Humala's rise shakes Peru's markets

LIMA: Investors were on tenterhooks on the eve of Peru's presidential elections Sunday, after the rise of leftist presidential candidate Ollanta Humala sent turbulence through financial markets.

Peru's business community fears the ex-military man has radical tendencies along the lines of Venezuela's President Hugo Chavez and has firmly backed his populist but conservative rival, Keiko Fujimori, daughter of jailed ex-president Alberto Fujimori.

The two candidates were neck-and-neck ahead of Sunday's vote, with one or the other slightly ahead according to different polling companies.

Lima's stock index fell more than five percent twice this week and its currency, the new sol, saw its largest drop in two months against the dollar a day after polls showed Humala on the rise again.

"The fall in the stock exchange is linked to opinion polls," said Roberto Hoyle, president of Lima's stock exchange, who saw similar dives when the nationalist candidate led the April 10 first round.

"What's the stock market like? Low? That means I've risen in polls," 48-year-old Humala joked to reporters at Lima's foreign press club Friday. "They obey dark interests," he added.

"Humala's sin is that his first economic program, which he later moderated, did not respect free markets and followed recipes applied in Bolivia, Venezuela, Ecuador and Argentina," said independent analyst Jacinta Hamann.

Humala, who is supported by many of the poorest sectors, particularly in the south, promises a major redistribution of riches after a decade of unprecedented growth on the back of mineral exports.

The country is still marked by wide inequalities, with 34 percent poverty and up to 60% in rural areas of the Andes, according to the World Bank.

Humala, like Fujimori, proposes a windfall tax on mining profits but also says the state must show more control over natural resources.

The mining sector is the economic lung of Peru, which is the world's top producer of silver, second for copper and zinc and fifth for gold.

The Andean nation is breaking export records and has around $40 billion in investment lined up in the next 10 years.

Since Humala's first round victory, foreign investors have suspended new projects over $3 billion, according the Apoyo institute of economic studies.

In a bid to banish their fears, the leftist candidate recruited the economic team of former centrist president Alejandro Toledo and sought to distance himself from Chavez, whose support cost him the presidency in 2006.

But with most of the media behind Fujimori and repeated accusations of his ties with Chavez -- including the latest, from a former US diplomat, that Humala received almost 12 million dollars from Venezuela in the past six months Humala has struggled to shake the image off.

Fujimori, a 36-year-old with a US business degree, reassured investors by repeating her attachment to the status quo of free-market policies, while promising to increase populist social programs for the poor.

"With Keiko Fujimori, there wouldn't be instability on the financial level, but there would be on the political level," said Elmer Cuba, an analyst at the Macroconsult agency.

Lima's stock exchange shot up 7.16 percent Thursday and the currency strengthened after a poll showed Fujimori leading by 2.2 percentage points.

Fujimori has campaigned in the shadow of her authoritarian ex-president father, Alberto Fujimori, who beat hyperinflation but is also serving a 25-year jail term for corruption and human rights violations under a clampdown on leftist guerrillas during his 1990-2000 leadership.

Peru stocks were down 2.52 percent Friday, as the polls failed to give a clear outcome of Sunday's vote.

Copyright AFP (Agence France-Presse), 2011