LIMA, Peru -- Pedro Castillo, a far-left political outsider, was leading the count on Tuesday in Peru's tight presidential election as markets reeled over investor concerns he could win and boost state control over the country's market economy.
With 96% of the votes counted from Sunday's race, Mr. Castillo had 50.22% of the votes compared with 49.78% for his right-wing opponent Keiko Fujimori, a difference of 75,000 ballots. About 18 million votes were cast in Sunday's election.
Outstanding votes include those from Peruvians living abroad, which favor Ms. Fujimori, and rural votes, which favor Mr. Castillo. There are also about 250,000 votes that need to be reviewed by electoral courts before being included in the tally, political analysts say. Those ballots were contested by campaigns or had technical issues.
Alfredo Torres, head of pollster Ipsos Peru, said most of those votes appear to be from areas where Ms. Fujimori won, suggesting she could narrow the gap.
"We don't know if it will be enough to overtake him...it's most likely that Castillo stays ahead," said Mr. Torres. "With luck, we'll know next week."
As Mr. Castillo pulled ahead in the count on Monday, local markets tumbled. The Lima Stock Exchange fell 7.7% on Monday, and was steady Tuesday as the count continued. The sol currency continued to depreciate after weakening to a historic low on Monday against the dollar.
The election has polarized the nation, raising concerns about social unrest. Ms. Fujimori has claimed election irregularities, saying that Mr. Castillo's party was trying to undermine the "popular will." Mr. Castillo's supporters marched in the streets after he called on them to "be vigilant in the defense of democracy."
The election was held amid a brutal pandemic that has pushed 3 million Peruvians back into poverty and killed over 180,000 people, the world's worst per capita death toll, according to data from Johns Hopkins University.
If Mr. Castillo ends up the official winner, it could push Peruvian politics significantly to the left.
During the campaign, Mr. Castillo lashed out at transnational corporations he said pillaged Peru's resources and pledged to draft a new constitution to give the state a bigger role in the economy. He professed admiration for former military dictator Gen. Juan Velasco, who nationalized U.S.-owned mines in the 1960s and 1970s. And he labeled President Nicolas Maduro's regime in Venezuela a democracy, even as the U.S. and other countries in the region consider it an illegitimate dictatorship.
In recent days, however, Mr. Castillo's party has tried to ease investor concerns. It said late Monday that it won't carry out nationalizations or seize private savings. It ruled out banning imports or implementing price and currency controls. And it promised to respect the central bank's autonomy. It said it would promote the growth of business, while raising taxes on miners to pay for health and education investments.
"In general, we want to promote investments, which will be welcomed in Peru, and above all mining investments," said Pedro Francke, an economist and adviser to Mr. Castillo.
"We'll maintain an open and ample dialogue with different business sectors and honest entrepreneurs, whose role in the industrialization and productive development is fundamental," his party said in a statement.
Mr. Castillo's ascent was propelled by despair over the pandemic, which exposed deep flaws in the nation's development model, political analysts said. Over the past two decades, the country posted some of the highest economic growth rates in Latin America, and reduced poverty from 60% to about 20%. But the country's political class also failed to use the windfall to significantly upgrade government services like public hospitals and public education.
Those shortcomings became glaringly obvious during the pandemic, as Covid-19 patients overwhelmed poorly equipped public hospitals, which faced shortages in staffing and treatments like oxygen. Long-simmering public anger over corruption and mismanagement boiled over as Peru's death count rose rapidly.
The pandemic also punished Peru's economy, which shrank 11% last year, particularly in rural regions where the poverty rate rose quickly. Mr. Castillo, who wears a trademark wide-brimmed Andean hat, swept votes in the resource-rich southern Andes -- home to mines owned by Glencore and China's MMG -- winning over 90% of the vote in rural communities that feel excluded from development.
Whoever ends up winning will likely struggle to govern a country that has had four presidents in three years and a fractured, unruly congress that has helped oust two of them.
After Ms. Fujimori's 2016 electoral defeat by 41,000 votes, her allies in congress launched a campaign to take down her rival, ex-President Pedro Pablo Kuczynski, political analysts say. He resigned in 2018 before congress could impeach him.
Mr. Castillo stunned Peruvians in April when he appeared to come out of nowhere in the first-round vote. He topped a field of 18 contenders even though he only got 15% of the votes, suggesting there isn't overwhelming popular support for a government overhaul.
But his opponent, Ms. Fujimori, is one of Peru's most unpopular politicians, according to polls. Ms. Fujimori, the daughter of imprisoned former autocratic President Alberto Fujimori, was jailed until 2020 on corruption accusations, which she denies.