Mending an icon

How Rio’s first good governor in decades is starting to renew Brazil’s most famous city

From The Economist print edition

IT IS not hard to discover what is wrong with Rio de Janeiro. Walk along the main shopping street of the Complexo de Alemão, a large shanty town that has been surrounded by police gunmen for months, and after about 20 metres the stalls selling fruit, vegetables and pirated DVDs give way to one selling wraps of cocaine and marijuana. It is run by boys with machineguns slung over their shoulders. Other shoppers try hard to pretend that this is normal, but they avoid looking the gunmen and their hangers-on in the eye, just in case. From time to time more machineguns pass by on motorbikes, their riders off to collect drugs, kill a rival or enforce their own version of the law.

When Sérgio Cabral was elected governor of Rio state at the end of 2006, hopes were high that he might curb corruption among politicians and the police, and pull the city of Rio (for which he is also responsible) out of a 25-year slump. He hired a team of reformers, broke a local taboo by appealing to the federal government for help, and seemed almost too eager to try new things. Inspired by the work of Steven Levitt, an American economist, he at one point suggested legalising abortion as a way of reducing the future supply of potential criminals.

A year and a half into his term, how is Mr Cabral doing? According to his finance minister, Joaquim Levy, the new government’s plan was first to get the state’s finances in order and then to fund improvements in health care and public security. An unspoken assumption was that Mr Cabral’s administration would also practise a cleaner brand of politics.

The first part has gone well. Despite the oil money that Rio gets from the wells off its coastline, the state has often been in the red. That has changed under the new administration. Tax receipts are up: the courts that rule on tax disputes, which can go on for many years—some cases from the early 1990s are still not settled—are being streamlined with the aim of cutting the time spent wrangling to no more than two years. And spending is more controlled. As a result, the state’s finances have gone from a deficit of 100m reais ($63m) to a surplus last year of 790m reais.

Mr Cabral has also been busily soliciting foreign investment to add to the deal that his predecessor signed with ThyssenKrupp, a German industrial group, to build a steel mill that is due to be the biggest foreign investment in Latin America. The time taken to register a business is falling. The state’s pension fund has been under something like normal financial management and is now accumulating cash for the first time in ten years.

However, government in Rio is mainly judged by the level of violence, and here its record is less good. After a promising start, Mr Cabral’s administration fell out with reformers in the police. Brazil’s murder rate has been falling, but in the city of Rio killings by the police have risen sharply—up from 300 in 1998 to 900 last year. Earlier this month two policemen opened fire on a car they thought belonged to a drug dealer, killing a three-year-old boy. The army, where it has been deployed against crime, has proved equally slapdash. Last month soldiers handed three young men from one shanty town to a gang in a neighbouring area. All were promptly murdered.

Part of Rio’s problem is that voters have long shown a preference for charm over administrative skills when it comes to choosing their politicians. Anthony Garotinho, a football commentator turned tele-evangelist, and his wife Rosinha, who between them governed the state with a startling incompetence from 1999 until 2006, are the most recent examples. According to André Urani, author of a forthcoming book on the city, the explanation lies in an abdication by Rio’s elite which, he argues, has regarded local politics as insufficiently important to merit its attention.

Yet even as Mr Cabral’s administration seems to be breaking this pattern, there are signs of it resurfacing elsewhere. The front-runner in the mayoral race in Rio, to be held in October, is Marcelo Crivella. He is the nephew of Edir Macedo, who runs the Universal Church of the Kingdom of God, a large network of Pentecostal churches. His uncle also co-owns the Rede Record group, which includes one of Brazil’s biggest news channels. Mr Crivella is a bishop in the church (he also has a career as a singer). Though this ought not to count against him in his bid to be mayor, his willingness to over-promise should. He recently got in trouble for suggesting in campaign leaflets that he could single-handedly remodel one of Rio’s largest shanty towns to resemble a picturesque hillside village in Italy.

Set against this tradition, Mr Cabral’s government, which is clean, competent and takes institutions seriously, is a huge improvement. Yet it is too early to declare Rio’s renaissance to be under way. As the machineguns in the shopping streets attest, there is still a huge amount to do.

Sob pretexto de manifestar uma preocupação legitima com os problemas da preservação da Amazônia, o artigo embaixo conclui com uma ameaça a soberania do Brasil. A proclamação forte do presidente Lula sobre a soberania brasileira tem endereço certo, como prova este artigo da revista inglesa The Economist.

