LIMA, June 15 (Reuters) - In Peruvian capital Lima, fear is spreading among the city’s small but powerful urban elite about the likely election win of a little-known socialist teacher.
Pedro Castillo is poised to be named president ahead of conservative rival Keiko Fujimori. With almost all votes tallied, Castillo's lead over Fujimori is narrow but looks to be enough, though the final result could take days or even weeks as legal challenges play out.
During campaigning, Castillo pledged to sharply hike taxes on mining in the world's no. 2 copper producer to pay for social spending and redraft the constitution to give the government more muscle in running the economy. He has also hinted at potential land reforms.
Fujimori's conservatives were quick to play up fears about the rise of "communism" and to stir up old ghosts of land grabs and a Venezuela-style collapse. Lit-up signs appeared in the capital warning, "Think about your future, say no to communism." They did not mention Castillo by name and no-one has claimed responsibility.
"(Castillo's) party is Marxist-Leninist. He says he will change the constitution, that he will carry out expropriations. So if he does all that, it shouldn't come as a surprise," Alfredo Thorne, a former finance minister, told Reuters.
As his victory looked more likely in recent weeks, Castillo softened his rhetoric, rebuffing comparisons to authoritarian leftists like Venezuela's Hugo Chavez. He has brought on board more moderate advisers, played up a pro-market message, and denied that he plans to nationalize or expropriate savings.
However, many in the wealthy parts of Lima - which overwhelmingly voted for Fujimori - are still fearful.
"All of my friends have taken their money abroad, I don't know anybody who hasn't withdrawn their money," said an attorney in the city who serves on the boards of several large corporations and had also withdrawn funds.
"I wouldn't keep any money in Peru, not a penny," the attorney added, asking not to be named because of sensitivities about the political situation.
The sol currency has fallen 8% since Castillo was the surprise winner of an April 11 first-round vote, while the Peru select equities index (.SPBLPSPT) is down some 9% over the same period, with banks and mining shares among the hardest-hit.
Analysts say, however, that a fragmented congress will limit radical change and force Castillo to be pragmatic, which could even create a silver lining for markets and potential buying opportunities for investors.
The collective fear appears to be real, whether or not it is warranted.
Some families are splitting properties among members or putting them in trusts, the attorney said, and even in some cases resorting to withdrawing cash in briefcases to store at home.
Banks have been importing physical dollar bills in order to meet the demand, according to two sources with knowledge of situation.
"The goal of importing dollar bills is to increase availability, in case there are people who need a larger amount of cash," said one of the banking sources, adding that Peruvian lenders have high liquidity and deposits are not at risk.
"It's collective hysteria," said Ramiro Llona, a prominent artist who been critical of Fujimori, the daughter of divisive former President Alberto Fujimori. Llona said that fear and bias was driving some of the push-back against Castillo, the son of peasant farmers from Peru's rural north.
"I strongly belief that there is a component of racism at play here... fear that a person from the Andes might win."
Whereas 88% of residents in the capital's San Isidro, Peru's richest neighborhood, voted for Fujimori, in Peru's poorest Andean region, Huancavelica, 85% supported Castillo. He has galvanized support among those left behind like no other politician in recent decades.
Reuters spoke to half a dozen wealthy Lima residents who said support for Fujimori was rooted in two historical traumas - land appropriations in the 1960s and hyperinflation in the 1980s, both under leftist leaders.
"The ones with the old-money fortunes are the ones who are dying of fear," said a senior consultant who serves Peru's largest corporations, asking not to be named.
Those among the elite who have spoken out against Fujimori have found themselves ostracized.
"Being anti-fujimorista in this runoff election was like having leprosy," said Ursula Castrat, a podcast presenter and former editor at Cosas, a magazine that chronicles the lives of the upper classes. She vocally opposed Fujimori on social media.
Llona, the artist, said his wife had come under pressure from friends to get him to tamp down criticism of Fujimori.
Castrat also said her friends pressured her to support Fujimori.
“I ended up voting for Fujimori as a gift to one of my best friends,” Castrat said. “I had already bought her a present but she insisted, so I took a photo of my ballot and sent it to her.”
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