March 16, 2009 / 9:46 PM / 11 years ago

In power, El Salvador ex-rebels seek U.S. ties

SAN SALVADOR (Reuters) - El Salvador’s President-elect Mauricio Funes said he wants strong relations with Washington after his party of ex-Marxist guerrillas ousted their right-wing civil war foes in a tight election victory.

Presidential candidate Mauricio Funes (L) for the Farabundo Marti National Liberation Front (FMLN) and his vice-presidential running mate Sanchez Ceren gesture to thousands of supporters gathered to celebrate their victory in the presidential election in San Salvador March 15, 2009. REUTERS/Daniel Leclair

A former TV journalist who never took up arms, Funes’ peaceful past helped the Farabundo Marti National Liberation Front, or FMLN, win power through the ballot box for the first time on Sunday years after it fought one of the Cold War’s nastiest conflicts.

Washington, which armed El Salvador’s military against FMLN rebels in the 1980’s, congratulated Funes and said President Barack Obama looked forward to working with him.

“I would aspire to strengthen relations with Obama,” Funes told Reuters Television after his victory over ARENA’s Rodrigo Avila, which sparked noisy street celebrations by red-clad supporters.

Venezuela’s socialist President Hugo Chavez telephoned to congratulate Funes within minutes of hearing he had won. Daniel Ortega of Nicaragua, another staunch leftist, also called.

But rather than swing El Salvador to the hard left after 20 years of pro-Washington rule by the ARENA party, Funes insists he wants to work closely with Washington on joint issues like migration, street gangs and drug smuggling.

A quarter of El Salvador’s population — 2.3 million people — live in the United States and the money they send home is key to the economy. The U.S. recession has also dampened demand for El Salvador’s factory exports.

Funes says he will keep the U.S. dollar as El Salvador’s currency and the CAFTA free trade accord with the United States and will model his policies on those of moderate leftists like Brazil’s Luiz Inacio Lula da Silva, a personal friend, and Chile’s Michelle Bachelet, both of whom also phoned him.

Lula said Obama told him last week he had received “good references” about Funes, Funes’s office said.

Funes also urged unity and reconciliation with the ARENA party, which was founded by an army major closely associated with right-wing death squads in the 1980-92 civil war.

Scars from the war mean the left-right breach runs deep, and it will take time to move on from a barbed election race in which ARENA called the FMLN “communists” and “terrorists.”

ARENA leaders were visibly smarting after their defeat.

“The country is totally divided,” snapped ARENA’s San Salvador director Adolfo Torres after his party’s defeat.

INVESTORS NERVOUS

Investors reacted nervously. The country’s credit default swaps, which offer protection against default or restructuring, weakened, widening by 18.2 basis points to a mid-price of 553.75, according to data provider Markit. CDS prices have slid since October but inched up in recent weeks.

“Overall this is a very positive thing for democracy,” said Rice University political science professor Mark Jones.

“But the main potential concern is knowing what exactly they will do once in power. There are elements in the FMLN that have different ideas from Funes and favor a government along the lines of that of Hugo Chavez or Ecuador’s Rafael Correa.”

Eurasia Group analyst Heather Berkman said Funes’ cabinet was likely to dilute FMLN hardliners with market-friendly technocrats, and noted Funes will need the backing of small opposition parties to pass laws in the divided Congress.

“Difficult economic circumstances should dictate cooperation and force moderation,” she wrote in a report.

After years as a peaceful opposition party, the FMLN cashed in on electoral fatigue and economic gloom to win by nearly 3 percentage points, scotching the notion it was unelectable.

“(It) doesn’t mean a leap into a vacuum nor a break with the system,” said Funes, 49, who never fought in the war.

The Nationalist Republican Alliance, or ARENA, kept the coffee-exporting nation in the pro-Washington camp, even sending small troop contingents to help U.S. forces in Iraq.

But rampant poverty and crime have helped the FMLN, whose fighters laid down their arms under a 1992 peace deal.

Funes said his first priority would be to tackle a looming economic crisis. “There is no time to lose. From tomorrow we will start taking the necessary decisions,” Funes said.

Funes plans to fight tax evasion by the wealthy and use the funds to create jobs for returning migrants. He also vows to invest in farming to reduce dependence on imported food.

Slideshow (3 Images)

Despite Funes’s insistence he will be a pro-business moderate, his victory was a boost for Chavez and Ortega.

Vice President-elect Salvador Sanchez is a veteran FMLN hard-liner who many fear could take policy to the left.

Avila said ARENA would not let El Salvador turn authoritarian. “We will be a constructive opposition, an opposition that is vigilant so that liberties are not lost.”

Additional reporting by Anahi Rama and Alberto Fajardo, and Frank Jack Daniel in Caracas, Sue Pleming in Washington

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