Colombia's Santos win boon for Wall St and Chavez?

A Colombian voter chooses his candidate for the Colombian presidency in Panama City May 30, 2010.

BOGOTA (Reuters) - Conservative Juan Manuel Santos is well placed to win Colombia's presidency after a first electoral round victory that pleased investors but which may also help a foe, Venezuela's President Hugo Chavez.

Santos, a Harvard and LSE-trained economist was only around three percentage points short of the majority needed to win the election outright on Sunday, and his 25 point lead will make it very difficult for his rival Antanas Mockus to catch up. The two face off in a June 20 runoff.

Sunday's result is a ratification of the tough security and pro-business policies of staunch U.S. ally President Alvaro Uribe in Latin America's third most populous country and was received well by investors.

A victory in June for the wealthy scion of Bogota's political elites will likely inflame already high tensions with neighboring Venezuela -- possibly benefiting Chavez who is beset by economic woes and often thrives on external conflict.

"I doubt Chavez is unhappy with this result. Mockus would have thrown him off balance," said Michael Shifter, an analyst with Washington think-tank Inter-American Dialogue.

Former Defense Minister Santos has for years verbally sparred with the socialist leader, who is beefing up his armed forces. Officials have said Colombia's military needs to prepare itself for an "external threat.

A Santos presidency would do nothing to reduce fears of a border clash -- although war in the region is unlikely.

A seasoned warrior of Colombia's internal conflict, Santos, 58, is the anointed heir to Uribe, who cleared much of the country of leftist rebels and multiplied investment five-fold with security and low taxes in eight years in office.

The peso currency and benchmark TES bonds firmed on Monday, while the country's risk rating on JPMorgan's EMBI Plus index fell 8 points to 231 points.

"Now there is much more certainty about what might happen and what lies in store for the country. As well economic matters, the teams are well regarded. That generates stability and confidence recovers," said Alexander Cardenas, director of economic research at Colombian brokerage Acciones and Valores.

Mockus, an eccentric two-time former Bogota mayor, is also seen as a steady economic hand but is a relative unknown and has little sway in Congress since his Green Party has few seats -- raising governability questions.

"OIL AND WATER"

The son of one of the country's most influential families who for years owned top newspaper El Tiempo, Santos proved his steel in the fight against FARC guerrillas, overseeing the dramatic rescue of hostages and a 2008 bombing raid that killed the insurgents' No. 2 commander.

That raid, on a rebel camp in neighbor Ecuador, briefly raised the specter of war in the Andean region. Relations with Venezuela never fully recovered and Chavez repeatedly called Santos a danger to Latin America during the election campaign.

Santos says he and Chavez are like "oil and water," and although both men say they are willing to talk, Chavez also says he would struggle to have normal ties with Santos.

Venezuela's leader is highly unpopular in Colombia and his remarks were always likely to increase support for Santos, although some analysts attributed a surge in Mockus' ratings in April to hopes for less conflict.

"In the end the reverse happened, it strengthened Santos," former Colombian Vice President Humberto de La Calle said on TV station RCN.

Some Chavez allies have said in private they would prefer Santos to become president because Mockus is an unknown quality. The conservative Santos offers a clear target for Chavez, who often attacks what he terms as venal elites in his own country.

Chavez rose to international prominence with fierce criticism of former U.S. President George W. Bush. Since Bush left office, Chavez has focused his wrath on Uribe, whom he accuses of conspiring with Washington to topple him.

"With Santos, Chavez can continue to play his favorite game," Shifter said. "Chavez lost Bush and will soon lose Uribe, but at least he'll have Santos as a foil."

(Additional reporting by Nelson Bocanegra, editing by Alan Elsner)