Paraguay votes in first big test for ruling party

ASUNCION (Reuters) - Paraguayans vote for a new president on Sunday in the first major challenge to the ruling Colorado Party in more than 60 years.

Most polls show former Roman Catholic Bishop Fernando Lugo edging out the ruling party's Blanca Ovelar, who is the first woman to run for president, and retired army Gen. Lino Oviedo. But many analysts say the race is too close to call.

Dozens of international observers will be watching for signs of electoral fraud in the poor South American country known for widespread corruption and contraband.

The candidate who gets the most votes wins, with no second round of balloting.

"We're going to be watching each ballot box to make sure nothing funny happens," a member of Lugo's election team said on Saturday as she toured a school that will serve as a polling station.

Lugo is heading a center-left coalition that includes farm groups, unions and the traditional Liberal Party. He has steered clear of South America's more radical leftist leaders, such as Venezuela's Hugo Chavez and Evo Morales in Bolivia.

The Colorado Party, which backed Gen. Alfredo Stroessner's 35-year dictatorship until helping to oust him in 1989, is traditionally center-right, while Oviedo's UNACE party is right-wing.

Paraguay's military and about 10,000 police officers are handling security at the polls, which will be open from 7 a.m. to 5 p.m. (7 a.m.to 5 p.m. EDT).

Heavy rains through Saturday morning raised concerns that some people in remote areas would have trouble getting to voting stations as dirt roads turn to mud.

Ovelar and her political mentor, outgoing President Nicanor Duarte Frutos, have rejected the possibility of electoral fraud.

"We're willing to accept the election results no matter what and we demand the same of the other candidates," Ovelar told reporters.

Paraguay has about 2.8 million registered voters out of a total population of 5.6 million. They will elect members of Congress and provincial governors as well.

Political analysts expect no party to win a majority in Congress, which will force the new government to make alliances no matter who is in charge.

A landlocked country dwarfed by wealthier neighbors Argentina and Brazil, Paraguay relies economically on agricultural and hydroelectric power exports.

(Additional reporting by Juan Bustamante; Writing by Hilary Burke; Editing by Peter Cooney)