By Hugh Bronstein
BUENOS AIRES (Reuters) - Argentina's center-right opposition, led by candidate Mauricio Macri, has its best chance in more than a decade to wrest the presidency from the populist Peronists in a run-off election Sunday and set the economy on a markedly different course.
Outgoing President Cristina Fernandez, who was preceded in office by her late husband Nestor Kirchner, is as revered by the poor for her generous welfare programs as she is reviled by business for the strict controls the couple put on the economy over 12 years in power.
Barred from seeking a third straight term, she will leave office next month with Argentina deeply divided between those who want the government to keep playing a strong role in their lives and those who back the opposition's free-market policies.
In a sign of Argentines' weariness with a stagnant economy and high inflation, Fernandez's candidate, Daniel Scioli, lost his front-runner status after the Oct. 25 first-round vote when Macri unexpectedly came in right on his heels.
Macri, the two-term mayor of Buenos Aires and scion of a wealthy family, developed a comfortable lead in the opinion polls for the run-off. But with one in 10 voters undecided, Scioli cannot be counted out. [L1N13G0HO]
Whoever is sworn in on Dec. 10 will inherit a yawning fiscal deficit that Fernandez has financed by printing pesos, contributing to double digit inflation. Foreign reserves are at a nine-year low and the county has been shut out of the global bond market due to a festering sovereign default.
Macri wants to open Latin America's No. 3 economy to more investment by lifting currency and trade controls, but will also have to put accounts in order after eight years of free-spending populism under Fernandez.
Juana Fontana, a 74-year-old lawyer, said she will vote for Macri because the current policy model "has hit bottom."
Scioli, seen as more of a moderate than Fernandez, says he would be flexible in adjusting macro-economic policy while standing by the poor.
Macri has accused Scioli, the governor of Buenos Aires province, of fear-mongering in ads claiming that he would scrap welfare programs. Scioli says it is Macri's planned spending cuts that create panic. Each accuses the other of lying.
FEARING 'DRASTIC' ADJUSTMENT
Scarred by the economic collapse in 2001 that tossed millions into poverty, many Argentines fear any dramatic shift could make things worse.
"I'm not crazy about Scioli, but I'm going to vote for him because Macri's policies would let too many foreign goods into the country, and that would be bad for local industry," said Cristina Castillo, a 53-year-old Buenos Aires psychologist.
"Reading between the lines, it's clear Macri wants a drastic fiscal adjustment," she added.
A new fiscal policy is exactly what investors want, along with the lifting of currency controls and a solution to a marathon legal battle with bondholders who rejected Argentina's 2005 and 2010 debt restructurings.
The local Merval stock index has shot up 25 percent since Macri's muscular performance in the first round, as investors factored in the possibility he will win the run-off and free up markets by dismantling currency and trade controls.
Fernandez, who often cites her late husband as the guiding light of her approach to governing, has taken to the airwaves in recent weeks, appealing to voters to ensure that government funding of education, healthcare and programs for poor mothers remains.
"When I leave, please God, I don't want to see ruined what it took us years to build!" she shouted to cheering, chanting and crying supporters at a recent rally.
(Additional reporting by Miguel Lobianco; Editing by Mary Milliken)