The assembly line at Marcopolo, a bus bodywork manufacturer in Brazil's far south, resembles the opening ceremony at the Olympics. Like flag-bearing delegations, mini-buses and vans in varied colours and designs inch forward as they head to compete with their international counterparts in markets from South Africa to Cuba.

More than 3,000km to the north-east, on the outskirts of Salvador, the living room-turned-office of a women's co-operative is crammed to the ceiling with boxes of beachwear heading for Australia and France. Further north in the Amazon region, miners work round the clock in giant open-cast pits as CVRD, the world's biggest iron ore company, struggles to keep pace with the demands of Chinese steel mills.

From small shoe and furniture manufacturers to huge steel and automobile factories, companies throughout Brazil have caught export fever. Over the last two years to August, foreign sales grew by 63 per cent to $89bn. In the past 12 months the trade surplus amounted to $31.6bn, the largest for any emerging market except for oil-exporting Russia.

Traditionally one of the world's most isolated economies, Latin America's largest country appears finally on the way to punching its weight in the global market. Exports have increased to 17 per cent of gross domestic product, up from only 6.5 per cent in 1998. Numerous sectors - from steel and cars to agriculture to pulp and paper - have seen massive capital investment.

At the same time, economic dynamism has been accompanied by a more active and assertive foreign policy. Under Luiz Inácio Lula da Silva, its left-of-centre president, Brazil is pressing ahead with regional integration plans that include trade agreements and infrastructure projects. And it has begun to assume a leadership role for poorer nations. As the United Nations general assembly convenes in New York next week Mr Lula da Silva will reiterate his call for a global fund to fight world hunger. More than 50 heads of state are expected to lend him support. And with an eye on a seat in the UN security council, Brazil is also leading peacekeeping forces in Haiti and has pardoned more than $315m in debt by African nations.

Last year Brazil helped launch the G-20 alliance of developing countries, strengthening the voice of poor agricultural exporters at the World Trade Organisation. Brazil's initiative has helped keep world trade talks on track following the setback at last year's Cancún summit. Subsequently, Brazil has won two landmark legal actions that have increased the pressure for Europe and the US to dismantle agricultural subsidies.

Celso Amorim, Brazil's foreign minister, who held the same job a decade ago, is in no doubt about the change in the national mood. "There is a new self-awareness that just wasn't there before. Brazil was then in a fragile position and the conditions weren't ripe for Brazil to play a big role. Now we have a quality seal: a credible economic policy and stable politics."

Mr Lula da Silva - who has stabilised the economy since his landslide election victory in October 2002 - deserves some credit for the export bonanza. Yet his predecessor as president, Fernando Henrique Cardoso, put much of the economic and political framework in place.

Underpinned by a fixed exchange rate system, the Real currency plan introduced in 1994 brought inflation under control, stimulating business investment. Trade liberalisation - begun even earlier but advanced under Mr Cardoso - made companies more competitive. Privatisation in the 1990s freed up inefficient state companies and big unwieldy conglomerates became more focused in order to survive.

Ironically, the financial crisis of 1999 also brought benefits. The resulting 67 per cent devaluation and free floating exchange rate helped restore competitiveness, while corporate executives were forced to look abroad to increase sales as domestic markets slumped.

When Mr Lula da Silva took over in January last year, the international economy was beginning to recover. Chinese growth fuelled sharp rises in the prices of iron ore, soya andother commodities in which Brazil has long held a competitive advantage.

Mr Lula da Silva's hands-on trade diplomacy has encouraged many entrepreneurs to go abroad for the first time. He has led the country's largest trade missions to countries such as China, India and South Africa, helping to secure multi-billion dollar trade and investment deals.

Even critics admit that the Lula administration has a more "audacious" foreign policy. "Lula's popularity and mandate for social equality have been a huge asset for a more proactive policy abroad," says Mário Marconini, executive director of the Brazilian International Relations Centre in Rio de Janeiro.

Further export growth could run into obstacles. Any slowdown in the world economy, and in particular a retreat in China and elsewhere in Asia, could undermine demand for many Brazilian exports. Brazil also needs to keep opening markets and, despite recent progress, the outcome of trade talks remains uncertain. In particular, it has made little progress in gaining more access to the US, the world's biggest market.

