Look out Chavez, Peru's Garcia may buck leftist wave

LIMA, Peru (Reuters) - If Alan Garcia's pledges are to be believed, his victory in Peru may signal that pragmatic social democracy is making more inroads in Latin America than headline-grabbing anti-U.S. populism in Venezuela and Bolivia.

The election of Bolivian President Evo Morales and his backing from anti-U.S. Venezuelan leader Hugo Chavez have sparked worries in Washington about the influence in the region of leftists ready to befriend Iran or nationalize the operations of U.S. firms.

But the victory of former President Garcia -- a self-proclaimed moderate -- over the Chavez-backed leftist army nationalist Ollanta Humala in Sunday's presidential election may have put a stop to that trend.

"Garcia's victory may be a defining moment for Latin America. The kind of leftist drift feared in Washington may have stopped in Peru," said Riordan Roett, director of Latin America studies at the Johns Hopkins University.

Garcia and Chavez were openly hostile to each other during the campaign after the Venezuelan leader accused Garcia of being corrupt -- something not lost to the Bush administration, which has welcomed Peru's criticism of Venezuela for meddling in its affairs.

"This (Garcia victory) is a setback for Chavez's project," said Patricio Navia, a political scientist at New York University.

Garcia's record is dismal. His first 1985-1990 government tried to nationalize the banks and his government defaulted on its debts. Hyperinflation and prices controls ruled. Critics say Garcia II will be the same plot with the same dire end.

But Garcia made his comeback by promising voters he had learned from his mistakes. He now favors a U.S. free trade deal, waxes lyrical about foreign investment and warns of the evils of inflation.

BRAZIL AND CHILE

Analysts point to Brazilian President Luiz Inacio Lula da Silva and Chilean President Michelle Bachelet as examples of governments led by former radicals who may challenge Washington on issues from free trade to the Iraq War -- but are far more moderate than Chavez-style populists.

"With all the talk of Latin America's turn to the left, few have noticed that there are really two lefts in the region. One has radical roots but is now open-minded and modern; the other is close-minded and stridently populist," Jorge Castaneda wrote in the June issue of the journal Foreign Affairs.

'ANXIOUS TO REWRITE HISTORY'

Garcia puts himself in the first camp.

"I see myself between Chile and Brazil -- both have been successful. Lula is a realist. And the Chilean governments have had good technical teams," Garcia said in a interview with the Inter-American Dialogue think-tank.

Other countries are no longer looking like they will join the leftward shift. Mexico's Andres Manuel Lopez Obrador, once a clear favorite to win July's election, has lost support and now faces a close battle with his conservative opponent.

In May, rightist Washington ally Alvaro Uribe was elected to a second term in Colombia by a landslide.

"Garcia is so anxious to rewrite history and change his legacy from total failure to success. He believes the road will take him to the U.S. (free market) tradition," said Larry Birns, director of the Council on Hemispheric Affairs, a liberal think tank in Washington.

But some say Peruvians have been fooled by Garcia's dazzling oratory and power will soon corrupt him.

Others fear the government will soon fill with Garcia's hard-core APRA supporters. APRA is one of Latin America's oldest parties with a cult-like following from militants with an ideology of anti-US imperialism.

"The proof will be in the pudding," said Roett. "We will have to wait and see what he does."

(Additional reporting by Adriana Garcia in Washington)