Sleeping giant Brazil wakes, but could stumble

By Raymond Colitt - Analysis

BRASILIA (Reuters) - From Wall Street to the World Trade Organization, Brazil is finally punching its weight with a booming economy and stronger global leadership but it remains burdened by a bloated state and daunting social problems.

President Luiz Inacio Lula da Silva, basking in the investment grade status Brazil received last month, said it was a "magical moment" for Latin America's largest country.

The economy was previously plagued by boom and bust cycles and rampant inflation, and Brazil was for long dubbed the eternal country of the future, always promising much but never delivering.

But now it is growing at rates of around 5 percent, helping secure its place as one of the four so-called BRIC major emerging economies along with Russia, India and China.

The stock market -- home to world-class companies such as aircraft maker Embraer and oil firm Petrobras -- has gained eight-fold in just over 5 years, helped by economic stability and surging prices for Brazil's huge farm exports.

While many analysts credit former president Fernando Henrique Cardoso with laying the groundwork, former leftist union leader Lula surprised skeptical investors by maintaining market-friendly policies after he took office in 2003.

Abroad, Lula has forged a common front of developing nations to pressure rich nations for freer farm trade, making Brazil a key player in global trade talks.

He has also pushed Brazil's role as regional moderator at a time of growing political divisions between left and right in Latin America.  Continued...