South Africa's Manuel may battle Lagarde in IMF contest

By Catherine Bremer

PARIS (Reuters) - French finance minister Christine Lagarde, favorite to take the IMF's top job, could face a late challenge after a report that South Africa's Trevor Manuel could enter the race as the window for bids closes.

With Lagarde lobbying African officials in Lisbon over her candidacy on Friday, Emerging Markets magazine said South Africa will nominate Manuel, a former finance minister, for the job. It cited a "senior and well-placed" source in Pretoria.

President Jacob Zuma's office would not confirm the report and Manuel said his focus was on South Africa but appeared to leave some room for maneuver.

"Today is the deadline. I haven't put my hat into the ring as I speak to you," he told public radio station SAFM. "My adrenaline is flowing about South Africa right now. It's where my focus is."

Manuel, who handled Africa's biggest economy deftly for a decade, has long been touted as an ideal developing-world candidate for the IMF job.

Many see him winning more support than the only other declared rival to Lagarde, Mexican Central Bank chief Agustin Carstens, whose policy views are viewed as too conservative by many of his emerging market peers.

Lagarde, an adept negotiator with hands-on experience in the euro zone's debt crisis, is seen as the clear favorite despite a legal investigation hanging over her concerning a 2008 arbitration payout.

French judges are expected to ask on Friday for more time to consider whether allegations that she abused her authority when she granted a large payout to a prominent businessman to settle a legal case warrant opening a formal inquiry.

Lagarde told reporters in Lisbon, where she was attending the African Development Bank's annual meeting, that she was confident about the investigation's outcome.

Lagarde has flown to Brazil, India and China to tout her merits for the IMF job, and will carry on her tour to Saudi Arabia and Egypt this weekend.

BRICS STILL DIVIDED

The African Union said on Thursday it wanted to see a non-European in the job but emerging market powers have failed to come up with an agreed candidate to challenge Europe's traditional grip on the job.

"Lagarde is still the favorite," said Jacques Reland of the Global Policy Institute. "The BRICS are still quite divided and I don't think a new candidate from South Africa can threaten her candidacy given the importance of the European and U.S. vote."

The United States and Europe hold 48 percent of votes at the International Monetary Fund. Emerging nations have 12 percent.

The Fund will name its new managing director on June 30.

Frenchman Dominique Strauss-Kahn quit the post in May over charges he tried to rape a New York hotel maid.

Emerging market powers like Russia, India and China want an end to Europe's grip on the top job at the international lender, given their increasing weight in the world economy, but some see it as too early to change a years-old pact that keeps the IMF in European hands and the World Bank run by an American.

Manuel, also 55, won plaudits for his time as finance minister from 1999 to 2009. Born under apartheid and imprisoned for political activities in the 1980s, he made a swift transition from blue-jeaned activist to dark-suited minister and won investor confidence in post-apartheid South Africa.

Carstens has an economics PhD from the University of Chicago, a haven for proponents of deregulation and laissez-faire economics.

(Editing by Mike Peacock)