Brazil and the Amazon

Welcome to our shrinking jungle

Jun 5th 2008 | BRASÍLIA
From The Economist print edition

A political storm over environmental policy has coincided with a rise in deforestation

AFP

FROM the Amazon last month, Brazil’s Indian agency released aerial pictures of painted men with bows and arrows who have had little or no contact with modern civilisation. To judge from their hostile stance, they want to keep things that way. But the Amazon is the responsibility of Carlos Minc, Brazil’s hyperactive new environment minister. In his first few days on the job he flew to Germany to talk about the Amazon, from there to the northern city of Belém to meet the governors of the states that contain the forest, and then on to Brasília where on June 3rd he explained to a crowd of journalists why the rate of deforestation is increasing again. “I haven’t changed my shirt in three days,” he complained.

Since taking office in 2003, President Luiz Inácio Lula da Silva has balanced the wishes of those who would like the Amazon to be a giant park and Indian reserve against those who want to turn it into a giant farm. He appointed an icon of the conservationists, Marina Silva, as his first environment minister. He has sometimes been willing to enforce the law against loggers: in February he sent troops to Tailândia, a town in Pará state where illegal logging is the main industry, after inspectors from the environment ministry were thrown out by sawmill workers.

But Lula has also encouraged infrastructure projects in the Amazon that trouble conservationists, including two new hydroelectric dams. Instead of giving the job to Ms Silva, he asked Roberto Mangabeira Unger, a Harvard philosopher turned minister, to produce a development plan for the Amazon. And he is touchy when he feels Brazil is being lectured by foreigners: Europeans, Lula said recently, should take a look at a map of their own continent and see how much forest is left before telling Brazil what it should do with the Amazon.

All this was too much for Ms Silva. She grew up in the forest, learned to read only when a teenager, worked with Chico Mendes, an activist who was killed by ranchers in 1988, and later became a senator. She tired of lending her credibility to the government only to lose battles with other ministries. She resigned last month. Her replacement, Mr Minc, says that he accepted the job on a number of conditions (ten in all), which amount to a refusal to be pushed around. “I am not a masochist,” he says, before admitting that it remains to be seen if the deal he thinks he got will hold.

It needs to if Brazil is to halt a recent rise in deforestation. On June 2nd the National Institute for Space Research, which monitors deforestation (see article), announced that the forest retreated substantially in April compared with the month before. The change may be explained in part by the fact that April was less cloudy than March, so a greater area was visible to satellites. But the trend is clear. The environment ministry began to get alarmed in January: in the previous two, usually wet, months nearly 2,000 square kms (770 square miles) of forest were cut down. There may be worse to come, as the next four months—the dry season—are normally peak ones for deforestation.

This increase has several causes, and picking out one or two tends to distort the picture. However it does seem that there is a link between high commodity prices and deforestation, with a lag of about a year (see chart). Brazil became the world’s largest exporter of beef in 2004. Meat from the Amazon is eaten in Brazil but not exported because the cattle there have not been declared free of foot-and-mouth disease. So the link between a hamburger eaten in Paris and a tree felled in Brazil is indirect.

As for soya, the relationship is even more indirect. The vast majority of the crop is grown nowhere near the Amazon. But its expansion has pushed cattle ranches further into the jungle, and started itself to encroach on the forest. Big trading houses have imposed a ban on buying soya from recently deforested parts of the Amazon. It is too soon to judge the effects of this. Even so, Mr Minc has already picked a fight with Blairo Maggi, the governor of Mato Grosso and one of the world’s largest soya farmers. Mr Maggi in turn has cast doubt on the reliability of the numbers on deforestation.

Yet high commodity prices are only part of the story. Illegal deforestation happens when ranchers and loggers conspire to clear swathes of land. A rancher typically claims a part of forest and then sells the timber rights to a logger. This helps to finance the next stage of the rancher’s operation. The logger then takes what he wants and afterwards clears the area. The rancher tidies it up with the help of a bulldozer, burns what is left, sows grass and raises cattle. When the land is exhausted, as it quickly is, the ranchers move on.

That is the most common way to stake a claim to ownership of land in the Amazon. Of the 36% of the forest that is supposedly privately owned, only 4% is covered by a solid title deed, according to Imazon, an NGO. Since the government does not know who owns what, enforcing any rules is impossible.

