The region was settled by waves of German and Italian immigrants including, in the 20th century, many anarchists, sowing the seeds of community activism. In Porto Alegre, even the homeless have their own pressure group. So perhaps it's not surprising that Porto Alegre was also the birthplace of an extraordinary experiment in direct democracy.

Today, it's the showcase for a process of direct democracy known as the Participatory Budget scheme that's giving all Porte Alegre's citizens a say in how their city is run. People who haven't been to Porto Alegre for the last eight or nine years are amazed at the transformation of the city: unemployment has fallen, there's an excellent public transport system, and poor neighbourhoods have changed out of all recognition. A counter-argument to prevailing neo-liberal economic theory, the Participatory Budget scheme earmarks the bulk of the city's financial resources for renewing the infrastructure of the town's slum areas, and improving living standards for its neediest residents. As a result, exceptional neighbourhood leaders have sprung up in the most unexpected places.

Tarso Genro

Tarso Genro is Porto Alegre's Mayor. It's his second term of office since 1989 when a "popular front" of progressive parties won the municipal elections and introduced the Participatory Budgeting scheme. He explains that the whole population votes on the budget, including the internal budget for salaries and the running of the town hall. "Where the arguments begin are over the money set aside for investment: about 15% to 20% of our budget, depending on the year to be used for new works and certain special services linked to them. Competition for this money is fierce within the community because we receive about 1,300 demands each year and can only satisfy between 300 and 350 of them."

Marli Medeiros was born in poverty and brought up four daughters and an adopted son, mainly on her own. Marli is the driving force behind the environmental education, or "Rubbish Recycling" centre. She lives and works in Vila Pinto; one of Porto Alegre's poorest neighbourhoods and until recently one of its most violent. In 1994, its main economy was drug dealing. Nobody dared go out after 7pm. Fifty-one rapes were reported that year. Six years later a dramatic change had taken place. There were no recorded rapes in the year 2000, and things were a great deal more peaceful. This was mainly thanks to a thriving Rubbish Recycling Centre which offers a genuine economic alternative to the people of Vila Pinto.

Marli explains: "When I went to see the Mayor and told him I wanted to set up a project here, he set me a challenge: he told me he doubted I could get people to change from drug-dealing to rubbish re-cycling, but he said that if I could attract more supporters for my project, he would study it carefully." She admits that the income from drug dealing is immediate. But rubbish is a reliable commodity too: "Rubbish also brings in a totally guaranteed return! Today it's the raw material with the surest economic return of all. There's an endless supply of it; it's a serious environmental problem which can always be converted into income by this kind of community. And you don't need any complex technology to separate it and recycle it."

Marli says that the first thing to set up is selective rubbish collection. "I believe that the whole world has to realise that if we don't look after the rubbish, if we don't give it the proper treatment, we are going to continue to contaminate our planet. Selective rubbish collection is absolutely essential."

Sorting rubbish

Retired businessman Rolf Naumann has been elected a community delegate, and spends much of his time working on public transport plans and supervising the construction of a ring road. City projects like this are now supervised by community delegates. They also vet all Porto Alegre's income and expenditure figures - this makes corruption and kickbacks almost impossible. As civil engineering contracts are a magnet for corruption the world over, this is a major breakthrough.

Angelica Mirinha is a single mother who fought to improve conditions in her shantytown. She's moved through the ranks of the budget process, from local delegate to her present job as political organiser. She became involved because she lived in a 'smart' area which was coveted by property developers. "Property speculation's rife in a city like Porto Alegre. And we won the right to go on living in this smart neighbourhood. Because we are citizens too!"

Now Angelica's working on a slum clearance scheme. She tells the residents that they need to fight for their rights: "If a shantytown fails to realise that it has to fight to improve things, then poor conditions like these will remain. Housing, health, employment and social problems don't improve. Often it's because people are disheartened because of all the false hopes and broken promises from the populist and paternalistic politicians of the old days, but I think that now this area has got its residents' association going again with a new president, a woman who has clear ideas about residents' rights, I think they can put up a good fight to win funding to rebuild their homes and have a better life ahead of them."

Tarsi Genro says that they are fighting the evil effects - social exclusion, violence, unemployment and extreme poverty - of causes which they can't control. "It isn't up to us to decide on the economic model which now favours financial speculators instead of encouraging investment in production to generate jobs and social integration. It isn't up to us to decide on major public works which generate economic activity, wealth and infrastructure and help the country develop." But he has a longer term strategy as well. "We need to turn our fight against effects into a fight for a different kind of country with a different form of income distribution. In the final analysis: a society where the outstanding characteristics are solidarity and equality instead of social exclusion and exploitation."