COMMENTATOR (COMM.): Previously on Life...

SASKIA SASSEN: Cities become these strategic places where the powerless, where the disadvantaged can actually engage power.

ANNA TIBAIJUKA: The poor of the cities, they are not just passive objects. Most often they are solving their own problems.

MARTA SUPLICY: If we have a competent administration that really cares for the people, we can do it.

COMM: Porto Alegre, capital of Rio Grande do Sul, is Brazil's second most important inland port. Its 1.3 million citizens come from a wide variety of backgrounds. With the fastest growing economy in Brazil, the state of Rio Grande do Sul attracts immigrants from many other poorer regions of the country who come in search of work and a better future. Rio Grandenses are famous for their entrepreneurial skills. They're known as "gauchos" because - at least initially - the basis of their wealth was cattle ranching. Gaucho traditions, from accordion music and baggy pants to drinking maté, are proudly maintained. Rio Grande do Sul has a history of fierce independence, including a breakaway movement to form a separate nation. 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 is also the birthplace of an extraordinary experiment in direct democracy. It's known as Participatory Budgeting; it's being copied in various forms in almost a hundred other Brazilian cities today.

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. Over the last 13 years, the scheme has been continuously added to and improved.

TARSO GENRO, Mayor of Porto Alegre (TRANSLATION): The first thing population votes on is the internal budget: the salaries and for the running of the town hall "machine". Of course, voting on salaries and running costs is really more or less a formality because these are fixed by law. 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.

COMM: This is the story of three of the people who became involved in the Porto Alegre experiment. Their lives and neighbourhoods have been profoundly changed by the experience. Rolf Naumann often speaks German at home with his wife and ecologist daughter. Now retired, he devotes much of his energy to worrying about the city's transport system. 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. 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 and has become the un-crowned queen of Vila Pinto.

This is 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. Over two-thirds of the workforce is female.

MARLI MEDEIROS, Director, Rubbish Recycling Centre (TRANSLATION): Vila Pinto has 23,000 inhabitants and according to the statistics it was Latin America's second worst slum area. When I discovered this I decided to take a closer look. I felt I had a duty to change this situation, I felt ashamed of living in a community which was known the world over as a slum. The misery was due to the fact that this neighbourhood was controlled by drug dealers and as far as they are concerned the worse things are, the harder it is to get access, the better it is for them. We had no proper roads so even the police couldn't get in.

COMM: The Rubbish Recycling Centre has grown from strength to strength; each week's work begins with a communal prayer to ask for help with the problems and to give thanks for all the good things that have begun to happen. On the other side of town in a very middle-class neighbourhood, Rolf passes by his old business premises where he still keeps an office.

ROLF NAUMANN, Retired Businessman (TRANSLATION:) I got involved because we had an environmental problem in our neighbourhood. There were several restaurants known as cafés in the vicinity which were open 'til the small hours of the morning. They were very noisy, very loud, with a lot of very excited young people. So the residents decided to get together and do something about it. And we were advised that the best way to get the council to act was through the Participatory Budgeting process. And that's when I discovered that this existed, and people were interested - there was real solidarity. And so I got enthusiastic and began to take part.

COMM: There are pockets of poverty all over Porto Alegre; sometimes is quite wealthy areas like Angelica's. But the budgeting process has a policy of rebuilding slums right where they are, rather than exiling poor residents to the outskirts of town.

ANGELICA MIRINHA, Political Organiser (TRANSLATION): Yes, my own house and the others in Vila Renascença were all part of that policy and that struggle because this is a central, a "smart" neighbourhood. So it was very much coveted by the property developers. They would have liked to use this land for big developments which would give them big profits. 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! We began with our own individual demands: a house of our own, in our own neighbourhood. But this process needed to become a collective one, to make us stronger to defend our case. So joining up with other poor neighbourhoods was very important to create a strong group and to learn all about town planning regulations, discuss things, design a good project and move ahead with our struggle. Because of all the experience I got first as a community delegate then a councillor: learning to stand up for my demands, my neighbourhood, my district; I came to understand what working as a community co-ordinator means. Taking part in the Participatory Budgeting system as a district co-ordinator is a gratifying job because of the results you get. But it depends a lot on your dedication and your efforts to get other people to fight for the things which you have already won and that you know can be won by them too.

COMM: While Angelica was helping people fight for slum clearance projects, Marli needed to find a way of empowering women and ending the cycle of violence against them.

MARLI MEDEIROS (TRANSLATION): The drug dealers used and abused their women. When the police made a raid, the women had to hide the drugs in their bags so that when the men were searched, they had nothing on them. And the women and children were at their beck and call and if they didn't want to get involved, they were beaten up. They had no choice but to do what the men told them. Of course this was not the case for the majority, but a lot of women had to carry out this task. They were at the men's mercy and the men felt that since they were supporting them financially, they owned them. So they handed out food and also the odd beating. A local government known as a "popular democracy" was in power and a revolutionary process called Participatory Budgeting had been introduced. You could put forward your demands and discuss them with people from all over. 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.

