FACTBOX-Key political risks to watch in Latin America

PERUVIAN ELECTIONS

The three front-runners in the race for Peru's April 10 presidential election all favor mainstream economic policies that have been in place for much of the past 20 years.

Left-wing nationalist Ollanta Humala, who scared investors when he nearly won the 2006 race, trails well behind in polls. He has cast himself as more of a moderate this time around but he continues to languish. Unless he can catch up, the contest will be fought by a clutch of parties in the center or on the right, averting pressure on local markets .IGRAPEN=PE.

Peru's economy is forecast to grow about 6 percent in 2011, after an expansion of almost 9 percent this year. While growth has cut the poverty rate to about 35 percent, social tensions linger.

Peru's human rights office says more than 100 communities have organized to stop big mining or petroleum projects planned by foreign firms, potentially delaying billions in foreign investment.

Peru has overtaken Colombia as the No. 1 producer of coca leaf used to make cocaine. The government will likely look to step up its drugs war in 2011 but has struggled to stamp out remnant bands of Shining Path rebels in the drug trade. [ID:RISKAR]

What to watch for:

-- A surprise rally by Humala in campaign polls.

-- Violent protests over mining and oil projects.

-- Escalating drugs war.

ARGENTINE ELECTIONS

President Cristina Fernandez has not said whether she will run for a second term at the presidential election in October. Her husband and predecessor, Nestor Kirchner, had been expected to run but his death in late October turned Argentine politics on its head and there is considerable uncertainty over which candidates will emerge.

Kirchner's death also robbed Fernandez of her closest ally and drove Argentine bond and stock prices higher as investors bet it would eventually put an end to the couple's interventionist economic policies.

Several recent announcements, such as a surprise overture to the International Monetary Fund (IMF) on the country's discredited inflation data, suggest Fernandez is taking a more pragmatic approach. [ID:nN26268496]

But with a record soy and corn harvest swelling state coffers and the economy booming, Fernandez is expected to maintain brisk social spending as the election draws nearer, prioritizing growth despite inflation risks. [ID:RISKAR]

What to watch:

-- Fernandez's decision on whether to run for re-election or not.

-- Other candidates emerging, especially if there are challengers to Fernandez inside ruling Peronist party.

-- Government moves to ensure access to billions in foreign currency reserves to pay debt next year.

-- Any sign the Senate could approve a bill to reform the questioned INDEC national statistics agency when Congress reconvenes in March.

-- Any labor unrest when wage talks start in March or April and social protests linked to skyrocketing prices.

COLOMBIAN REFORM AGENDA

President Juan Manuel Santos' ambitious reform agenda, the guerrilla and drugs war, measures to tame the soaring peso and still delicate relations with neighboring Venezuela and Ecuador are key issues to watch in Colombia in 2011.

Since coming to office in August, Santos has pushed an ambitious set of reforms ranging from the management of oil royalties to overhauling the health system and a tax system adjustment. The success of the reforms are seen as essential for Colombia to tackle its fiscal deficit and regain the investment grade it lost in a 1990s fiscal crisis.

Key to watch will be the royalties reform [ID:nN31245717], tax overhaul and a fiscal regulation proposal [ID:nN07144747] that seeks to lower debt and better savings.

Santos has a strong majority in Congress and has managed to make significant progress on the reforms. But several proposals already must have to wait to a second legislative session start in March. Under Santos, Colombia has improved strained ties with left-wing leaders in Ecuador and Venezuela. But underlying political differences linger.

While it has made big inroads against FARC rebels involved in the country's cocaine trade, Colombia still faces security risks from guerrillas and new militias. [ID:nRISKCO]

-- Urban attacks by FARC to show presence.

-- Details on how royalty reform will share out cash.

ECUADOR

Political stability will be the key issue in Ecuador in 2011 after recent violence revived memories of the coups and street protests that have hounded the OPEC member nation. [ID:nN30130945]

Hundreds of police officers mutinied on Sept 30, causing deadly riots and surrounding leftist President Rafael Correa for hours in a Quito hospital where he had taken refuge.

The mutiny was finally ended when the military rescued Correa, and the country has since calmed down, but it raised fresh concerns about the government's dependence on support from army chiefs.

A struggling dollarized economy, a possible bid to re-enter the international capital markets with a new bond issue, which would be the country's first since defaulting on its global debt in 2008, and a possible move by Correa to dissolve Congress and call elections are all points to watch in 2011. [ID:nRISKEC]

What to watch for:

-- Renewed political instability.

-- Efforts to lift oil production.

CUBAN REFORMS

The success or failure of Cuba's economic reforms will be the key issue to watch in the next year as the government moves to strengthen the economy and ensure survival of the island's communist system once the current aging leadership is gone.

The cash-strapped government is looking for ways to cut spending while increasing income, and could get long-term help if offshore oil exploration slated to begin in 2011 is successful. [ID:nN05129084]

All this occurs against a backdrop of only slightly tempered hostility with the United States, including an ongoing dispute over a U.S. contractor held by the Cubans on suspicion of spying. [ID:nRISKCU]

What to watch for:

-- Fate of detainee Alan Gross.

-- Better or worse economic performance.

-- U.S. and EU reaction to Cuban reforms. (Editing by Kieran Murray)