Some observers may think he is being overly optimistic in light of the series of domestic and foreign challenges of late. Little would seem to be going his way at a crucial time in his political career and as he is trying to assert his country's influence internationally.

Brazil's problems have been exposed over the past week by clashes between gangs and police in the nation's biggest city, Sao Paulo. Lawlessness, trigger-happy police, racial intolerance and the wide gap between rich and poor were highlighted by the world's media. There could be no worse publicity for a nation trying to portray itself as a model of stability and an attractive destination for foreign investors.

Overseas capital is much needed to improve the development prospects for South America's most populous country and biggest economy. Brazil is looking towards a GDP growth rate this year of about 4 per cent, a sluggish figure for a developing country with 180 million people.

There has also been a political dimension to the crisis, which could affect Lula's re-election chances. He has been criticised for failing to live up to promises to improve the lives of the poor, who are at the mercy of crime gangs.

Sao Paulo's state governor, Claudio Lembo, blamed the rich, white elite for the difficulties being faced by the poor. He said that until they let their wealth filter down to the darker-skinned poor, Brazil would fail to achieve its full potential.

'The upper-middle class has to recognise its responsibility and open its wallet,' Mr Lembo told the country's biggest-selling newspaper, Folha de S. Paulo.

Lula's main opponent for the presidency, Mr Lembo's predecessor, Geraldo Alckmin, is also under fire for failing to crush rampant crime during his five-year term, which ended two months ago. Mr Alckmin's rejection of Lula's offer of national troops to quell the unrest has been viewed as a political statement rather than a decision in the interests of the state's people.

Lula has a good chance of re-election, according to University of Brasilia political scientist David Fleischer. Mr Alckmin's campaign has stagnated and he is faring poorly in opinion polls; with only two candidates likely to run, Lula is well placed to win on the first round of voting, making a run-off unnecessary, he says.

'Lula has quite a reserve of charisma and is seen as an icon by the lower middle class and lower class, who are a majority of the voters,' Dr Fleischer explained yesterday. 'Unless some other disaster explodes he has a good chance of winning on the first round.'

Among the well educated, upper classes, the president is not held in such high regard, though, largely because of his background.

Born to a poor, illiterate, farming family in the Pernambuco state city of Garanhuns 60 years ago, he left school in the fourth grade and did not learn to read until he was 10 years old. In 1956, his mother moved her eight children to Sao Paulo, where the family lived in a small room at the back of a bar.

Lula began working on the streets of the city at the age of 12, selling peanuts and shining shoes. Two years later, he got a job at a copper processing factory and over the next few years, trained as a metal worker and earned his high school diploma. He was working as a press operator at a vehicle manufacturing plant when he lost the little finger of his left hand in an accident at the age of 19.

He married when he was 21, but his wife died in childbirth three years later. In 1974, he remarried and with his second wife, Marissa, has three children.

During the late 1960s, Lula became involved in trade unionism, which was at the time severely curbed by the country's dictatorships. He quickly rose through the union ranks and in 1975 was elected leader of the 100,000-strong metal workers' union. Gradually, through activism such as strikes, he transformed the movement from being mostly government-friendly into a powerful independent force. As a result of one strike, he was jailed for a month.

Lula moved into politics in 1980, founding Brazil's first significant socialist party, the Worker's Party, after bringing together trade unionists, academics, church activists and Trotskyites. He contested government elections in Sao Paulo two years later but lost, although his party gained a strong following; four years later he ran for Congress and was elected.

As a congressman, he contested the presidency in 1989 and lost. The following year he left Congress to build the Worker's Party around the country. He contested the presidency in 1994 and 1998, again without success.

Lula changed tack when running for president in 2002, courting business leaders in Brazil and overseas and joining forces with a small, centre-right party. He took 46 per cent of the vote in the first round and 61 per cent in the second. On January 1, 2003, he took office as the head of the country's first left-wing government in 40 years.

Leftist credentials do not mean that Lula has an instant bonding with his anti-US neighbours, Venezuela's Hugo Chavez and Bolivia's Evo Morales. That was highlighted earlier this month when Mr Morales went ahead with an election promise to nationalise his country's gas industry. The move directly affects Brazil; 70 per cent of its gas comes from Bolivia while the Brazilian national oil company, Petrobras, was the largest foreign investor in the sector. The decision could mean Brazilians will have to pay 60 per cent more for their gas.

At a meeting on May 4, three days after the move, Lula appeared weak: Instead of fighting for Petrobras' contractual rights, he said Bolivia's decision was justified. In return, Mr Morales said Bolivia would not cut off gas supplies and would renegotiate the price.

Since taking office, Lula has been a pragmatist when it comes to foreign relations and with elections looming, there was no possibility of annoying an influential neighbour. That approach has meant befriending a wide political range of leaders, from Mr Chavez to US President George W. Bush to his Chinese counterpart, Hu Jintao.

The result has been a foreign policy akin to walking a tight-rope. The US is Brazil's biggest trading partner, but that has not pleased Mr Chavez and other nations opposed to American globalisation.

Rather than back the US-sponsored 34-country Free Trade of the Americas, Lula took a lead position in the Doha round of World Trade Organisation negotiations, forming alliances with countries in Asia, Africa and the Middle East. With those talks in danger of failing, Brazil has achieved little for its efforts.

There was little progress on the pact in Vienna last week at a meeting of Latin American leaders and their European counterparts. Mr Chavez and Mr Morales had the loudest voices, drowning out efforts by Brazil to be heard.

Similarly, Lula seemingly has lost his voice in the 12-nation South American community, Mercosur, despite taking office with the promise that regionalism would be his foremost foreign policy objective. The group, formed in 1994, is on the brink of collapse amid bickering among its members.

At home, Lula has achieved more unity. Adopting a political line that Dr Fleischer described as 'pragmatic left', his party has moved progressively towards the centre of the political spectrum.

'Lula came from labour union leadership that had been working towards getting more benefits for his metal worker's union,' he said. 'He doesn't have the political baggage from the so-called 'old left wing' of the 1950s, 1960s and 1970s. He's the new, pragmatic left.'

Under Lula, foreshadowed deep social changes have been replaced by less radical reforms and a policy of fiscal austerity.

Some far-left members of his political party have become disillusioned and moved to other groups. But that, coupled with the array of difficulties in Brazilian and foreign relations, does not seem to have affected his prospects. The latest opinion polls give him a 10-point lead over Mr Alckmin.

Given Lula's record of victory against the odds, his chances of re-election look good.