In October 2002, President Luiz Inácio Lula da Silva was elected on a platform that emphasised economic growth, equity and social inclusion. However, the opportunity to address long- standing social and economic issues came at a time when the external economic environment was unusually adverse.

For this reason Lula implemented a stabilisation programme for the economy during his first months in office, surprising some of his critics. He introduced pension reforms in an effort to reduce a huge deficit, and pushed through a modest increase in the minimum wage. But he has had to contend with a surge of land invasions by activists frustrated at what they see as the slow pace of agrarian reform.

In 2005, Lula’s popularity was hit by a cash-for- votes corruption scandal in the ruling party. The President made a televised apology and said he had known nothing about the alleged corruption. However, the scandal weakened his political strength in his own party and in the country.