Leading article: President Lula's Third Way

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In all the talk about whether China or India is going to dominate the world's economy, Latin America rarely gets a mention. More fool us, because some countries in that neglected continent are forging ahead faster than most of us in Europe realise, and are destined to have an impact on our destiny as well as their own.

To none does this apply more than Brazil, whose fiery left-wing president, Luiz Inacio Lula da Silva, usually known simply as Lula, starts a state visit to Britain today. First, there's the sheer size of Lula's fiefdom. With a population equivalent to that of the rest of Latin America and a landmass bigger than that of the entire European Union, it is a mistake to underestimate Brazil's potential.

But it is not just a question of big being beautiful. What is most noteworthy is the experiment Lula and the Workers Party have been conducting with the economy - trying to find a halfway mark between the stridently anti-US, anti-capitalist populism of Hugo Chavez of Venezuela and a docile acceptance of IMF orthodoxy, with all its disproportionate burdens on the poor.

So far, Lula has not led Brazil to the ruin that so many doomsayers predicted. On the contrary, after a bumpy start, his Third Way has notched up impressive achievements. It has closed the gap between rich and poor and reduced the percentage of the population living in poverty, all without sending the middle classes and foreign investors fleeing in panic.

If Brazil's Third Way takes hold, it could transform the continent's image. Goodbye to memories of bemedalled caudillos and loud-mouthed Peron-style populists. Goodbye also to the depressing cycle of high-spending, irresponsible governments giving way to their absolute opposites, thereby confirming the continent's reputation for instability.

The experiment may end in tears. But perhaps it won't, in which case Tony Blair needs to listen to what the Brazilian leader has to say over the next few days. An even exchange of views is the only way that Britain can hope to draw on Brazil's services as a bridge to the region's more entrenched, anti-Western stalwarts, such as President Chavez.

It is also the only way to exercise any leverage with Brazil over the environment. Lula is chief steward of much of that rainforest whose daily destruction causes justifiable worry in the West and elsewhere, reflecting concerns both about climate change and a planet denuded of many species.

Brazil's reputation for defending the rights of indigenous peoples - let alone those of endangered species - against loggers and developers has been dismal. We cannot coerce the Brazilians to do any better, but we can be better friends. And that may help.

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