Second, Brazilian manufacturers on average are producing at around 85 per cent of their capacity. As the economy recovers, rising demand at home could suck away production from export markets. Many companies have announced expansion plans but are still gauging investment and regulatory conditions.

Third, financing exports remains difficult. Annual interest rates for Brazilian companies average 35 per cent in inflation-adjusted terms, much higher than those of their international competitors. The BNDES, the government development bank, offers cheaper loans but is regarded as unresponsive and slow. In spite of some government incentives, most businesses complain about a tax burden that at over 36 per cent of GDP remains one of the highest among emerging markets.

Perhaps most urgently, infrastructure - such as roads and ports - is inadequate. Although Brazil is larger than the continental US, its railway network is less than one-tenth the size. Trucks making the journey from Matto Grosso state, the heart of Brazil's agricultural region, must negotiate washed-out roads, metre-deep potholes and the threat of rampant highway robbery. According to one estimate, Brazilian transport costs are double those of China or Russia.

"If we don't get rid of some of the obstacles to investment quickly, poor infrastructure will definitely undermine economic growth as early as next year," says Paulo Godoy, head of the infrastructure association (ABDIB).

However, Brazil is better positioned to withstand a downturn in global markets than ever before. There are several reasons to think export expansion could be sustained over several years.

First, irrespective of recent falls in commodity prices, many economists argue that today's bull market conditions are part of a long-term secular trend. The entry of China and India into world markets will help sustain long-term demand and reduce the impact of cyclical downturns, they argue.

China's and India's increasing dominance in the global manufacturing and services sectors is likely to fuel per-capita income there and subsequently demand for commodities from competitive Latin American exporters, argues Walter Molano, head of research at Connecticut-based BCP Securities. "We are just at the start of the boom," he says.

Furthermore, competitive advantages - abundant fertile land, mineral resources, cheap hydroelectric energy and low labour costs - mean Brazil is more able to defend market share than its rivals. Brazil produces raw sugar at a cost of around $160 per tonne compared with more than $250 in other leading sugar cane exporters and more than $500 for sugar beet growers in Europe.

Certainly CVRD continues to see strong demand. In the second quarter CVRD increased its shipment of iron ore and pellets by 34 per cent to 55.8m tonnes and its total revenue by 68 per cent to $2bn over last year.

More importantly, the export boom is now deeper and wider. Unlike Mexico, which depends heavily on the US market, Brazil's export destinations are more diverse (see chart). "Little by little we are starting to hit new markets such as South Africa, Malaysia and Thailand," says Francesco Pallaro, regional commercial director for New Holland, the farm machinery manufacturer that transferred sugar harvester production to Brazil from Australia last year. "Brazil will continue to be an export base for us."

In addition, manufactured products account for roughly 55 per cent of exports, marginally less than a few years ago but up from 10 per cent in the 1960s. Cheap raw materials are processed into high-value goods to be exported. The country's massive grain supply is fed to chickens; huge iron ore reserves are processed into steel and subsequently cars. Such advantages have attracted foreign investors, including American beef and poultry farmers. "The potential is simply huge," says Roberto Moreira, head of Penasul, a chicken company in Rio Grande do Sul recently bought by US investors.

Brazilian fashion and jewellery designers are flooding boutiques and department stores in New York. Gourmet coffee sold in Bejing and Moscow is adding value to the country's most traditional export. Havaianas, sandals that sell for $3 in Brazil, have become all the rage in London and Los Angeles, selling for a minimum of $40. The emergence of brand names helps the prospects of manufacturing and processed food exporters.

Brazilian companies today are also more competitive because of an improving corporate culture, including more transparency and professional management that is receptive to shareholder pressure. Following stagnation in recent years, productivity in the first half of 2004 grew again and is now roughly 70 per cent higher than in 1992.

Smaller companies are also catching export fever. Last year exports of small and micro-companies grew by 30 per cent, faster than those of medium and large companies. Government initiatives, from internet marketplaces to export-friendly postal services, are seeking to consolidate these trends.