As of July, says the new minister, ranchers and other farmers who fail to present any kind of documents backing up their claims to ownership of land will have lines of subsidised credit suspended. If they have not co-operated after four years, their land will be confiscated. But in practice it is close to impossible for the government to impose its will on the edges of its empire, even if it wanted to. Members of that newly photographed tribe are not the only people who do not recognise Brazil’s sovereignty in the Amazon.

A revista inglesa The Economist publica um artigo sobre o “Bolsa-Família”. O artigo notícia que o programa esta sendo imitado em outros países o que mostra que a globalização das idéias também existe. A revista destaca que o programa permite no Brasil não só combater a miséria, mas quebra a dependência cultural levando as crianças para a educação. Ele tem contribuído, disse o artigo, para um crescimento econômico no nordeste do Brasil com taxas semelhante as da China. A seguir o artigo em inglês.

Brazil

Happy families

From The Economist print edition

An anti-poverty scheme invented in Latin America is winning converts worldwide

Panos

(more…)

From The Economist print edition

Why Brazil is better placed than it used to be to cope with a world slowdown

Agencia Estado

BRAZILIANS know about economic and financial crises. The squalls afflicting America and threatening Europe look like a gentle breeze when compared with the frequent and violent blow-ups that litter Brazil’s economic history. Much of the problem has been Brazil’s vulnerability to shocks imported from around the rest of the globe. So what might happen if the economies in the rich world stumble again this year?

(more…)

A economia brasileira está mais preparada do que nunca para enfrentar sem grandes sobressaltos as turbulências que afligem o mercado americano, sustenta a revista The Economist, em reportagem publicada na edição desta semana. “A rajada de vento que aflige os Estados Unidos e ameaça a Europa parece como uma leve brisa se comparada aos freqüentes e violentos golpes que sujaram a história econômica do Brasil.”

Citando os últimos eventos que inibiram o crescimento do País - crise asiática em 1998, moratória argentina em 2001 e alta inflacionária em 2005 -, a revista observa que, apesar de esses fatos aconselharem cautela, “há razões para acreditar que a economia agora deve lidar melhor com qualquer coisa que o mundo atire nela”.

A revista argumenta que a economia está mais robusta por três razões: em primeiro lugar, um crescimento impulsionado por uma demanda interna vigorosa; em segundo, a integração do País aos mercados mundiais - “Não é superdependente dos EUA, destino de um quinto das exportações”; em terceiro, uma menor vulnerabilidade a crises financeiras, em grande parte graças a uma combinação de Banco Central independente e transparente e câmbio flutuante.
(more…)

A revista inglesa The Economist analisa a renuncia de Renan Calheiros ao Senado, a luz das discussões para a aprovação da CPMF. Segundo a revista, a CPMF permite combater a sonegação, mas a resistência dos senadores a sua aprovação estaría influenciada pelo fato de 2008 ser ano de eleição municipal. O pretexto do crescimento da arrecadação serviría simplesmente para criar obstaculos ao governo. A saida de Renan, insinua a revista, visava a facilitar o acordo para aprovar o imposto e tería sido negociada pelo governo com o senador. Muitas interpretações e alguns fatos, para alimentar a polemica. A seguir a integra do artigo.

Dec 6th 2007 | BRASÍLIA
From The Economist print edition

What the loss of a key ally means for the Lula government

Illustration by Satoshi Kambayashi

AS THE president of the Senate, Renan Calheiros was perhaps the most powerful ally of President Luiz Inácio Lula da Silva in Brazil’s legislature. Seven months ago, the media, acting on tip-offs from the federal police, accused him of getting a lobbyist for a construction firm to make regular child-maintenance payments to his former mistress. On December 4th Mr Calheiros finally resigned his post.

Thus ended a tenacious rearguard action. As well as the link with the lobbyist, Mr Calheiros was alleged to have used shell companies to buy two radio stations and a newspaper in his home state, and to have paid for a dossier digging up dirt on his enemies in the Senate. He protested his innocence. Then his mistress was photographed for Playboy (in the same pose as Christine Keeler, a big-eyed brunette who ended the career of a British minister in 1963). Mrs Calheiros stood by her man. But on December 4th, moments before a crucial vote in the Senate ethics committee that would probably have ended his career, Mr Calheiros gave in.

