LIMA (Reuters) - Peruvian socialist Pedro Castillo held a wafer-thin lead in a polarized presidential election on Wednesday, with a battle brewing over the result that could spark weeks of political wrangling, market volatility and deeper divisions.
Castillo, the son of illiterate farmers who has rattled the Andean nation's political elite and garnered huge support from the rural poor, had 50.2% with 99.8% of votes processed, just a 0.4 percentage point ahead of right-wing Keiko Fujimori.
Fujimori, the heir of a powerful political family, has however, raised unsubstantiated allegations that supporters of Castillo tried to steal votes and her team has flagged plans to raise a legal challenge to the result.
The leftist's party has strongly denied the claims and electoral observers say the vote was carried out cleanly.
The allegations, with some echoes of the legal wrangling after the U.S. election last year, could trigger weeks of confusion and tension, amid a polarized election cycle that has divided Peruvians, with higher-income citizens supporting the right-wing candidate and lower-income ones supporting Castillo.
"The people are tired, if they continue to trample over our rights that our president has already won, we are going to get into a social struggle," said Justiniano Ilario, a teacher supporting Castillo while on a protest march.
"Enough is enough, the people from the provinces, we are tired of this outrage of corruption that exists everywhere."
Luis Cano, wearing a "Keiko" cap in rival street protest, said the Castillo supporters were using tactics other authoritarian leftists in the region had done before to win the vote.
"They are using Chavista tactics," he said, referring to former Venezuelan President Hugo Chavez. "Everything is programmed in advance to contest the ballots and even abroad, contesting only the places where Keiko was going to win."
Hundreds of voters on both sides have taken to the streets to protest for their candidate, mostly peacefully and even at times with musicians and dancers. Castillo has made calls on supporters to "defend the vote".
There are also some 300,000 contested votes, which will need to be further scrutinized by an electoral jury, a process that will take several days to complete and could tip the balance.
The world's no. 2 copper producer saw three presidents in a week last year amid political scandals and protests, has been hit by the world's deadliest COVID-19 outbreak and posted its worst economic plunge in three decades last year.
(GRAPHIC: Castillo v Fujimori: https://graphics.reuters.com/PERU-ELECTION/yxmvjabwzpr/chart.png)
Fujimori had closed the gap slightly overnight as almost all the overseas votes that favor the conservative candidate came in, though not by enough to rein in Castillo's lead as she had hoped, leaving disputed votes as her last potential reprieve.
"It's unlikely that at this point that Fujimori will overtake Castillo," said David Sulmont, a sociology professor at Peru's Pontifical Catholic University and former head of their polling unit.
"It is one of the country's tightest elections," he added. "The margin may keep varying, but I think Castillo will be the winner."
On Wednesday, a key economic adviser to Castillo told Reuters that the leftist would maintain a "market economy" if named president and there would not be massive state interventions in the economy.
The aide added though that mining taxes would be raised to pay for planned educational and healthcare reforms, though recognized the sector must retain competitive.
Peru's sol currency, gained around 2% on Wednesday, though stocks were down over 3% with mining sector shares among the worst hit.
'COMPANION IN STRUGGLE'
A win for Castillo, a teacher who was the surprise victor in the first-round vote in April, would mark a major advance for Latin America's left amid rising discontent over poverty and inequality that has been sharpened by the COVID-19 pandemic.
On Tuesday evening, Castillo came close to claiming victory. "We already have the official party tally, where the people have won this fight," he told supporters, referring to an unofficial vote count conducted by his party, Free Peru.
Bolivia's former President Evo Morales, an iconic leftist whose socialist party is now in power in that country, also congratulated Castillo on his "victory" in a post on Twitter, calling him a "brother of the soul and companion in struggle".
Fujimori is on her third attempt to become president, having been the runner-up in the last two cycles. In 2016, she lost by a margin of 0.24 of a percentage point.
Castillo has spooked markets with proposals to redistribute mining wealth, redraft the constitution and raise taxes on mining firms, a key source of revenue for the Andean country, though he has looked to moderate his tone in recent days.
(GRAPHIC: Castillo v Fujimori: https://graphics.reuters.com/PERU-ELECTION/xegvbrjggvq/index.html)
(Reporting by Marcelo Rochabrun and Marco Aquino; Additional reporting by Reuters TV; Editing by Adam Jourdan and Alistair Bell)