Lula's Next Big Fight

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In the world of trade negotiations, Cancún is already legendary. In September, as Caribbean waves lapped the beach outside their hotel, Brazilian Foreign Minister Celso Amorim handed U.S. Trade Representative Robert Zoellick a new set of demands from a coalition of 22 developing countries, led by Brazil, China and India. If the U.S., the E.U. and other developed nations failed to slash their hundreds of billions in agriculture tariffs and subsidies, the poorer nations would refuse to discuss issues dear to the rich, like investment rules and intellectual-property rights.

Zoellick stood up, Amorim recalls, and said that while he couldn't agree to those terms, "I can't accuse you of being unbusinesslike." Both sides knew that global trade relations had changed. The impasse between rich nations and Brazil's "G-22" group collapsed the five-day Cancún meeting — which Zoellick blamed on a cabal of "can't-do" countries led by Brazilian President Luiz Inácio Lula da Silva, who has emerged as the spokesman for the developing world.

It looks as if Lula may have more to talk about this week. The battle over First World subsidies could torpedo a new round of talks in Miami — talks meant to lead to the Free Trade Area of the Americas (ftaa), the proposed 34-nation, $13 trillion free-trade zone from Alaska to Argentina. Brazil is the U.S.'s co-chair in the Nov. 20-21 talks, which are meant to hash out ground rules for the final stretch of negotiations before the target completion date of Jan. 1, 2005.

Things got fierce before the meeting began. The U.S. used its carrots and sticks to successfully pressure nations like Peru and Colombia to defect from Brazil's alliance. Lula, meanwhile, accused Washington of creating a "commercial apartheid." He sent diplomats throughout Latin America to shore up support for what he and Argentine President Néstor Kirchner call the Buenos Aires Consensus, a left-leaning design for trade that emphasizes job creation and access to markets.

Now Lula faces a delicate diplomatic moment. If things melt down in Miami, Brazil could be blamed for derailing the ftaa. If Brazil is seen as giving in to the Yankees, it risks losing its heady new role as Third World standard bearer. "We are not trying to gang up on the United States," Amorim told Time. Instead, he insists, the U.S. has made "an attempt to corner Brazil."

America isn't about to budge on politically vital issues like agriculture subsidies. It hopes to make Brazil back down by painting its defiant stance as reckless international populism. That may be the only way left to salvage the ftaa, a pact the U.S. has long coveted as a guarantee against Latin America (today the U.S.'s second-largest export market) reverting to statist protectionism.

But Lula looks unlikely to blink and is "definitely prepared to walk away" from an ftaa, says Michael Connolly, an international-trade expert at the University of Miami. Brazil's $500 billion economy is South America's largest and among the world's top 15. It has always cared more about its own trading bloc, Mercosur — a $620 billion customs union that includes Argentina — than about an ftaa. So what seems to matter most to Lula is the chance to thwart U.S. hegemony. "The U.S. thinks first and foremost about the U.S., so now it's up to the Brazilians to think more about ourselves," he told Time last year. "Foreign trade and relations depend on daring, wisdom and political will."