SAO PAOLO – For the best part of thirty years the President of Brazil, Luis Inácio da Silva, “Lula”, has been a rising star in the Brazilian firmament. From the days when he led the metalworkers of the car industry of Sao Paulo out on a strike against the military government he has been a darling of the workers, the Catholic Church, and the liberals. In those early days Chancellor Helmut Schmidt of Germany and Prime Minister Adolfo Suarez of Spain came to seek him out, partly to bolster his stature against the generals and partly to attempt to discern where mighty Brazil, then far ahead of China and India, might be heading.

I found him at the time living in a small worker’s house in one of those less than awe-inspiring suburbs on the outskirts of this immense, smog-filled, city of over 11 million. He was, as I discovered when interviewing him for the International Herald Tribune, wise beyond his years. At the age of 34 he dealt with my probing about the attractions of Marxism and violent revolution with intelligent disdain and concluded by observing, “There is no point whatsoever in demanding unrealistic things. I think it is better to go forward one millimetre, but one down to earth millimetre, knowing that we won’t have to go two millimetres backward later on.”

Soon after he was imprisoned by the military but emerged as the regime liberalised, making way eventually for democracy, as the leader of a fast growing new political movement, the Workers’ Party. Three years ago Lula finally won the presidency and his supporters believed the moment of pure, untarnished, selfless government had begun. The poor in a country that is the world’s ninth economic power, but has the worst distribution of income among major developing nations, would finally find their reward. Lula, himself growing up in destitution, promised, launching his “zero hunger” campaign, that every family would be fed adequately every single day.

Life is modern day politics in a major industrial power with the capital markets watching one’s very move is never so straightforward. The day that Lula became president was the day he had to hang up the hat of his militant reforming zeal.

For 25 years Lula on the outside of the political establishment had been the major force for social change bringing the pressure of his oratory, charismatic leadership and political muscle on government of various political hues to engage in social reform. Gradually the income distribution of Brazil has improved. Schools and health clinics have been built in the poorer areas.

But Lula in power has become a different persona, to the anguish of many of his supporters. On the one side he has pursued economic and fiscal policies of the most conservative type. This is well to the good, as it has saved Brazil from going through another bout of skyrocketing inflation and loss of investor confidence. The economy is stable, exports are zooming, inflation is down and interest rates are falling. Economic growth is steady, at around 3-3.5%, although this is disappointing given the other benign factors.

Lula, the social reformer has taken second place. His “Bolsa Família” has extended cash transfers to millions of the poorest – as long as they send their children to school – but it is merely an upgraded version of the programme of his predecessor, Fernando Henrique Cardoso.

Even more disillusioning is that Lula’s government has become immersed in two successive scandals, involving illegal contributions to the Workers’ Party in return for favors and, worse, the buying of votes in Congress. Even if, as he claims, Lula wasn’t involved in these shenanigans, he should have known, and perhaps did know, what his trusted chief of staff who was forced to resign was up to. This has lost Lula his important middle class support and perhaps doomed his presidency.

A poll to be published this week will show that José Serra, now mayor of Sao Paulo, will beat him comfortably in October’s election. Serra, a close political ally of Cardoso and his former highly successful minister of health, is a policy wonk and a hard driven, effective, administrator. He told me that he has the credibility with the international financial community that Lula had to earn the hard way. This, he says, ” will enable me to be less orthodox and to drive the rate of economic growth above 5%.” He will also, he maintains, as he has in Sao Paulo, “cut out the enormous waste of Lula’s mal-administered government and get results that will immediately benefit poorer people”.

Serra, also a political opponent of the generals who had to flee the country, is as progressive in his social thought as is Lula. The difference is he could deliver what Lula has only promised.