By resigning his presidency before the vote, Mr Calheiros holds on to his seat in the Senate. (Had he been censured, he would have been barred for eight years from running for office.) That outcome suits the government. Indeed, Mr Calheiros’s resignation was probably negotiated with Lula’s men. That is because government support for Mr Calheiros was seen as necessary to get through the Senate the renewal of the CPMF, a tax on financial transactions worth 30 billion-40 billion reais ($17 billion-22 billion) a year.

The twists of the Calheiros affair have nonetheless slowed the government down. Getting the CPMF approved has now become a matter of urgency. It is meant to be a provisional tax (and is therefore subject to periodic renewal). But it is also a constitutional measure, requiring a 60% majority. It always generates a tussle. This year the fight is particularly intense—so much so that Lula has cancelled his foreign trips next week so that he can stay in Brasília and twist arms.

The president has formidable political instincts: one of his staffers, who also worked for Brazil’s previous president, says that Lula “can just smell politics”. But he does not expend much energy on managing his unwieldy coalition in the legislature. It does not help him that next year there will be municipal elections. Not all of the opposition parties, who have half the Senate seats, want to help swell government coffers before an election year.

The main cause of the government’s difficulties, though, springs from Brazil’s recent success. Last month the country recorded a small current-account deficit, but overall the economic picture is rosy. In fact, tax revenues are so buoyant that the government is finding it hard to convince congressmen that it needs more money.

One reason for this abundance is that the CPMF makes tax evasion harder, by giving the revenue service information on money moving between accounts. Nuno Camara of Dresdner Kleinwort, an investment bank, has calculated that the government’s tax take has already surpassed its own estimates for 2008 by more than 30 billion reais, roughly equivalent to what it might expect to get from the CPMF. “If you compare the situation now with when we introduced this tax, things are completely different,” says Paulo Renato Souza, a congressman for the opposition PSDB party and former education minister.

For its part, the government is trying every legal method it can think of to get the tax renewed—including cutting its rate from 0.38% to 0.3% over the next five years, and exempting low earners. The government has also revived a proposal to limit increases in government salaries to inflation plus 2.5%. “Brazil does need to lower its tax burden,” says Aloizio Mercadante, a senator for the ruling PT, “but suddenly depriving the government of a main source of its revenue is not the way to do it.”

A smoother way to lower the government’s future appetite for tax revenue would be to use money from the CPMF to reduce debt faster. Public debt, net of government assets, still stands at 43.5% of GDP. That figure is higher than the average for countries which enjoy the investment-grade credit rating to which Brazil aspires. Though less so than in the past, this debt is still expensive: the government pays a real interest rate of 7%. It is also relatively short-term: some 30% matures every year. Mr Calheiros’s continued presence in the Senate, where he still has a great deal of influence, will probably make the passage of the CPMF easier. For the government, some good may yet come from his less than glorious career.

God may indeed be Brazilian after all

Illustration by Claudio Munoz

From The Economist print edition

WHEN Francisco Suares, a Portuguese explorer, wrote home to his brother in Lisbon about Brazil’s natural bounty in 1596, he declared himself “ashamed to write it, fearing that I shall not be believed.” And so it remains today. Brazil’s forests are bigger than anywhere else’s. Its soil is so fertile that some trees grow to full maturity quicker than people do. Beneath the soil lie huge mineral deposits that are raw material for China’s double-digit growth. Brazil is already on its way to becoming an alternative-energy superpower. And as if to prove a popular saying that “God is Brazilian”, it now seems that there are billions more barrels of oil than previously thought lying beneath deep waters off the country’s coastline.

Just how many billions is unclear, but Petrobras, Brazil’s state-controlled oil company, announced earlier this month that it reckons the Tupi oilfield contains between 5 billion and 8 billion barrels. That may not quite yet put Brazil in the same league as Venezuela and Saudi Arabia, as Dilma Rousseff, President Luiz Inácio Lula da Silva’s chief of staff who also chairs Petrobras’s board, excitedly proclaimed. But the higher estimate would make the Tupi field alone equal to all of Norway’s reserves. It contains light crude, which is less expensive to refine and therefore worth more. And there may be other big deposits to be found nearby.

José Sergio Gabrielli, Petrobras’s chief executive, refuses to speculate about how big an oil power Brazil might become. But he does concede that there is the potential for many more discoveries on the scale of Tupi—which itself is the world’s second-biggest strike in 20 years, after Kazakhstan’s 12 billion-barrel Kashagan field, discovered in 2000.

