Investor fright as Peru votes left-wing leader

LEFT-WING former army commander Ollanta Humala won Peru’s presidential election and vowed the poor will share in the country’s new wealth but financial markets plummeted on fears he will ruin the economy.

Humala claimed victory and results from 89% of ballot boxes gave him a slim but growing lead of more than 2.7 percentage points over right-wing lawmaker Keiko Fujimori, the daughter of jailed former President Alberto Fujimori.

Peru’s stock market sank more than 12%, while the sol currency fell 1.5%, prompting the central bank to offer to sell about $215 million (€150m) in deposit certificates aimed at curbing the currency’s fall.

Humala has dropped some of his more radical proposals since narrowly losing the last election in 2006 and senior advisers tried to reassure markets yesterday that he will run the economy prudently, but many investors simply don’t trust him.

Shares in mining companies fell as much as 15% because Humala has said he wants to impose a windfall tax on Peru’s vast mining sector.

Top companies in neighbouring Chile with operations in Peru also saw their shares fall sharply while Peru’s sovereign bonds plunged in New York.

Investors worry Humala, who takes office on July 28, will increase state control over the economy and throw away fiscal discipline.

Kurt Burneo — an economic adviser to Humala and a former central bank and finance ministry official tipped as a possible finance minister — said Humala guarantees counter-cyclical fiscal policy; will respect the central bank’s independence, as well as investments made by private companies; and will further cut Peru’s debt- to-GDP ratio.

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