Brazil's feelgood factor set to keep Lula's party in power

• Brazil's Lula introduced sweeping social reforms

But lately a mood of optimism pervades the place, teeming with children going to school and adults heading for work, while skirting trucks ferrying materials to a federal housing complex built for the favela's poor - a feelgood factor felt across the country.

"We never imagined the future would look so bright, at last there's hope in our lives," says Adriana Horacio dos Santos, 34, as she stands in front of her shack smiling next to her four children.

At the heart of this lies centre-left president Luiz Incio Lula da Silva's social initiatives that have lifted 28 million Brazilians from poverty since he took power nearly eight years ago. This and a booming economy explains his record approval rates of more than 80 per cent and his hand-picked successor and former chief of staff, Dilma Rousseff, being on course to win next Sunday's presidential elections by an overwhelming margin.

Lula's flagship programme is Bolsa Familia, or family grant, which he expanded soon after coming to power and already benefits some 50 million people, a quarter of the country's population. Including Dos Santos, whose mother was a drug dealer and who, when she arrived in Niteroi twelve years ago after living in the streets, was forced to place her children in an orphanage since she could not afford to look after them.

"I still struggle to make ends meet, but now I have enough money to buy food, medicines and shoes for my children. I even attend free courses they've started offering as part of this programme to become a construction worker and an electrician," she says proudly as she flicks on an outside bulb. "Look! I installed that light myself!"

Under Bolsa Familia, the world's biggest redistribution programme - costing only 0.5 per cent of GDP - mothers are paid 22 reals (8) a month per child, with a maximum payment of 220 reals in return for children to attend school and get medical check-ups. This scheme is so successful that opposition Social Democrat candidate, Jose Serra, now promises to expand its coverage when only a few years ago many municipalities controlled by his party refused to register people for this grant.

Not surprisingly, Dos Santos shakes her head when asked if she trusts the opposition with the programme."No, not at all, why do you think I'm taking courses?"

Besides Bolsa Familia the government has also brought electricity to 10 million homes and installed water tanks in millions of others. Under the Hunger Zero initiative, introduced shortly after Lula took office, the number of Brazilians suffering hunger has been halved from 22 million people in 2003 (12 per cent of the population) to 10 million today - something he is particularly proud of having himself gone hungry as a child growing up in a remote village in northeastern Brazil.

Crucially, Lula's administration also increased the minimum salary by over 50 per cent in real terms, directly impacting nearly a third of all workers. All this combined explains the historic reduction in inequality and the explosive growth of the middle class in Brazil.

Critics warn, however, that these social advances are not sustainable. They point out rigid labour laws and limited investment compared to competing developing nations, as well as a continued low quality of education. But Marcelo Neri from the Getulio Vargas economic think tank says that, while there may be some truth behind these criticisms, they are exaggerated.

"Social inequality seemed a lost cause until Lula came to power, this is not the case any more," he told The Scotsman. "But Lula has not only provided social help, he's built a new middle class that's boosting the internal market. This means we don't depend on exports as much as other countries like China, we're way more independent."