Most of Brazil’s oil comes from the Campos basin, in the waters off Rio de Janeiro. It is typically found at depths of 1,000-2,000 metres below the seabed. Below that lies a huge layer of salt, at some points more than a mile thick. This stretches both north and south to the hitherto less prolific basins of Espirito Santo and Santos. It is below the salt, in the Santos basin, that Petrobras discovered Tupi. The company has also found “sub-salt” oil in Espirito Santo, although it has not yet assessed the scale of this. Mr Gabrielli believes that the two basins have yielded relatively little oil to date not because it is not there, but because it lies deeper underground, below the salt.

Tupi’s oil will be hard to extract. Petrobras is a world leader in deep-water oil production, but Tupi is farther down than any of its existing fields. Drilling through the salt layer and the hard rock beneath brings further technical difficulties. The first test-well alone cost $240m. Moreover, there is a shortage of skilled labour and equipment throughout the oil industry at the moment—although Mr Gabrielli says Petrobras can transfer staff and resources from other projects if necessary.

Despite these caveats, it is reasonable to assume that Brazil’s economy and currency will get a boost when the oil starts flowing, it is hoped, in 2010. The discovery might also tip the balance of power in South America further in Brazil’s favour. Already self-sufficient in oil, Brazil is now likely to become a significant exporter. That may reduce the clout of Venezuela’s oil-rich president, Hugo Chávez, in the region. As if to underline this, Petrobras announced on November 13th that it was pulling out of a joint venture in Venezuela.

Brazil’s drive towards oil self-sufficiency follows the opening up of the industry to foreign investment in the 1990s, when the government also floated some 40% of Petrobras’s shares on the stockmarket. Britain’s BG Group has a 25% stake in the Tupi field, and Portugal’s Galp Energia holds 10%.

The government followed up the announcement of the Tupi field by withdrawing neighbouring blocks from an auction of exploration rights due later this month. That might signal rising petro-nationalism. But it also looked prudent, since those blocks may be worth much more as more becomes known about Tupi.

Amid the euphoria, which included an instant leap of 26% in Petrobras’s share price, came suspicion about the timing of the announcement. Less than a week after it was made, the company announced a poor set of results, with operating profit down 22% compared with the same quarter last year.

Petrobras has also faced mounting difficulties in supplying natural gas to thermal power plants, especially since its fields in Bolivia were quasi-nationalised last year. Some see the Tupi announcement as an attempt to distract attention from this. “It is like throwing a second ball onto a football pitch when the game is going against you,” says Alexandre Marinis of Mosaico, a political consultancy.

Electricity rationing under the previous government in 2001-2 helped Lula to win office. One solution now would be to raise the price of gas, but officials are worried that this would feed into inflation, and jeopardise the scope for further cuts in interest rates. Mario Pereira, an energy consultant, reckons that the risk of electricity shortages should wane after 2008, if Petrobras completes a planned liquefied natural-gas terminal on time.

That may be a big if. Lula and Ms Rousseff, a former Trotskyist who is sometimes touted as a potential presidential candidate for the ruling Workers’ Party, were keen to associate the government with Petrobras’s strike. But the oil may not start flowing until after the next presidential election in 2010. Energy may be an electoral headache rather than a boon for the government, if not for the country.

From The Economist print edition

Why Brazil looks in better shape than many other emerging markets

RIGHT now it is hard to walk around swanky parts of São Paulo without running into someone who has an uncle, a cousin or a brother involved in a company float. As many as 27 firms made their debut on the São Paulo exchange, known as Bovespa, in the first half of the year, surpassing the total number of floats in the whole of 2006. And they keep coming.

IPO-fever is such that shares in the exchange itself were due to start trading on October 26th, as The Economist went to press. It should be a coming-of-age party for a market that has broadened, deepened and bounded ahead recently (see chart).

This is quite a turnaround. Five years ago interest rates were so high that investing in equities was an esoteric pastime. Trading volumes were languishing and companies were rushing to delist.

Since then, three things have happened. First, interest rates have come down. Second, steps have been taken to improve corporate governance. And third, Brazil’s public finances have been tidied up by a combination of good housekeeping and the commodities boom. Even Warren Buffett, a shrewd American investor, has been buying the Brazilian currency.

