June 6, 2011 / 7:39 AM / 8 years ago

Leftist Humala declares victory in Peru election

* Humala claims victory

* Once a radical, Humala toned down anti-capitalist views

* Market sell-off expected on Monday

By Terry Wade and Alejandro Lifschitz

LIMA, June 6 (Reuters) - Left-wing former army commander Ollanta Humala claimed victory in Peru’s presidential election on Sunday and tried to strike a conciliatory tone as investors and the opposition worry he will ruin a long economic boom.

With 84 percent of ballot boxes counted, Humala had a narrow but growing lead of 1.8 percentage points over right-wing lawmaker Keiko Fujimori, the daughter of jailed former President Alberto Fujimori.

Exit polls and quick counts showed Humala clearly ahead and his advantage in the official returns was expected to grow as more votes came in from poor, rural areas.

“We want to install a government of national unity,” Humala, 48, told thousands of cheering supporters after a bruising race that brought back bitter memories of Peru’s chaotic past.

One of the world’s fastest-growing economies over the last decade, Peru is a major metals exporter, but a third of its citizens are stuck in poverty and Humala campaigned on promises to spread the country’s wealth.

“We want economic growth with social inclusion,” said at a rally in downtown Lima that stretched into the early hours of Monday. “We can build a more just Peru for everybody,” he told followers waving red and white Peruvian flags and rainbow-colored indigenous banners.

Some danced in jubilation, others chanted “Humala Presidente! and “Fujimori never again”.

Humala narrowly lost the last presidential election in 2006 and has since toned down his more radical anti-capitalist policies to try to win over centrist voters.

But investors still worry he would increase state control over the economy and throw away fiscal discipline. Peru's stock market .IGRA and its sol currency PEN=PE have stumbled on his rise in the polls and were expected to tumble on Monday.

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Full campaign coverage [ID:nVOTE2PE]

Key political risks to watch in Peru [ID:nRISKPE]

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Humala vows to run a balanced budget, bring experienced technocrats into his government and respect foreign investors who plan to spend $40 billion on mining and oil projects in Peru over the next decade.

He also promises to give the a poor a greater share of Peru’s natural resource wealth and end nagging social conflicts.

“It’s the end of the traditional right and powerful businessmen,” said Cesar Lecca, an academic who says he thinks Humala has matured.

Business leaders fear Humala will jeopardize the country’s recent economic success with interventionist policies, increase social spending, and turn his back on free-trade pacts.

Fujimori, 36, was the favorite of investors but many voted against her because her father is serving a 25-year prison sentence for corruption and using death squads to crack down on suspected leftists when he was Peru’s president in the 1990s.

Humala, who as an army commander led an unsuccessful revolt against the elder Fujimori in 2000, hammered his rival during the campaign for having worked for her father’s authoritarian government.

WOLF IN SHEEP’S CLOTHING?

Fujimori warned Humala could wreck Peru’s economy by dismantling the free-market reforms begun by her father. Those reforms helped set the stage for unprecedented growth over the past decade as Peru left behind the hyperinflation and guerrilla wars of the 1980s and ‘90s.

His daughter apologized for the “excesses” of her father’s rule but that apparently wasn’t enough to win over the centrist voters she needed for victory.

Critics say Humala is still a hard-liner at heart who will take over private firms and try to change the constitution to allow himself to run for consecutive terms like his one-time mentor, Venezuela’s firebrand leftist leader Hugo Chavez.

“Humala has four different manifestoes. He doesn’t convince me and represents a return to militarism of the past,” said 35-year-old security guard Julio Cauche.

Humala wants to pass a windfall tax on Peru’s vast mining sector and says the state must vigorously regulate the economy, although he has ruled out taking over private firms.

“It is bearish. It is not positive news,” Alberto Bernal, head of research at BullTick Capital Markets in Miami, said of Humala’s apparent victory. “There is really no reason for an investor to be hopeful.” [ID:nN05214221]

Peru has a “contingency plan” ready to implement if markets sink following a win by Humala, Finance Minister Ismael Benavides told Reuters. [ID:nN05226006]

Humala says he has left his radical past behind, insisting he will only serve one term and that investors have nothing to fear. He has recast himself as a moderate leftist like Brazil’s successful former President Luiz Inacio Lula da Silva.

Humala even hired aides who spent years with Brazil’s ruling Workers’ Party to help run his campaign, and they sought to portray him as a serene family man instead of an unpredictable rabble-rouser.

Highly disciplined from his military days, he jogs around his neighborhood at the crack of dawn each morning and keeps his hair cropped short. His entourage calls him “comandante”.

Though Humala has a constructive relationship with U.S. diplomats and meets with them regularly, he is likely to forge closer ties with Brazil’s center-left government.

That would reinforce Brazil’s ascendant influence in South America at a time of U.S. economic stagnation. Humala sees Peru as a strategic trade hub on the Pacific Ocean between two mammoth markets: China and Brazil. Brazilian firms have already poured billions of dollars into mining and energy projects in Peru. (With reporting by Terry Wade, Teresa Cespedes, Marco Aquino, Simon Gardner and Alejandro Lifschitz in Lima and Manuela Badawy, Daniel Bases and Walter Brandimarte in New York; Editing by Kieran Murray)

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