36 The Americas The EconomistAugust 10th 2019
2 his first day. Even when two years later po-
lice officers went on strike, and 200 were
murdered, Mr Hartung did not back down.
Finally, Espírito Santo was better placed
to downsize. Its bureaucracy includes a
large share of temporary workers, includ-
ing roughly 60% of teachers. Unlike civil
servants, they can be fired. Mr Hartung
eliminated more than 7,000 positions, or
roughly 12% of the bureaucracy. In Rio de
Janeiro less than 3% of government work-
ers are temporary.
Austerity has been painful. Sergio Ma-
jeski, a state congressman who opposed
the fiscal adjustment, says that cuts to pub-
lic investment made it harder to climb out
of recession. But despite laying off teachers
and closing schools, Espírito Santo jumped
from 9th place to 1st on a nationwide sec-
ondary school exam between 2013 and 2017.
Mr Majeski says this is because weaker stu-
dents began skipping classes. But accord-
ing to Marco Aurélio Villela, the director of
a government school in Vitória, teachers
on short-term contracts tend to perform
better because they know they can be
sacked.
And cutting staff has helped the state to
maintain a relatively high level of invest-
ment. According to a study by Brazil’s trea-
sury, three states that limited spending on
salaries—Espírito Santo, Alagoas and
Ceará—were able to invest, on average, 304
reais per person in 2018. Rio de Janeiro, Mi-
nas Gerais and Rio Grande do Sul, the states
deepest in debt, only spent 91 reais.
Can other states emulate Espírito San-
to? It will be difficult without changes to
federal laws. Mr Bolsonaro’s pension re-
form, working its way through congress,
may only apply to federal workers. The su-
preme court will soon decide whether to al-
low indebted states to reduce civil servants’
salaries and hours. That would provide
some relief, as would a bill to allow people
to be sacked for persistent poor perfor-
mance. But most politicians will balk at un-
popular cuts. A pilot project led by Ana Car-
la Abrão, an economist at Oliver Wyman, a
consultancy, found that the city of São Pau-
lo could reduce its payroll by 30% without
sacking anyone, by paring back perks for all
but the best-performing employees. The
project was shelved by a new mayor in 2018.
Last year Mr Hartung decided not to run
for re-election. It would have sent a better
message if he had, and had won, says Cris-
tiane Schmidt, the treasury secretary for
Goiás, a state in deep fiscal trouble. Brazil-
ians tend to blame corruption for their eco-
nomic woes, even though more money is
lost to bloated bureaucracy. Whereas Sér-
gio Moro, a judge, gained international
fame for leading the sprawling Lava Jato
anti-corruption investigation, few outside
of Espírito Santo have heard of Paulo Har-
tung. That may change as more states find
their coffers empty. 7I
n argentine politics, being compared
to a fat cow is not altogether a bad thing.
At one of his last campaign stops ahead of
national primaries on August 11th, Mauri-
cio Macri, Argentina’s embattled presi-
dent, rallied with thousands of farmers at
the country’s annual agricultural show.
Award-winning cows, horses, sheep and
even donkeys paraded in front of him, as
gauchos dressed in their baggy bombacha
trousers doffed their berets. Mr Macri
“looks like a winner to me”, said one cow-
boy, proudly showing off a bullock weigh-
ing close to half a tonne as he sought a sel-
fie with a beaming president.
The first round of the general election is
due in late October; Mr Macri faces a tough
contest from the duo of Cristina Fernández
de Kirchner, Argentina’s president from
2007 to 2015, and her former chief of staff,
Alberto Fernández (no relation). Cristina is
running to be vice president; Alberto for
president. Argentina is saddled with high
inflation, rising unemployment and soar-
ing debt. But despite the economic woe, Mr
Macri may have a genuine chance.
At the show the president celebrated
this year’s record harvest, after last year’s
worst drought in half a century. In a stadi-
um speech he mentioned new roads, sew-
ers and schools built during his first term.
He promised that his government, if re-
elected, would create a million jobs. “Sí, se
puede!”(Yes, we can!) the crowd chantedback. Mr Macri is no Barack Obama, but he
is learning how to rouse a crowd. “We are
not going back,” he shouted, to rapturous
applause. “We want a true democracy!”
The primary election has no practical
effect at the presidential level, because
both Mr Macri and Mr Fernández are un-
challenged within their parties. But since
all Argentines over the age of 16 are legally
obliged to vote, it functions in effect as a
dry run of the October election. Pollsters
reckon the Fernández-Fernández ticket
will edge out Mr Macri, perhaps by a few
percentage points. But according to one of
Mr Fernández’s aides, that is not enough to
give them a clear lead come October. “We
know our best chance lies in an early
knockout,” he says.
To that end, Mr Fernández has pursued
Mr Macri on the economy, a subject the
president’s team avoids. He talks about lit-
tle other than inflation, the devaluation of
the peso and the record $57bn bail-out
from the imf. “We can’t pay our debts until
we start growing again,” he says in one tv
commercial. He says that, if elected, he
could in effect default on government
bonds and renegotiate the imfloan.
That scares the markets. On August 5th,
as the standoff between China and the Un-
ited States hit emerging markets world-
wide, the peso fell by almost 2% against the
dollar and the yield on Argentina’s debt
climbed. “Our opponents are doing their
worst to create market panic, but we’re pre-
pared,” says Nicolás Dujovne, the treasury
minister.
Mr Macri’s longtime political guru,
Jaime Durán Barba, sees a narrow loss in
the primary as a victory in the making. If Mr
Fernández comes out ahead, many voters
will then fear he and his former boss could
win. As long as Mr Macri survives to the
run-off in November, Argentines who dis-
like Ms Fernández will “come home” from
third-party candidates. The former presi-
dent has been in court recently over cor-
ruption charges (she denies them all).
Curiously, given the gap between Mr
Macri’s centrism and the Fernández duo’s
populism, the campaign so far has been be-
reft of ideas, says Sergio Berensztein, an
analyst and pollster. Instead the candi-
dates are focusing on “micro-reforms, not
the macro-mess of the past 20 years”, he
says. After the election a real debate will
have to start—about the changes Mr Macri
promised on taking office four years ago. 7BUENOS AIRES
Argentina’s primaries will show how the presidential election may goArgentina’s electionIt won’t be easy
Macri de coeur