Peru's staid presidential race goes topsy-turvy

Reuters News
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Posted: Mar 23, 2011 12:52 PM

By Teresa Cespedes and Terry Wade

LIMA (Reuters) - Peru's once staid presidential race has turned into an unpredictable five-way contest that is rattling local financial markets as front-runner Alejandro Toledo plunges in polls.

Toledo, a former president who only a month ago had seemingly locked up the race, has slipped nearly 10 percentage points in polls. He is now technically tied with two candidates from opposite ends of the political spectrum less than three weeks before the April 10 vote.

In a poll published on Wednesday by local survey firm CPI, Toledo was at 20.5 percent, only half a percentage point ahead of lawmaker and right-wing populist Keiko Fujimori, daughter of jailed former President Alberto Fujimori.

A poll by Datum published on Sunday showed Toledo at 20.3 percent, ahead of left-wing nationalist Ollanta Humala by only 1.7 points -- within the poll's margin of error.

"With the outlook we have at this moment, any two of the five candidates could make it to the second round," Manuel Saavedra, head of the CPI poll, said on RPP radio.

"More than a quarter of voters could change their minds before election day."

A runoff is expected on June 5. Peru is one of the world's fastest-growing economies -- it expanded 9 percent last year.

Close on the heels of Toledo, Fujimori and Humala are former Lima Mayor Luis Castaneda and Pedro Pablo Kuczynski, a former Wall Street executive who served as prime minister under Toledo in his 2001-2006 term.

Though polls show Humala would likely lose to any rival in a runoff, his rise caused Peru's sol to sink to a one-month low of 2.787 on Monday against the U.S. dollar. It was trading at 2.777 to the dollar on Wednesday.

It was the first time the race sharply shook local financial markets, and brought back memories of 2006 when Humala nearly won the presidency.

Analysts say more volatility is expected, even though all of Humala's rivals clearly support market-friendly economic policies that have been in place for nearly 20 years.

In a sign of heightened uncertainty, the cost of buying insurance for Peruvian government bonds has risen over the past week, along with sovereign bond yields.

"We think that the market is overreacting" to the risk of an Humala victory that is very unlikely, Bulltick Capital Markets analyst Kathryn Rooney said in a note to investors.

(Editing by Mohammad Zargham)


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