Government agencies offer workshops, credits and assistance to entrepreneurs in outlying areas. "Without the help of the government we would not be exporting today," says Vitoria Coelho Castro, who in 2001 set up an export co-operative with seven other beachwear manufacturers in Salvador. Now 20 per cent of its income is from foreign sales.

"There has been a change in Brazil's export culture," says Luiz Furlan, industry and trade minister. "Exports may grow more slowly but there is no chance they will fall." Mr Furlan expects annual export growth of between 10 per cent and 15 per cent in coming years.

In its efforts to ensure long run growth Brazil faces many obstacles. Yet there is no doubt the country is charting new territory. After half a century of experience at the heart of Brazilian industry, Jorge Gerdau, the 67-year old president of the Gerdau steel company, is more confident than ever. "This is not Brazil's first attempt to become an export power," he says. "But it is the most promising."

Pioneering companies break new ground

Brazil's dominant international image for the past decade of football, carnival and bossa nova is slowly changing. Many Brazilian companies are now succeeding in the global marketplace using original local design backed by aggressive marketing, innovative management and a low cost base.

Take Marcopolo, a medium-sized bus manufacturer from the southern state of Rio Grande do Sul. In the late 1990s, after capturing half the domestic market, it turned to foreign niche markets overlooked by more complacent international competitors. In an increasingly fragmented global market, Marcopolo varied its designs to meet local needs. In 2002 it sold a bus to Saudi Arabia with a retractable roof to accommodate Muslim religious traditions. For Mexico City, it designed a 22-seat minibus. "It has the technological capacity and administrative flexibility the better to meet different market demands," says Christian Torsten Klemt, analyst with Solidus brokerage in Porto Alegre. "Brazil's past economic volatility forced it to become flexible and innovative."

Marcopolo says its low cost base and flexible working methods ensure competitiveness. "Our larger competitors are good at producing big amounts of the same product. We are better at smaller, customised orders," says Carlos Zignani, Marcopolo's head of investor relations.

Iveco, the Italian vehicle manufacturer, in 2000 contracted Marcopolo to set up its assembly plant in China. Having seen Iveco's experience, Marcopolo is eyeing the Chinese market as part of plans to double output within five years. Marcopolo's exports have doubled in a decade to around R$800m ($275m).

Meanwhile Embraer, the world's fourth largest aircraft manufacturer, was until its privatisation in 1994 a lossmaking, sluggish state company. Professional management unleashed its potential. Within 10 years it had captured an estimated 40 per cent share of the regional jet market, becoming one of the few emerging market competitors in the high-technology aerospace industry.

Embraer anticipated growing international demand for smaller jet airliners that fly shorter distances more efficiently. One of its boldest moves came with its 1999 decision to develop a family of jet aircraft carrying between 70 and 110 passengers. "We saw a niche, consulted potential customers, and pushed ahead," says Maur"cio Botelho, president. By contrast Bombardier of Canada, its biggest competitor in this area, opted simply to stretch an existing smaller model to fill the market gap quickly.

Industry analysts have not yet issued a final judgment on Embraer's latest products but it has taken 273 firm orders for its new jets. Finnair bought 12 aircraft in June and says it will be able to reduce its fuel consumption by one-third and improve service due to Embraer's "fast and comfortable aircraft".

However, Embraer's $1.46bn contract to build aircraft for US Airways remains uncertain after the carrier filed for bankruptcy protection. Embraer and Marcopolo are pioneers in locating factories to avoid trade barriers. Marcopolo assembles buses in Mexico, Portugal and South Africa to gain access to the broader North American, European and African markets. It ships buses either partially assembled or in kit form from Brazil to escape import tariffs.

Embraer has beaten its international rivals into the fast-growing Chinese market, which it estimates will be worth $15bn over the next 20 years. Its joint venture with China Aviation Industry Corporation is China's only manufacturer of regional jets and delivered the first aircraft in June Embraer also cracked the coveted US defence market in August with a contract worth up to $7bn over 20 years to supply surveillance aircraft, made with its US partners, to the US army and navy.

"Both companies are a model for Brazilian exporters. They identified niche markets, developed targeted products, and are going local to sell and manufacture them," says José Augusto de Castro from the Brazilian Foreign Trade Association. "They are the forerunners of Brazilian multinationals."