Ollanta Humala will take office as Peru's new president next month. Washington's fear of him and their paranoia about his relationship with Venezuela's President Chávez are palpable. The U.S. sees the possibility of yet another South American country, a capitalist stronghold, turning left. But Humala has made pre-election promises to the ruling oligarchs which appear to favor a neoliberal market economy. We have to wait to see what happens in actual practice as he assumes office and picks his cabinet and staff. - Les Blough, Editor

Business Report. The Chronicle with Bloomberg

June 6 (Bloomberg) -- Ollanta Humala claimed victory in Peru's presidential runoff as voters overlooked his past support for Venezuela's Hugo Chavez and rallied behind pledges to stamp out corruption and extend a mining boom to the nation's poor.

Congresswoman Keiko Fujimori, who told supporters last night she is awaiting final results and will "be the first" to recognize a defeat to Humala, will speak at 4 p.m. New York time. With more than 90 percent of ballots counted, Humala had 51.4 percent to 48.6 percent for Fujimori, the daughter of the jailed former president Alberto Fujimori.

Related: Humala beats Fujimori in Peru’s presidential vote

"The people have been waiting a long time for change," Humala, 48, told thousands of supporters at a midnight rally in downtown Lima. "It's not possible to say that the country is progressing when 12 million people are living in extreme poverty without electricity or running water."

Peruvians, fearful of reviving the political trauma associated with the authoritarian rule of Fujimori's father, opted for a former army rebel who advocates greater state control of the country's natural resources. Many voters doubt the sincerity of his transformation from a one-time ally of Chavez to a defender of policies that have made Peru the fastest-growing economy in Latin America over the past decade.

Market Selloff

As in April, after Humala topped the field in the first round of voting, investors dumped Peruvian assets today on concerns his policies would freeze $50 billion of mining, energy and infrastructure investment that the government expects will fuel 6.5 percent growth over five years.

After shares plunged, trading in Peru's stock market was suspended 90 minutes, for the first time since the global financial crisis. The Lima General Index was down 12.5 percent at 3:08 p.m. in New York, the steepest drop since at least 1990.

Dollar bonds also tumbled, sending borrowing costs to the highest in four weeks. Yields on dollar bonds due 2037 rose 22 basis points, or 0.22 percentage point, to 5.96 percent, according to data compiled by Bloomberg.

To reassure Peruvians the country's economic policies will remain in place, Humala may appoint in the coming days an ally of former President Alejandro Toledo to head the Finance Ministry, Omar Chehade, the President-elect's running mate, told Canal N today.

Potential candidates include former deputy finance minister Kurt Burneo and former central bank president Oscar Dancourt, who both served under Toledo, and other "high quality professionals," Chehade said.

Army Renegade

Humala fielded congratulations from leaders in Argentina, Brazil, Chile and Venezuela today, among others. Venezuelan President Chavez said Humala's victory is "part of this dynamic of this world awakening to a new era."

Like Chavez, who as a paratrooper in 1992 led a coup attempt, Humala as an army lieutenant colonel in 2000 led 50 soldiers who seized and occupied for a week one of Phoenix-based Southern Copper Corp's mines to protest corruption in Fujimori's government. His brother, Antauro Humala, is in jail for killing four policemen during the takeover of a highland town in 2005.

To broaden his appeal to Peru's growing middle class, the Nationalist Party candidate abandoned rhetoric against foreign mining and natural resource companies used during the 2006 campaign, when he lost the presidency to Alan Garcia by five percentage points.

'Keep the Gas'

Last night, as supporters chanted "Keep the Gas in Peru," Humala said he would seek broad backing for his policies and form a government comprised of the most-qualified people independent of their political affiliation.

As Humala's campaign gained momentum, he set aside a platform that included pledges to rewrite Peru's constitution to allow the state to run telephone companies and airlines, and renegotiate free trade agreements with the U.S. and other nations covering 90 percent of the country's exports.

In the final days he stepped up attacks on Fujimori, accusing her of turning a blind eye to the corruption and human rights abuses when she served as first lady during her father's decade-long government, which ended in 2000.

Instead of looking to Chavez, Humala now says he'd emulate the pro-market policies of former Brazilian President Luiz Inacio Lula da Silva, and hired two of his former aides as campaign advisers.

Seeking Reassurance

Investors will be seeking immediate reassurances that he'll maintain existing economic policies and respect contracts, said Jaime Valdivia, who helps manage about $1.4 billion of emerging- market assets at Bluecrest Capital Management in New York.

"Humala has to prove himself," said Valdivia. "The market will have little patience for abrupt announcements."

Nobel Prize winning novelist Mario Vargas Llosa, who earlier compared a runoff between Fujimori and Humala as a choice between cancer and AIDS, rallied a group of intellectuals who said they were reluctantly voting for Humala to prevent a return of the Fujimori "dictatorship."

Humala's candidacy ignited the hopes of a third of Peru's population that hasn't benefitted from the economic boom. While a decade of growth averaging 5.6 percent has spurred employment and doubled per capita income to $5,224, as many as 80 percent of homes still lack running water and sewage in the state of Huancavelica, according to a United Nations study last year.

Mining Investments

Humala pledges to curb tax evasion and raise mining taxes to finance higher social spending, and says he'll resolve conflicts between farmers and mining companies that have caused companies including Southern Copper to shelve investments.

Peru is the world's biggest silver producer, and third in copper and zinc. Mining investment helped bring in $7.3 billion in foreign direct investment last year and helped fuel growth above 7 percent for the past 13 straight months.

Humala's victory could lead to a near-term jump in gold, zinc, and copper prices as foreign mining firms reconsider investments in Peru, Win Thin, global head of emerging markets currency strategy for Brown Brothers Harriman & Co. in New York, wrote in a note to clients last night.

Southern Copper, Peru's biggest copper producer, fell 11.5 percent today to $30.74, the most in two years.

Many Peruvians voted for Humala simply to thwart Fujimori amid fears her victory could revive the corruption and authoritarian rule associated with her father, Coletta Youngers, a senior fellow at the Washington Office on Latin America.

Alberto Fujimori

The elder Fujimori, after slashing 7,650 percent inflation, saw his government collapse after his intelligence chief, Vladimiro Montesinos, was caught on videotape in 2000 bribing lawmakers. He's now serving a 25-year prison sentence for directing a paramilitary death squad that killed civilians during a war against the Shining Path, a Maoist insurgency.

Chehade said today that the 78-year-old Fujimori would likely be transferred to an ordinary prison from the police station on the outskirts of Lima, where he tends a garden and takes music lessons.

"Many who had been reluctant to endorse either candidate opted for Humala to prevent the return of a political movement responsible for the most corrupt government in Peruvian history," said Youngers.

--With assistance from Andrea Jaramillo in Bogota, Eduardo Thomson in Santiago and Alexander Emery in Lima. Editors: Joshua Goodman, Bill Faries

Source: SF Gate