| SAN JOSE, Costa Rica
SAN JOSE, Costa Rica A protege of outgoing President Oscar Arias could be elected Costa Rica's first woman head of state on Sunday, though a conservative rival has upped his challenge ahead of the election.
Opinion polls show ruling party centrist Laura Chinchilla, who has promised to expand Costa Rica's free trade pacts beyond the Western Hemisphere, within striking distance of the 40 percent of the vote needed to avoid a second round run-off.
A late surge by libertarian Otto Guevara, who wants to replace the local currency with the U.S. dollar and crack down on rising crime, could force an April run-off
An oasis of stability in politically turbulent and crime-plagued Central America, Costa Rica earned a reputation for environmental friendliness and peacemaking under Arias, who won the Nobel Peace Prize in 1987 for his role in ending regional civil wars. He is now serving his second presidential term.
The country's relatively smooth passage through the global economic crisis under Arias -- slipping into recession in 2009 for the first time in 27 years but faring better than many of its neighbors -- has bolstered Chinchilla.
"The financial crisis would have been worse if Arias wasn't there," said psychotherapist lvaro Aguilar, 57. "Chinchilla will give continuity to the good government we've had."
Costa Rica's economy, driven by coffee, pineapples and tourism, is seen returning to growth above 3 percent in 2010.
Chinchilla promises to continue Arias's economic policies, expanding free-trade pacts and courting foreign investment.
Guevara, a Harvard-educated lawyer and founder of the pro-business Libertarian Movement, wants to get tough on crime with longer jail terms and softer gun laws, and has eaten into Chinchilla's lead with a surge in support since September.
"We have already built a beautiful country, with a lot of roads, a Nobel Prize, many nice things ... but we can't go out in the street," said Silvia Ugarte, 36, a nurse who will vote for Guevara. "He has in mind a more radical way to combat crime. I think that's the main problem now."
CREAKING PORTS, CRIME
A spurt in support for third-ranked Otton Solis, a veteran of the center-left Citizens' Action Party who opposes the regional CAFTA free-trade pact, may also dilute Chinchilla's lead on Sunday and raise the chances of a run-off.
Costa Rica has enjoyed faster growth than most of its neighbors through free trade and attracting new industries.
Its export-driven economy is seen rebounding as tourism rebounds and recovers for its coffee, fruit and electronic goods like microchips. A swelling budget deficit could exceed 4 percent of gross domestic product this year, however.
To sustain growth foreign analysts want a new president to tackle the red-tape that holds back business investment and improve infrastructure, particularly the Caribbean port of Limon which is a bottleneck for exports.
Costa Rica has no army, sees little of the street gang violence that plagues its neighbors and boasts some of the world's greenest energy credentials. It was ranked No. 1 last year in a "Happy Planet" Index, or HPI, published by a British think tank that combines measures of a country's ecological footprint with citizen happiness and life expectancy.
Costa Rica avoided the bloody cold war-era strife that tore apart much of Central America and whose effects linger to this day. Covered with lush, wildlife-filled jungles and volcanoes, it is a major pull for eco-tourists and surfers, and home to thousands of U.S. and Canadian retirees.
Yet voters are worried about a rise in violent crime.
Arias, president from 1986 to 1990 and re-elected in 2006, said in December the growing presence of violent drug cartels expanding out of Mexico was becoming a major security issue.
(Writing and additional reporting by Robert Campbell; Editing by Catherine Bremer and Anthony Boadle)