The flirtation with equities is still in its infancy. Years of high interest rates have given Brazil a fixed-income culture, says Eduardo Mufarej of Tarpon Investment Group. Only a tiny proportion of Brazilians own shares. As interest rates continue to head down, Brazilian pension funds should increase their exposure to equities, which now lies at just 16%, excluding those of state-owned Banco de Brasil. Itaú, a Brazilian bank, reckons this will add up to an annual flow to the Bovespa worth between 18.5 and 24.5 billion reais ($10.2 billion and $13.6 billion) until 2010, which is more than foreign investors have put into the market during the past decade.

The same forces that have benefited equities have brought all sorts of snazzy new debt products to Brazil in the past couple of years. Mortgage and credit-card debts, which did not exist when interest rates hovered somewhere above the Corcovado mountain, are now being bundled together into securities and sold. The adventurous are even getting excited about more exotic products, such as precatórios, which bundle local-government debts.

How sustainable is all this? On the one hand, the IPO activity has been good for corporate governance. In order to attract interest, the recent IPOs have had to sign up to so-called novo mercado guidelines, which do away with the dual share classes, over-friendly board members and non-existent protection for minority shareholders that made life hazardous for outside investors. A further boost to confidence should come when Brazil’s sovereign debt is upgraded to investment grade, which most people expect will happen within the next 18 months.

Familiar dangers lurk, though. Lots of good companies have taken advantage of favourable conditions to come to the market, but some pretty dreadful ones have too, according to Paulo Bilyk of Rio Bravo Investments. Brazil is more open than many other emerging markets and so more vulnerable to hot money. Some 70% of the money for the IPOs has come from foreign investors. That money would probably be the first to head for the exits in any wobble. And some of the new stocks are illiquid. Still, for the moment things are looking good. If you don’t believe us, say São Paulo’s financiers, ask Mr Buffett.

From The Economist print edition

The president’s wife seems certain to succeed him, but will she cool an overheating economy?

Reuters

ABROAD she is sometimes compared to Hillary Clinton. At home she likes to invoke Eva Perón. Either way, Cristina Fernández de Kirchner seems certain to win Argentina’s presidential election on October 28th, and thus to succeed her husband, Néstor Kirchner. If the polls are to be believed, she will win by a large enough margin to avoid the need for a run-off ballot (see chart 1).

If so, she will become the first woman to be elected as Argentina’s president. (Isabelita, Juan Perón’s third wife and his vice-president, briefly succeeded her husband before being ousted by a military coup in 1976.) She likes to point out that she has been a senator since 1995 and so was a national political figure when her husband was a mere provincial governor. But assuming she wins, she will owe her victory to his—or their—decision that he would not seek a second consecutive term and that she would run in his stead.

Mr Kirchner has presided over Argentina’s vigorous recovery from a horrendous economic, financial and political collapse in 2001-02. Thanks to four years of annual economic growth of over 8%, poverty and unemployment have halved since he took office in 2003 (see chart 2). For that, the president can take only some of the credit. He inherited a capable economy minister in Roberto Lavagna, who had put in place some coherent policies. Idle factories whirred back into action while world prices climbed for Argentina’s farm exports.

But Mr Kirchner’s brutal treatment of holders of some $81 billion in bonds on which Argentina defaulted in 2001 ensured that debt payments did not become a drag on growth. He quelled a riotous movement of unemployed protesters with a mixture of handouts and diatribes against the IMF, big business and the privatisations conducted by Carlos Menem, a right-wing Peronist, in the 1990s.

After winning control of Congress in a mid-term election in 2005, Mr Kirchner dumped the prudent Mr Lavagna. Since then, he has deliberately allowed the economy to overheat. Interest rates are negative in real terms, while the government has opened the fiscal tap (so far this year central-government current spending has risen by an eyepopping 48% in nominal terms). As a result, inflation is rising fast.

The government has responded with price “agreements” (ie, controls) and blatant manipulation of the official inflation index. The real figure, suggested by the numbers published by two provinces, may be up to twice the official one (see chart 3). Similarly, Mr Kirchner’s populist approach to energy—energy prices in Argentina are only 60% of those of its neighbours—has led to occasional shortages. Meanwhile, his government has been hit by several corruption scandals this year.

Nevertheless, Mr Kirchner is still popular—more so than his wife. So why did he decline to stand for re-election himself and impose his wife as the Peronist candidate? He has never fully explained. Some opponents reckon that his intention is to return in four years’ time, thus prolonging the family hold on power. Insiders say that he believes that Ms Fernández’s skills are better suited than his own to the tasks now facing the country. “She can sit down and bargain without having been the person who screwed over anyone,” says an official who is close to her.

