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Former President Alan Garcia beat a fiery ex-army nationalist in Peru's runoff election on Sunday, staging a political comeback after his 1980s government ended in economic ruin, rebel violence and accusations of rights abuses.

Peru's presidential candidate Alan Garcia smiles at a news conference after exit polls showed him to be leading the elections in Lima, June 4, 2006. [Reuters]

The result is a blow for Venezuela's President Hugh Chavez, who sparked a diplomatic spat with Peru after trying to take advantage of a populist anti-U.S. tide in Latin America by supporting Ollanta Humala, a former army commander.

With 77 percent of the ballots counted, Garcia, who portrays himself as a left-of-center democrat, won about 55 percent of the vote and Humala, who spooked many middle-class Peruvians with calls for a revolution against the rich, had some 45 percent of votes.

Humala conceded defeat but vowed to battle for his nationalist revolution to help half the Peruvians who are poor.

A jubilant Garcia waved a white handkerchief, a traditional victory symbol of his APRA party as thousands of supporters gathered outside his campaign headquarters in Lima and fireworks filled the sky.

"Today, Peru has sent a message of national sovereignty and has defeated efforts by Hugo Chavez to incorporate us in the expansion strategy of his military and backward-looking model, which he's tried to implant in Latin America," Garcia said.

Many Peruvians apparently voted for Garcia - dubbed "Latin America's Kennedy" when he was first elected to the presidency at the age of 35 seeing him as the lesser of two evils and less hostile to business.

"It's a sad day. Neither of them is a good candidate," said 45-year-old psychologist Ida Blanc after she cast her vote for Garcia in an upper middle-class neighborhood of Lima.

Rival voters threw water and rubbish at each other in the southern Andean city of Arequipa in a sign of the political polarization of Peru, one of Latin America's poorest countries.

Garcia says he has learned from his mistakes and will better manage Peru's economy after five years of unprecedented growth. But Peruvians who were left destitute by his first term are still very suspicious of the 57-year-old lawyer.

"Peru is being tremendously generous to Garcia, something that he doesn't really deserve ... But this is not a blank check, he has to work hard, to do something better this time," said Augusto Alvarez, analyst and editor of daily Peru.21.

Garcia still preaches state regulation and his victory would be another sign of a backlash against free-market reforms in Latin America, which have done little to improve the living conditions of millions of voters.

Humala, who has charged that the election could be tainted by fraud, declared "everything must be transparent" after he voted with his wife in Surco, a middle-class district of Lima.

Humala's plans to put the $75 billion economy in state hands seem too risky to many people who have lived through 30 years of turbulent governments ranging from military dictatorships to President Alberto Fujimori's corrupt populist government from 1990 to 2000.

Humala's campaign has also been hurt by the vocal support he has received from Chavez, who is generally unpopular in Peru, a country that has good relations with the United States and has a significant migrant population there.