged few. South Africa has made better progress than Brazil in closing the educational gap between whites and non-whites.

Right now land reform is the sorest point. In the past few weeks there has been a wave of protests and illegal property invasions by the Landless Workers’ Movement. Their cause has an honorable pedigree stretching back to the 1980s when clerics like the Archbishop of Recife, Helder Camara, joined the rebels. In the north east 70% of the land has long been owned by 4% of the people yet studies have shown that small family-based farms get a better performance per hectare than large holdings. However, the protestors are in danger of running ahead too fast. Under Cardoso 600,000 families were settled on re-distributed or state land but the promised agricultural revolution has not materialized. The government seems inept at the necessary follow up- new seeds, fertilizer, irrigation and regular expert advice. It is giving land reform a bad name, but also beginning to alienate the very poorest from Lula’s government.

Still, in the favelas of Recife the mood remains hopeful. I overheard one gas pump attendant debating with a friend. “With a new job Lula has to learn”, he said with conviction. The masses in Brazil have always been patient- but not docile. Many of the older favelas of Recife have been improved and upgraded by the hard work of the residents themselves.

Charles de Gaulle once said, “Brazil has a great future. But it always will have”. Need this be true? Not necessarily, but to really change Brazil for the better is going to tax Lula’s legendary powers of leadership to the limit.