Last week, Luiz Inacio da Silva, 57 -- known to everyone as Lula -- was elected president of Brazil. Lula, who was born into extreme poverty and never got past elementary school, rose to become a trade union leader and founder of the Workers' Party. After losing three previous elections, this time he downplayed his left-wing credentials and promised to maintain the fiscal discipline of outgoing President Fernando Henrique Cardoso. Now, American investors are wondering whether Lula's move to the center is sincere or a tactic. Can he handle the expectations he has aroused, given Brazil's economic woes? Two days after his victory, he sat down with Newsweek-Washington Post's Lally Weymouth for an exclusive interview. Excerpts:

WEYMOUTH: What are your plans?

LULA: Although Brazil is a country with extraordinary potential, we have 50 million people living below the poverty line. Brazil is a country with social inequities, and this is a major issue. Although Brazil has grown since 1980, the wealth has been concentrated in the hands of a few. So we have made a commitment to reach out to the poorest [sectors] of our population.

We know the vulnerability of the Brazilian economy and are aware of our dependence on foreign capital. We know about the contracts that Brazil has and have agreed to honor them.

You've promised to create jobs. Can you do that, given Brazil's economic situation?

Not much public money is required. Only [increased] production will give Brazil the conditions needed to reduce interest rates and generate the jobs that we need. I want to start my administration by opening credit cooperatives for those who wish to participate. I want to give incentives to organized labor to develop its own pension funds. Social policies in my government will be made together with NGOs [nongovernmental organizations], the Catholic church and the evangelical churches.

There are two ways to generate growth: the free market or the socialist model that relies on the state. Which course will you follow?

I don't think that the state has to manage companies. I remember what President [Franklin] Roosevelt did with the Tennessee Valley Authority. The state's role is to plan, stimulate development with incentives and, if necessary, provide funding in partnership with the private sector.

Who will you name as governor of the central bank? Will the central bank be independent or autonomous?

No country in the world has come under so much pressure during an election campaign regarding the appointment of the governor of the central bank. I cannot give in to the international markets' pressure on whom I should appoint as governor. I'm not concerned with the central bank's autonomy. It's not a major issue. The people who ruled Brazil for many years could have done that. But now, after I have won the election, they propose that.

Give me the opportunity to prove that I am more competent than they, although I don't have their schooling. I want to make a new social contract involving the business community and the workers.

During the campaign, I set up a working team to discuss the framework of a new financial system. I said to the bankers that interest rates offered by the government cannot be higher than profits in the manufacturing sector. The bankers complained that there are not enough incentives to invest in real estate. So I said: Why not start discussing the changes needed for you to invest in real estate?

In the stock exchange, people complain that Brazilian entrepreneurs invest much more heavily in the New York Stock Exchange than in the Brazilian. So I proposed a working group to come up with a plan for the Brazilian equity markets.

Are you willing to tell U.S. investors that you will not renegotiate Brazil's debt?

You can tell American investors and the American people that we will fulfill all the contracts that the Brazilian government has signed.

You've been critical of the U.S. government's initiative to create a free-trade area of the Americas. Why?

I favor a free-trade policy because we need to guarantee equal opportunities among the participating countries. The model that attracts me is the European Union because it first started building multilateral institutions so that there would be one central bank and one euro currency for Europe. We don't have multilateral institutions in the Americas.

What did you talk to President Bush about today [Oct. 29]?

He congratulated me on my victory and said he would like to meet me. I told the president that I also am interested in meeting him, and I recognize the importance of the United States in the world and in relationship to Brazil. It's our main trading partner, and we intend to improve our relationship with the U.S.


First, we want to strengthen our ties. Secondly, we want to discuss our trade disagreements, and there are many. I think that Brazil negotiates its interests poorly, not only with the United States but also within the World Trade Organization. So we will be tough and frank, but also loyal.

Will you support a U.S.-led attack on Iraq?

I wouldn't like to see wars between one country and another. I'm a man who loves peace.

The decision should not be unilateral on the United States' part. If the most important country in the United Nations starts to assume certain attitudes without respecting the decisions of the Security Council, any country can try to do the same thing. The U.N. needs to discuss Iraq at length and make a major effort so that Iraq deactivates all its chemical weapons.

Will your administration maintain the tight fiscal discipline that is a condition for the IMF loan to your country?

We said in June that we will fulfill all the contracts that Brazil has signed.

I would like not to have to borrow one dollar from the IMF. I would prefer to see Brazil increase its industrial production and exports, and achieve a trade surplus so that we don't have to borrow money. That's why I will propose to President Cardoso that, prior to my inauguration, he and I work together with the [Brazilian] congress to pass a law to reduce taxes in the manufacturing industry and also on our export products, so that Brazil will manufacture more and export more.

In your own party, there are radicals and more moderate members. Is the left going to give you a chance to carry out reforms?

The Workers' Party has learned about the exercise of democracy. We do have disagreements but we hold conventions and the majority wins. If you have a right-wing radical on one side and a left-wing radical on the other side, that makes it possible for me to become the road to the center and work to do things that are wise for Brazil.

How much in the center are you? Have you really changed?

I believe that I have changed, and I believe that Brazil has changed. It would be stupid if I had not changed, a man who has reached fifty-seven years of age, who has suffered all kinds of prejudices, who has run four times for the presidency. I can guarantee you that Brazil has changed. Never have so many businessmen -- from small, medium and large companies -- been on our side. I've talked with almost everybody in the financial system. I have tried to show them that I would be capable of leading Brazil to a better situation than it finds itself in now.

Some people say that you're like Venezuela's left-wing president, Hugo Chavez. Others argue you're more of a centrist, like Great Britain's Prime Minister Tony Blair or former U.S. president Bill Clinton. How do you see yourself?

When I started in the labor movement, the communists used to say I was a CIA agent. The right wing used to say I was a communist. I never was a communist and I never was a CIA agent. I was just a Brazilian who had the trust and confidence of my fellow workers whom I represented in the metal workers' union.

It is not possible to make any kind of comparison between Lula and Chavez. I have a political party; I have a labor movement. We have structures in society in Brazil that are much more institutionalized than in Venezuela. I remember telling President Chavez, "I would advise you to be more political. A president cannot fight with everybody at the same time. You need more political wisdom. You have to split your adversaries so that you can divide and rule and govern with them." I believe he is paying the price for his lack of political experience. He comes from a military background.

In relation to Cuba, let's not confuse the passion that my generation has for the Cuban revolution and what it represented then with any approval of the Cuban regime today. I defend religious freedom, cultural freedom, freedom for trade unions and political freedom.

Can you talk a little about your personal story and what you had to do to escape poverty and become president?

Here in Brazil, people would mention Abraham Lincoln to me as an example of a man who ran many times and lost, was of humble origins but became one of the most important presidents of the United States. This tale was used to inspire me to continue to run for the presidency. Many things happened in my life I never expected. I never imagined becoming a labor leader. In 1970, I started in the labor movement. By 1978, I had become the most important labor leader in the country. I never imagined participating in politics, and in 1978 I was supporting Cardoso for the senate. I never imagined belonging to a political party but on February 10, 1980, I created the Workers' Party. Never did I imagine being a candidate for the city council and today I am president of the republic.

What was the biggest turning point in your life?

I ate bread for the first time in my life when I was seven years old. Until then, I drank black coffee and mixed flour in the coffee and porridge for breakfast. In those days, a lot of children starved before reaching the age of one. I managed to survive.