Ms Fernández has given little away about her intentions. She has maintained a big lead in the opinion polls while doing little campaigning. Like Mr Kirchner, she does not submit to press conferences or interviews by Argentine journalists. She has spent much of the past few months travelling abroad—something her husband has done very little. She has unveiled few policy plans and held few rallies.

But she is a better public speaker than Mr Kirchner, feisty and articulate where he is awkward and uncommunicative. “I identify with the Eva Perón who clenched her fist at the microphone, not with the…good fairy who arrived with Perón to hand out work and [women’s] right to vote,” she told El País, a Spanish newspaper. But some Argentines say she lacks the common touch of the always-remembered Evita. Of middle-class background, Ms Fernández and Mr Kirchner met at university, and worked as property lawyers in Santa Cruz, the Patagonian province of which he became governor. Nowadays Ms Fernández sports designer handbags, trademark white suits and, it is said snidely, collagen-enhanced lips.

That she has not been pressed harder in the campaign says much about the hapless opposition. The Radical party, the traditional opposition to the dominant Peronists, had the misfortune to hold (and lose) power during the economic collapse of 2001. Even though they were implementing Mr Menem’s policies, Argentines blamed the Radicals rather than the Peronists for the debacle. The party has shrunk and splintered: Julio Cobos, a Radical who is governor of Mendoza province, is Ms Fernández’s running mate.

Her main rivals are Mr Lavagna, who presents himself as an “alternative” to (rather than an opponent of) the Kirchners, and Elisa Carrió, a former Radical who offers little except a campaign against corruption. Several others have struggled to break into double figures in the polls.

Ms Fernández not only basks in her husband’s popularity. She enjoys some of the advantages of incumbency. She has use of the presidential jet and friendly coverage on state television. Her opponents say they have had trouble raising money because some would-be donors have held back for fear of a punitive tax audit. The opposition’s divisions also help her: she can avoid a run-off provided she gets 40% of the valid votes and leads her closest rival by ten points.

Assuming she wins, will Ms Fernández’s policies differ from those of her husband? Her political views, like Mr Kirchner’s, were forged in the Peronist left of the 1970s: nationalism, a sizeable state role in the economy and hostility to the armed forces. But aides point to differences of emphasis and experience. Ms Fernández has been her husband’s de facto floor leader in Congress over the past four years. Unlike him, she is a negotiator, they say.

While Mr Kirchner’s opponents accuse him of autocratic tendencies, Ms Fernández’s defenders present her as a champion of democratic institutions. On that, however, there are disagreements. She championed bills to give the presidency control over judicial appointments, and to reallocate congressionally-mandated spending at will. Yet she also supported moves to reform the Supreme Court that have the backing of NGOs.

The clearest difference is in foreign policy. Mr Kirchner showed no interest in it, beyond an alliance with Venezuela’s Hugo Chávez, whose government has bought some $5 billion in Argentine bonds and has swapped diesel fuel for farm machinery and other products. On her trips abroad, Ms Fernández has courted businessmen. She is likely to seek better relations with the United States and Europe, but without breaking with Mr Chávez. She has said she plans to renegotiate the $7 billion that Argentina owes the Paris Club of rich-country lenders—but rejects the club’s requirement that the IMF be involved. It is not clear whether she would seek to ease Argentina’s access to world financial markets by reaching a deal with the holders of bonds (worth $20 billion at face value) who did not accept the debt restructuring.

One big doubt is whether she will take the steps, eschewed by Mr Kirchner, needed to engineer a soft landing for the economy. Once inflation exceeds 20% and energy rationing reaches homes, Argentines will surely demand solutions to these problems. But these involve unpopular measures for which the public has not been prepared. If inflation is to be curbed, rather than covered-up, interest rates will have to rise, the growth of public spending will need to be checked, and the peso be allowed to appreciate. Energy tariffs will have to rise, some of them steeply.

A second doubt concerns Mr Kirchner’s role—assuming it is his wife to whom he passes the presidential sash on December 10th. He has vowed to remain in politics; although Peronism is a mosaic of warring factions, he controls its most powerful political machine. So Argentines will be in little doubt that if they vote for Ms Fernández they will be getting two Kirchners for the price of one—a somewhat inflated price, opponents would doubtless say.