TARSO GENRO (TRANSLATION): For many years we found that the priority was for basic sanitation, in other years the priority was paving roads or housing. It all depends on what the most pressing social problems are in a particular year and also on the group of people who have attended the popular assemblies - what they want determines future investments.

COMM: Once a year, neighbours from the 16 city districts get a chance to lobby for their own local projects.

ANGELICA MIRINHA (TRANSLATION): The Budget Scheme divides the city into 16 districts and each district has four community councillors and four delegates. The delegates are elected at two big annual assemblies: the First and the Second Round. In the First Round assemblies, one community delegate is elected for every ten people who turn up. He or she has to take part in weekly district meetings to establish what the local demands are. And the delegate gets to understand the process better, both by taking part in the local meetings and also in the seminars held for delegates and councillors.

COMM: Debates can get very heated; anyone can have three minutes to put their case. People quickly realise this helps them have a real say in improving their own lives. But where does it leave the elected city councillors?

TARSO GENRO (TRANSLATION): The City Council loses none of its prerogatives. It continues with all its usual quota of responsibilities and in the final analysis it's the City Council which decides on the municipal budget. But don't forget: it takes this decision in the full knowledge of what the community wants and if it goes against them it'll be punished and councillors won't get re-elected.

ROLF NAUMANN (TRANSLATION): It's a system, probably the most efficient one, which enables citizens to take part in the life of their city. A way in which they can influence things and even, in the case of this Participatory Budget system, decide about investments -decide what happens to the money which, in the final analysis we are all paying.

COMM: As well as providing a livelihood for 230 residents of Vila Pinto, the Recycling Centre is attracting funding for other community projects.

MARLI MEDEIROS (TRANSLATION): The income from drug dealing is immediate: you hand the stuff over, they give you cash in return. But rubbish? 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. You've got to do a lot of work with your people. People used to say to me: "Marli, what are you up to? Sorting rubbish or having meetings?" So I'd say, "If you want to make a good job of recycling rubbish, you've got to recycle the human beings first!"

COMM: In addition to the council of neighbourhood representatives, the budgeting scheme introduced special plenaries. Their role is to debate and monitor projects that affected not just one individual neighbourhood, but the whole city.

ROLF NAUMANN (TRANSLATION): Yes, I got involved six years ago and I was elected a community delegate about the time when the ring road project came up. This was the city's most important transport project, as well as being the largest and the most costly - and the ring road passes exactly 50 metres from my home. The ring road goes from the airport to the southern part of town - if I'm not mistaken, a length of 13 km. It's 60 metres wide with one very important characteristic: it has a bus lane. Porto Alegre decided that the best way to solve the transport problem added to the congested traffic was to improve public transport services.

COMM: The ring road project is well underway. 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.

ROLF NAUMANN (TRANSLATION): Every project designated as a priority in a specific forum - in this case, the Special Issue Committee on Transport - is followed by a Works Commission. According to the budgeting system rules, the Works Commission meets to study plans before the work itself can begin. It then oversees the work from the day the contract is signed, right through to the end.

COMM: This neighbourhood has fought for four years to get funds for a major road-widening scheme. So, despite the downpour, when the Mayor finally comes to sign the Works Contract, he receives an enthusiastic welcome. Local priorities though don't always coincide with the Town Hall's plans, as Mayor Tarso is quick to concede:

TARSO GENRO (TRANSLATION): During our first year in government we at the Town Hall defended the idea of making public transport an investment priority - but we received a dousing. We lost completely because the community decided that way in front of transport came community road paving and sanitation. We thought that people were much more worried about public transport but they weren't, despite the crisis with transport which we inherited from previous governments. So the Town Hall argues the point and makes proposals for all the works but if these are defeated then the work simply isn't commissioned.

ANGELICA MIRINHA (TRANSLATION): 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.

MARLI MEDEIROS (TRANSLATION): The Recycling Centre has only achieved this degree of success because Porto Alegre has selective rubbish collection. If this selective rubbish didn't exist we would be back to sorting through the rubbish dump like in the old days and that's where real violence against the human spirit begins. So today when people ask me: "What's the first thing you need in a city to be able to set up a place like the Recycling Centre?" The first thing 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.

TARSO GENRO (TRANSLATION): Our fight is directed against the negative effects of the economic system: social exclusion, violence, unemployment and extreme poverty. We are fighting the effects but we don't have the powers to attack the causes. It isn't up to us to decide on the interest rates or the way federal taxes are raised. 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. This is all beyond our control, what we control is the fight against the effects, but we need you to take this fight seriously. We need to turn it 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. Porto Alegre has become a reference point - not because it's solved all its social problems, although we will continue to fight to resolve them - it's become a reference point for its capacity to resist. And this capacity to resist is down to you. You are the ones who have created this capacity for resistance! You are running the Participatory Budget! You have built up a critical community which is permanently in action, calling government to account and even deciding on policies!