Where Lula May Look for Bright Ideas

His party's mayors are running innovative social programs

Five years ago, Valdemar de Oliveira Mafalda, a 52-year-old construction worker and father of four, moved his family from the hinterlands of Rio Grande do Sul in southern Brazil to the state capital of Porto Alegre. Like other poor migrants, the family settled in a squalid shantytown near the city center.

Fast forward to 2002. Mafalda's family now lives in a two-story house in the Condominio Lupicinio Rodrigues, an 82-unit development with pristine gardens and colorful murals. Unlike many public housing projects in Brazil, this one isn't stuck out on the city limits, cut off from schools and public transport. It's right where the shantytown used to be, ringed by businesses and middle-class homes. "They were going to knock down the shacks and build a bus depot," says Mafalda. "But we fought back. Now we can sleep easily at night. There's less crime. And my [grown] children are all near their work."

Mafalda has Brazil's left-wing Worker's Party to thank for his good fortune. The party, which is widely known by its Portuguese initials PT, has a history of devising innovative--and low-cost--solutions to intractable problems. That record is about to be tested, following a landslide victory by PT leader Luiz Inacio Lula da Silva in presidential elections. The onetime lathe operator known simply as Lula promises to tackle the country's most pressing social needs, of which Brazil has plenty. Some 44 million people scrape by on less than $1 a day. Housing is in short supply, and violent crime is on the rise. Yet Lula, who takes office on Jan. 1, also has vowed to abide by the tight fiscal targets set as a condition for a $30-billion rescue package from the International Monetary Fund.

Lula's blueprint for fiscally responsible social action may well draw from the collective experience of the PT mayors who run 184 cities across Brazil. In Brasilia, the PT-led government launched Bolsa-Escola in 1995, a scheme that pays a monthly stipend to poor parents who keep their children in school. The U.N. dubbed it an "absolute success," noting that it achieved its aims at relatively low cost. The program has since been adopted nationwide.

Then, of course, there's Porto Alegre. The city of 1.3 million has been under PT rule since 1989. Under a novel scheme dubbed the Participatory Budget, all city spending must be approved by 22 councils of local community representatives. Council meetings are open to the public, and Mayor Joao Verle reckons 50,000 residents have given their thumbs up or down on everything from health clinics to a new ring road for the city.

That may sound like a recipe for pork-barrel projects and runaway spending. But Porto Alegre's finances are among the best-managed of any Brazilian metropolis, with public debt equaling a mere 2% of annual income. How does the city do it? The Condominio Lupicinio Rodrigues is a good example. The project cost close to $300,000, but the residents argued persuasively that the city would reap big savings by keeping the project on the site of the shantytown, thus eliminating the need for new access roads and utility hookups.

The PT's record isn't blemish-free: Voters just kicked out the PT governor of Rio Grande do Sul state, for example, after he ran up a huge budget deficit. But Lula clearly wants to try the democratic approach to policymaking the PT mayors have pursued. In October, he announced the creation of a Council on Economic & Social Development, made up of executives, trade unionists, and nongovernmental organizations. Impressed by such inclusiveness, the World Bank says it may extend billions of new loans to Brazil on top of $4.5 billion already committed. "Brazil voted by a resounding majority to give priority to social programs," says Vinod Thomas, the World Bank's country director in Brasilia. "Their success will depend on the participation of the people at all levels." The PT has been working on that participation for years.

By Jonathan Wheatley in Porto Alegre

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