GREENVILLE, Miss. — The large signs are already up in Yazoo City. “Haley Barbour for Governor,” they proclaim in red, white and blue, well in advance of the Aug. 5 Mississippi gubernatorial primary and the November election. [IMGCAP(1)]

But it isn’t surprising that the Yazoo City native is popular in his hometown. Barbour’s fate in his race, local politicos observe, will depend on how well he does among conservative Democrats in Northern Mississippi, not in the town that bills itself as the “Gateway to the Delta.”

Even Barbour’s staunchest supporters agree that the race will be close. They don’t underestimate the skills of Gov. Ronnie Musgrove (D), who is seeking a second term.

Musgrove beat GOP opponent Mike Parker by a hair four years ago (when the state Legislature had to pick the winner because neither candidate drew a majority), and he now finds himself saddled with a weak state economy and an increasingly difficult budget squeeze.

But the governor has avoided a general tax increase by spending new revenue that had been scheduled to be set aside for the rainy day fund, landed a massive new Nissan plant in Canton, just outside the state capital of Jackson, and taken on the state’s trial lawyers with tort reform.

When it is finally finished, the 3.5 million-square-foot Nissan plant (bigger than 60 football fields) is expected to provide 5,000 jobs. The plant, which will begin pumping out sport utility vehicles, minivans and full-sized trucks on May 27, gives Musgrove an easy rejoinder to criticism that he hasn’t done enough to create new jobs in the state.

While Barbour has a reputation for being able to woo the blue jeans crowd as successfully as blue-suited businessmen, Musgrove is known as a truly tireless campaigner.

The governor caught a break when his primary opponent, wealthy trial lawyer John Arthur Eaves Jr., an opponent of Musgrove’s tort reform initiative, dropped out of the Democratic contest. Another trial lawyer, Mitch Tyner, is challenging Barbour in the Republican race, but that primary is not expected to be close. [IMGCAP(2)]

Barbour, a former chairman of the Republican National Committee, started well behind Musgrove in campaign fundraising but has, as expected, started to tap both his Washington connections and state sources for funds.

During the first four months of this year, Barbour raised $2 million, more than double the governor’s take in the same period. But Musgrove showed more money in the bank at the end of April.

One thing is certain: Barbour and Musgrove are each individually expected to exceed the record for spending by any two gubernatorial candidates, a mark set just four years ago when Musgrove and Parker together spent $5.6 million on the race. This time, Musgrove and Barbour could well spend a total of $15 million.

Barbour’s main message is that if Mississippians are happy with the governor they should vote to re-elect him. But if they think the state could do better, they should vote for Barbour. He cites education and tort reform as issues that still need to be addressed.

The Republican’s message is likely to resonate with voters given the state’s economic problems and standing relative to other states. And Barbour is certain to run a technically first-rate campaign.

But Democrats figure they can turn the issue around by portraying Barbour as a Washington, D.C., lobbyist “fat cat” who is out of touch with the state. They are likely to attempt to make the race as much a referendum on the Republican challenger as on the sitting governor.

Barbour is using Mississippi native Stuart Stevens for media and Ed Goeas for polling. Musgrove is using Bill Carrick for media and Tubby Harrison for polling, the same combination he used in his last race.

While education and economic issues dominate most of the early discussion in and about the race, politicos are whispering about the possible affect of the governor’s divorce. Barbour is expected to be pictured often with his family, a subtle reminder of the governor’s marital status.

President Bush almost certainly will campaign in the state for the challenger, bringing cash and enthusiasm to Barbour’s campaign. But Democrats are skeptical that the president will have a major affect on how people vote.

“I don’t think that this race is about bringing in outside politicians. It’s about the people of Mississippi,” says Lisa McMurray, Musgrove’s campaign manager, predictably.

Last year, the party of the sitting governor in about half of the states holding gubernatorial elections suffered defeat, a reflection of voter frustration about state budget problems. That mood continues, and it remains Musgrove’s most serious problem.

But the governor has avoided some of the worst traps, and he has ammunition to use against Barbour. The race looks far too close to call at this point.