PREVIEW-Chile municipal elections key to presidential race

By Pav Jordan

SANTIAGO, Oct 24 (Reuters) - Chilean municipal elections on Sunday will be an early test of the coalition government's ability to hold onto power in next year's presidential race as it tries to dodge the global financial crisis.

Political lines that traditionally split Chileans neatly to the left or the right have begun to blur as the Concertacion government -- a coalition of center-left parties that has ruled for 18 years -- is beset by infighting and even defections.

With presidential elections a year away, it has yet to decide on a candidate, while center-right billionaire Sebastian Pinera, who lost a 2006 election run-off to President Michelle Bachelet, is currently the opposition's only candidate.

"For the first time in a long time, this is going to be close, the people are tired of the Concertacion," said Enrique Cisternas, 46, a bank executive.

Chileans praise the government for public works projects like modern highways and for fiscal policies that have helped the economy to become one of the healthiest among emerging nations.

The economy has shown record surpluses in recent years amid soaring prices for No. 1 export copper, but prices for the red metal have plummeted in recent weeks amid fears of a global economic slowdown. At the same time, the peso currency has slumped 26 percent against the U.S. dollar this year.

Some fear the government has started to show signs of complacency after so many years in power, and there has been talk of corruption. Some politicians have defected from the ruling coalition.

Inflation running at 14-year highs and concerns that crime could be on the rise is also putting pressure on the governing party.

Chile has a multi-party system, but most parties are allied under the right-leaning Alianza or the left-leaning Concertacion. The split has been static since the return to democracy in 1990 from the 17-year dictatorship of Augusto Pinochet.

Voters will elect 345 mayors and more than 2,000 councilmen across 15 political regions on Sunday.

NEXT YEAR'S CANDIDATE

The results will show which of the Concertacion's four main parties are strongest and gets to choose the presidential candidate for next year's race.

"The municipal elections, coming one year before the presidentials, are the meter stick by which the political parties will measure themselves," said Fabian Pressacco, director of political science at Alberto Hurtado University in Santiago.

Ruling coalition presidential candidates may include two ex-presidents -- Ricardo Lagos and Eduardo Frei -- as well as former foreign minister Soledad Alvear and Jose Miguel Insulza, secretary general of the Organization of American States.

Government spokesman Francisco Vidal predicted the Concertacion will hold onto power across the board on Sunday, saying Chile is fundamentally anti-right.