Brazil's presidential candidates have faced off in a heated debate just two days before their runoff election, with the focus on allegations of corruption and arguments over who could best spark a stalled economy.

The debate on Friday came just hours after the news magazine Veja published a report alleging that President Dilma Rousseff knew about and benefited from a purported kickback scheme at state-run oil company Petrobras.

Opposition candidate Aecio Neves immediately jumped on the report, asking Rousseff in his first question if she knew about the scheme. She denied the report.

The allegations were made by Alberto Youssef, a convicted black-market money dealer who said that he laundered hundreds of millions in the scheme and that the governing Workers' Party benefited from it.

But he gave no proof during his testimony to the investigators he is cooperating with in exchange for a lighter sentence.

"This magazine has engaged in libel and you're endorsing it with your question," said Rousseff, who indicated she plans to sue Veja.

"They are trying to make an electoral coup. The people are not stupid. They know when they are being manipulated."

Later, responding to a question from an undecided voter in the audience who expressed dismay with corruption, Neves said that "the best measure to take to end corruption in government is to take the Workers' Party out of the government".

Managing the economy

The candidates then moved on to the other big question of the night, Brazil's economy.

Brazil's economy expanded 7.5 percent in 2010, the year before Rousseff took power, but has stumbled since, with expectations of growth below 0.5 percent this year. Inflation is floating above the government's own target of 6.5 percent.

Rousseff has said that under her watch Brazil's unemployment is at historic lows and workers' wages have risen.

She has given the state an expanded role in the economy, which the centre-right Neves has said he would shrink.

Neves also would seek trade deals with European countries, seek expanded commercial relations with the US, and privatise state-run enterprises that he said are inefficient.

Neves also said that the president has failed to control inflation.

The president responded by railing against the economic record of Neves' Social Democracy Party when it held the presidency in 1995-2003, a time of intense economic turbulence in Brazil, but also when a new currency and economic plan was introduced that ended the hyperinflation that had crippled the country for years.

"My promise is to control inflation,'' Rousseff said. "During the last 10 years we've maintained inflation within the targeted limit."

She added that during the global financial meltdown of 2008, the Workers' Party "took on that crisis and we didn't allow wages to fall".

Source: AP