Paul Toohey – The Timorese woman with the seen-it-all face, owner of a street stall in Dili, is joined by other local women as she demands in a maternal way that Kirsty Sword Gusmao hand over her baby boy.

Sword Gusmao obliges and passes four-month-old Kay Olok to the woman, who suddenly beams with pride at the opportunity to cradle the President's son.

The woman also uses the moment well, complaining to the President's wife that since the violent riots of last Wednesday, business has been slow, with empty streets and a sense of fear.

The Australian-born First Lady, new mother to Xanana Gusmao's children, listens and responds in Portuguese with sympathy.

The people know her, of course, but more than that, they seem to like her. A small crowd quickly gathers, but the three plain-clothes bodyguards nowadays assigned to protect Sword Gusmao full-time detect nothing from the group except delight.

"Yes, I do feel they have warmed to me," says the former Melbourne University student who became interested in the East Timorese struggle while studying Indonesian language in the 1980s.

"Someone in my position is going to have detractors, but on the whole I feel very much welcomed in spite of my background as an Australian. People appreciate I've been involved in the struggle for many years and continue to be interested in the well-being of East Timorese people."

Sword Gusmao believes Wednesday's riots, in which two men were shot dead and 16 wounded, were inevitable. With representatives of the 17 main donor countries meeting in Dili today to discuss and pledge ongoing aid commitments, she says now is not the time for the international community to judge the East Timorese.

Having visited East Timor in the bad days of early 1990s, she moved to Jakarta to immerse herself in the cause by secretly helping activist East Timorese students. From there she began communicating with her future husband in his Jakarta prison.

"I don't think [the donor countries] would have any reason to spit the dummy [over the riots]," Sword Gusmao says. "Which country in the world, with such levels of poverty and unemployment, would you not expect this to happen in? I don't think anyone will wag the finger at the Timorese."

Sword Gusmao says there is room for improvement in the conduct of the police, who appear to have badly overreacted to protests. "But we have to remember that they're learning too," she says.

Room for improvement with the conduct of the rioters, as well. Sword Gusmao agrees, but says the population is largely unimpressed with their efforts.

"My colleagues saw truckloads of many who had just finished looting shops, who had armfuls of cigarette cartons and other goods they'd stolen. They were showing huge largesse, offering cigarettes to people in the streets below.

"They were amazed by the number of people who turned away and refused to take what they were offering, because they realised it was ill-gotten gain and they didn't agree at all with what these guys had done. That speaks volumes with the fact people really are fed-up with violence."

Sword Gusmao, 36, seems disarmingly unaffected. She is using her considerable influence to tackle violence against women in Timor, which she says is under-reported.

"It is an irony," she says, "that the emerging empowerment of women in free East Timor has caused men with very traditional ideas to lash out at them." She says prostitution is now entrenched in the capital, but it is the women who have suffered sexual abuse at the hands of Indonesians, including those who remain in West Timorese camps, who she is particularly trying to draw out.

Her Alola Foundation, run from a small office in central Dili, is named after Juliana dos Santos – a young woman known to most by her nickname, Allola. "She was taken by a militia leader as a kind of war prize over the border to west Timor from Suai in September, 1999," Sword Gusmao says.

"She remains in West Timor today. Her case, when I came to know about it, particularly touched me and I went about actually lobbying the Indonesian Government and UN agencies to have something done about having her repatriated and reunited with her family.

"But she's since had a child and I think is suffering from Stockholm syndrome, where she is really no longer able to think freely enough about what she wants for herself and her child."

Sword Gusmao is also working on maternal and child health. "Given my new role both as First Lady and mother of two small children [the other child is Alexandre, 2], I'm kind of the ideal role model if you like in terms of promoting campaigns like breast-feeding and immunisation, she says.

Keeping a sense of reality is important for Sword Gusmao, who lives outside Dili in a mountainside home. She was stabbed in the leg in April last year while visiting an isolated beach with her mother. She was not badly hurt and believes the incident had nothing to do with who she was – the attackers were simply a couple of crooks wanting money.

She says she was stabbed because "when the guy came at me in a threatening manner, I lashed out. I aimed a kick at his chest and he didn't take to kindly to it".

With her home and life in Dili, she did not consider fleeing, as some other international citizens did on Wednesday. "There's no way I would've done that. I'm not suggesting that those that have evacuated are cowards by any means. Obviously this is my home, where I am oriented.

"I don't think there's any sense that this is the start of something that will be ongoing. The situation got out of control the other day and there are reasons for that. I think it was also possibly politicised by some groups, but I don't want to presuppose who they are."

Sword Gusmao saw footage of her husband caught up in the riots, but firmly believes none of the anger was directed at him. "I think they didn't realise he was there among the crowd in the chaos and confusion. I don't think there was any deliberate targeting of him. He's always been looked to as a mediator, someone who can intervene in conflicts and help to broker solutions."

The First Lady insists she is no pillow-talker who secretly rules the country. "I often share my opinions, particularly on the role of women in the process of nation building. Xanana does listen, but ultimately his word is what sticks.

"He knows these people better than anybody else could ever pretend to, including myself. I could never hope or desire to influence him in his decision-making. I have absolute faith in him, as the people do. I really believe he has their best interests at heart."