UPDATE 6-Paraguayan magnate wins back power for Colorado Party
* Colorados return after five years on sidelines of power
* Paraguay's first leftist president impeached last year
* Cartes wins comfortably with 46 percent of votes
By Daniela Desantis and Hilary Burke
ASUNCION, April 21 (Reuters) - Business magnate Horacio Cartes won Paraguay's presidential election on Sunday, returning his powerful center-right Colorado Party to power after the left's brief spell ended in impeachment last year.
Cartes, a political novice who had never even voted before joining the Colorado Party four years ago, won with 46 percent of votes, 9 percentage points ahead of Efrain Alegre of the ruling Liberal Party.
Thousands of Colorado Party supporters wearing red shirts and scarves honked horns and blasted traditional polka music in the capital Asuncion, celebrating their party's return to power after its 60-year reign was interrupted in 2008.
Cartes has vowed to reform the party, which is notorious for corruption. Its long period in power included General Alfredo Stroessner's 1954-1989 dictatorship.
"My legs trembled at the thought of the enormous and amazing responsibility of being president of all Paraguayans," Cartes said in his victory speech. "I want the people who did not vote for us to know that I'll put all my effort into earning their trust."
Nearly 40 percent of Paraguay's 6.6 million people are poor. The landlocked country relies on soybean and beef exports, but it is also notorious for contraband trade and illicit financing.
Cartes will take office in August for a five-year term. His election bucks the trend in South America where leftists have made steady gains in recent years. Only Colombia and Chile are ruled by conservatives.
Fernando Lugo, a leftist former Roman Catholic bishop, won Paraguay's presidency in 2008 in a vote that inspired hopes of deep reform, but he was impeached last June when the center-right Liberal Party abandoned his ruling coalition and then took over the reins from him.
Congress ousted Lugo after finding him guilty of mishandling a land eviction in which 17 police officers and peasant farmers were killed.
Some of Paraguay's neighbors likened the two-day impeachment trial to a coup and imposed diplomatic sanctions on the South American nation.
Paraguayans did not move to defend Lugo, however. He was seen as largely ineffectual and the Liberal Party was by far the most powerful political force inside his coalition.
But the Liberal Party not only lost the presidency on Sunday - it also did poorly in congressional and state elections, preliminary results showed.
"The big defeat today was for the Liberal Party, they must be asking themselves why they backed the impeachment. The Liberals can't beat the Colorado Party by themselves and today they didn't have the left's votes," said political analyst Alfredo Boccia.
One of Paraguay's wealthiest men, Cartes primarily made his fortune in the financial and tobacco industries. Rivals have tried to link him to drug running and money laundering, but he has never been charged with those crimes and denies any wrongdoing.
"The accusations made during this campaign have no truth to them, and personally I am very serene," the typically brash and outspoken Cartes told reporters early on Sunday.
Alegre, a more somber politician, led corruption probes in Congress. But his reputation as an honest administrator was undermined by an investigation into whether he misappropriated state funds while serving as Lugo's public works minister.
Voting on Sunday went smoothly and international observers said they had received no complaints of fraud.
Two guerrilla attacks were carried out in northern Paraguay, however. A member of the small, left-wing Paraguayan People's Army was killed in a raid on a police station, and a police officer died after a patrol car was bombed in another area, government officials said.
The group and others have fomented land conflicts in recent years and clashes occasionally break out between squatters and big landowners.
Cartes has promised to carry out agrarian reform and he wants to attract up to $2.7 billion in private capital to refurbish Paraguay's airports and build new highways.
He said on Sunday that he had already begun working to mend ties in the Mercosur trade group, which suspended Paraguay after Lugo's impeachment and brought in socialist Venezuela even though its inclusion was never approved by Paraguay's Congress.
Mercosur includes leftist-governed countries Brazil, Argentina, Uruguay and Venezuela.
Cartes has also vowed to put an end to nepotism in the Colorado Party and modernize Paraguay's bloated state bureaucracy, which employs about 10 percent of all workers.
"His relationship with his own party will be conflictive because one thing is winning (the election) and another thing is calming appetites in an insatiable party," Boccia said.