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. Last Updated: 07/27/2016

Leftist Candidate Leads Brazilian Polls

SAO PAULO, Brazil -- Leftist Luiz Inacio Lula da Silva easily won the most votes in Brazil's presidential election but failed to score an outright victory, sending Brazilians back to the polls for a second round in three weeks.

The result of Sunday's vote left the former metalworker in a strong position to win the leadership of Latin America's biggest country and become its first elected leftist leader.

With 90 percent of the vote tallied and the last results still trickling in from the remote reaches of the vast country, Lula had taken 47 percent of the ballot, prompting celebrations in streets by his legions of supporters.

But it was not enough to avoid a runoff against second-placed Jose Serra, candidate of the ruling coalition, who took 24 percent even though his campaign looked to have run out of steam in recent weeks.

The result means more anxious days ahead for Brazil's 170 million people -- and for domestic and international investors, who had poured money into Brazil in recent years then watched with growing concern as the Lula bandwagon rolled on.

"Historically, it's anyone's game in the second round," said Nicola Tingas, chief economist at WestLB Banco Europeu in Sao Paulo. "But this time around I'm not so sure. It's going to be very, very hard to overtake Lula."

While many Brazilians have said they wanted a leader who would tackle crime, unemployment and poverty, investors doubted Lula's ability to handle the world's ninth-largest economy and its $260 billion debt.

The vote was closely watched across Latin America and in Washington and Wall Street, where a leftist win was expected to mark a departure from the U.S.-backed economic model of unbridled free markets at a time when many countries in the region are looking precarious.

Wall Street cringed at the idea of prolonged political uncertainty. Analysts in New York were pessimistic that Serra, their favored candidate, could steal a second-round victory.

"The gap, though narrowed, is simply too big," said Lawrence Krohn, a Latin American specialist at ING Financial Markets.

"The message from this is more volatility and more uncertainty," he said.

"Seventy-five percent of the votes were against the government. Maybe the margin in the second round will be even bigger," said Ivo Rosset, head of leading textile company Rosset Group, and who has publicly backed Lula's campaign.

The bearded, burly Lula, in his fourth attempt at the presidency, had moderated his fiery socialist rhetoric of the past to woo the conservatives and businessmen from whose ranks Brazil traditionally chooses its leaders.

He mounted a slickly orchestrated campaign, promising to stick to stable economic policies.

With the currency, the real, trading at record lows and investors' aversion to Brazilian debt, Serra's pitch that he was a safe pair of hands played to many peoples' fears.

"Serra will do things that carry on from the last government, which is important during a crisis," said Sao Paulo architecture student Emilia Noriko Hayashi.

President Fernando Henrique Cardoso slashed inflation to single digits from 2,000 percent in 1994 and began whittling down a bloated public sector that was leading to bankruptcy.

The day passed peacefully in Rio de Janeiro, where 40,000 soldiers and police put on a show of force to counter a threat from drug lords to stop slum dwellers from voting.

The city has been engulfed in a crime wave that has led to virtual war between local authorities and gangsters who control its "favela" slums.