Paraguay's Ruling Party Candidate Ahead in Early Vote Count

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(Bloomberg) -- The early vote count in Paraguay showed ruling Colorado Party candidate Mario Abdo Benitez with a lead over his opposition rival, an outcome that many in financial markets have been looking for to maintain continuity.

Abdo Benitez, 46, a former senator, had 47.05 percent of the vote with about 65 percent of voting stations reporting as of 6:52 p.m. local time, according to the electoral court. His main challenger, Efrain Alegre, a former public works minister, had 42.42 percent of votes. A spokesman for Alegre’s Alianza Ganar coalition said it would not comment on the results until all the votes have been counted.

The candidate who wins a simple majority of votes will take office on Aug. 15, when tobacco magnate and incumbent President Horacio Cartes steps down.

Paraguay has enjoyed a rare period of sustained growth during Cartes’ five-year term, with the economy expanding by an annual 6 percent between 2013 and 2017. However, an economic boom fueled largely by soybean and beef exports hasn’t erased many of the country’s dismal social indicators. More than a quarter of the population remains below the poverty line, and about a third of 15 to 19 year olds don’t receive any formal schooling.

Bondholders have certainly benefited from the landlocked South American country’s impressive GDP numbers and reasonably solid public finances. As of last week, Paraguay’s U.S. dollar debt had returned 42 percent since Cartes took office in August 2013, compared with average emerging market gains of 31 percent in that period, according to data compiled by Bloomberg.

Bond markets are pricing in an Abdo Benitez presidency and continuity in macroeconomic policies, said Juan Manuel Pazos, chief macro and sovereign debt strategist at the Buenos Aires-based brokerage house Puente. Paraguayan bonds would likely suffer a correction if Alegre pulls off an upset victory, he said.

“I would expect it to be short lived and a buying opportunity,” said Pazos, who has an overweight recommendation on Paraguay’s 2026 and 2027 global bonds. “An Alegre administration probably wouldn’t see too much incentive to significantly deviate from the prudential fiscal path of the last few years.”

Paraguayans also cast their votes on Sunday for all members of the Senate and Lower House of Congress, as well as the country’s 17 governorships.

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