June 20, 2010 / 10:12 PM / 9 years ago

Snap Analysis -Colombia's Santos wins, ensures policy continuity

BOGOTA (Reuters) - Former defence minister Juan Manuel Santos easily won Colombia’s presidency on Sunday and will stick to policies that put guerrillas on the defensive and attracted foreign investment but he still faces risks with the economy and relations with leftist neighbours.

His win was widely expected since opinion polls showed he had a commanding lead ahead of the run-off and is likely to have little impact on Colombia’s peso currency or TES bonds.

Santos’ defeat of independent Antanas Mockus is seen as an endorsement of outgoing President Alvaro Uribe’s policies, which were credited with slashing rebel and drug violence.

Improved security has spurred a sharp increase in foreign investment, especially in the booming energy and mining sectors.

Here are some implications of Santos’ win:

* The political heir to Uribe will be loyal to the popular incumbent’s security and pro-business policies, to the delight of investors. Santos is known as a good delegator but lacks the populist touch of Uribe, whose strong rural support gave Santos a major boost in the campaign. Uribe’s popularity is based mainly on security gains since an offensive in 2002, when leftist rebels still controlled swathes of territory. But Santos will inherit the Andean nation at a time when issues such as the economy and healthcare are more important to voters. He may also have to deal with fallout from political scandals in Uribe’s second term.

* Santos’ U Party — once led by Uribe — has the strongest presence in Congress but he will still need support from the nation’s other fractious political parties. The son of an influential Bogota family, Santos was able to secure alliances with the Cambio Radial and Conservative parties before Sunday’s vote due to his large lead in a first round ballot in May. But the question will be whether those alliances will hold since Santos lacks the personal popularity that enabled Uribe to wield great influence over the legislature.

* Santos, also a former finance minister, plans to shrink the fiscal deficit — from an estimated 4.4 percent of gross domestic product this year — by 2014. The economy grew just 0.4 percent in 2009 and is seen expanding by 3 percent this year. Santos hopes to lower the deficit through better economic performance, the creation of an overseas fund to manage commodities revenues and formalizing more employment. But he may be tempted to raise taxes to cover the deficit if growth stagnates and the nation must continue with a stimulus plan.

* Left-wing governments in neighboring Venezuela and Ecuador are both wary of Santos, who helped orchestrate a contentious attack on Colombia’s FARC rebels inside Ecuador in 2008. Venezuelan President Hugo Chavez has said he will welcome any new leader of Colombia. But tensions over charges that Colombian rebels are using Venezuelan territory, the use by Washington of military bases in Colombia and a string of verbal clashes between Chavez and Santos will continue to hamper ties.

Editing by Kieran Murray

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