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Brazilians voted on Sunday in presidential, congressional and state elections. Opinion polls have consistently pointed to a resounding victory for Luiz Inácio Lula da Silva, the president standing for re-election. But with almost 100 per cent of the votes counted, it appears Brazil is heading for a run-off election on October 29.

Whatever the outcome, the strength of the president’s support - which up to the weekend had withstood a string of potentially devastating corruption scandals – demonstrates the importance to the mass of poor voters of low inflation and, especially, of the Bolsa Família, an income transfer programme that will deliver R$8.3bn ($3.8bn) to some 11.1m families this year. Families with per capita income of less than R$120 a month receive monthly benefits of between R$15 and R$95. The amounts are small but their impact on the poor is enormous. It is hard to imagine a better demonstration of the effectiveness and popularity of cheap, well-targeted social policies.

Yet spending on the Bolsa Família is dwarfed by far less efficient spending on public sector payroll and pensions. While the Bolsa Família will consume 0.4 per cent of gross domestic product this year, spending on pensions alone will eat up almost 8 per cent – 20 times as much. And while the Bolsa Família targets the very poor, the pensions system transfers money to the not so poor and, in many cases, the downright rich. As well as being iniquitous, it eats up money that would be far better spent on infrastructure, schools, hospitals and other productive investments that would drive growth to the benefit of all Brazilians.

If voters do give Mr Lula da Silva a second mandate, the record of his first four years in office suggests he is unlikely to deliver the politically difficult cuts in public spending needed to make sustained growth a reality. During this campaign the president has not mentioned the “spectacle of growth” he promised four years ago. But growth is what the next administration must deliver if poor Brazilians are to have any alternative to depending on hand-outs.

Correa rides in

Ecuador’s pro-Venezuelan candidate - Rafael Correa - was an outsider until a few weeks ago. But his campaign is picking up such impetus that he could win the contest in the first round of the country’s elections due to take place on October 15. In one recent poll by Cedatos/Gallup Mr Correa registered as many as 33 per cent of preferences against 22 per cent for León Roldós, his more moderate opponent. With a good number of “don’t knows” also more likely to favour Mr Correa, the former finance minister could even secure the 40 per cent plus one vote necessary for victory in the first round. And if voting goes to second round Mr Correa looks well equipped to win, with recent simulations giving him 44 per cent to 39 per cent for Mr Roldós in the run-off. Mr Correa’s anti-American and pro-Venezuelan rhetoric appears to be resonating among voters. One of the reasons perhaps why the candidate was quick to defend President Hugo Chávez following the Venezuela leader’s recent controversial attack on President George W. Bush. “The devil may be bad, but at least he is intelligent. Bush is a tremendously stupid president who has done a lot of damage to his country,” was the way Mr Correa expressed it.

…and so does Daniel Ortega

A month to go yet before the Nicaraguan elections, and Daniel Ortega, candidate for the left-wing Sandinistas and Mr Chávez’s preferred choice, is still ahead. One recent poll published by the daily newspaper La Prensa put him at about 30.9 per cent, with Eduardo Montealegre, the candidate backed by the US, in second place, six percentage points behind. That means that Mr Ortega is only four percentage points of the 35 per cent plus one vote that he needs for victory. There were some straws of comfort for the opposition, however. The same poll shows that two minor candidates, José Rizo Castellón, of the Constitutional Liberals, and Edmundo Jarquín, a former Sandinista now heading a more moderate alternative to Mr Ortega, both scoring about 16 per cent and 10 per cent of voters undecided. In addition, according to La Prensa 66 per cent of the voters identified themselves as anti-Ortega, and 74 per cent of those said they would be disposed to vote for whichever candidate could defeat Mr Ortega even if that candidate were not their first choice. That seems impossible to square with Mr Ortega`s high ratings, however. Bear in mind also that the former Sandinista president will be pulling all all the stops ahead of voting in the first Sunday in November, starting next week with plans to reduce bus fares in Managua , the capital. The reduction has been allowed because Nicaraguan Sandinista mayors are being offered cheap diesel from none other than Mr Chávez.

Uruguay`s limits

Tabaré Vázquez, Uruguay`s moderate socialist president, Uruguay`s moderate socialist president, sometimes gives the impression that he would quite like a trade deal with the US. Unfortunately, such a move goes against the grain of the tiny country`s political realities. For one thing, bilateral trade deals are not technically allowed in the Mercosur regional trade bloc, so Uruguay would have to leave it and risk ruining relations with its neighbours Argentina and Brazil . For another, Mr Vázquez would face opposition from the influential left wing of his broad political alliance if he were to pursue closer links with the US. So, as discussions with the US begin next week, Uruguayan negotiators will be looking for something well short of a full-blown free trade deal. That will disappoint those in favour, such as the finance minister, Danilo Astori, and it means precious little of any real importance is likely to happen. That is a shame. With Mercosur turning inward, following the accession of Venezuela , Uruguay has plenty of economic reasons to look for trade opportunities elsewhere.

Argentina debt

A chink of light or a train approaching from the other end of the tunnel? For creditors who refused to accept Argentina ’s swinging debt negotiation terms last year it is probably the latter. New efforts by hold-outs seeking redress look to go nowhere quickly. In particular, the attempt by Italian retail hold-outs to recover money through the World Bank’s investment dispute settlement court (ICSID) looks like a very long shot – not least because a bond hardly qualifies as the kind of investment protected by the bilateral treaties overseen by the court. Creditors may be encouraged by the decision last week of a New York judge to embargo $310m of Argentine government debt sitting in the Bank of New York. But the bonds don’t mature until 2023. Similar legal moves aimed at gaining access to Argentine assets also look likely to take vast amounts of time and are subject o many legal challenges. The shenanigans, meanwhile, are likely to have less and less influence on a government increasingly confident that it made the right decision to negotiate tough with creditors. With international reserves back at levels last seen before last year’s IMF repayment, the economy in its fourth successive year of growth and opinion polls running in the government’s favour ahead of next year’s presidential elections, negotiating with a bunch of awkward creditors is the last thing on President Néstor Kirchner’s mind.

Notes by Jonathan Wheatley, Richard Lapper, Hal Weitzman and Benedict Mander

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