SAN SALVADOR (Reuters) - El Salvador's President-elect Mauricio Funes said he wants strong relations with Washington after his party of ex-Marxist guerrillas ousted their right-wing civil war foes in a tight election victory.
A former TV journalist who never took up arms, Funes' peaceful past helped the Farabundo Marti National Liberation Front, or FMLN, win power through the ballot box for the first time on Sunday years after it fought one of the Cold War's nastiest conflicts.
Washington, which armed El Salvador's military against FMLN rebels in the 1980's, congratulated Funes and said President Barack Obama looked forward to working with him.
"I would aspire to strengthen relations with Obama," Funes told Reuters Television after his victory over ARENA's Rodrigo Avila, which sparked noisy street celebrations by red-clad supporters.
Funes told CNN El Salvador would have its own style of leftist government and had no reason to mirror Venezuela, whose socialist President Hugo Chavez telephoned to congratulate him minutes after hearing he had won. Daniel Ortega of Nicaragua, another staunch leftist, also called.
Rather than swing El Salvador to the hard left after 20 years of pro-U.S. rule by the ARENA party, Funes says he is a centrist and wants to work closely with Washington on joint issues like migration, street gangs and drug smuggling.
A quarter of El Salvador's population -- 2.3 million people -- live in the United States and the money they send home is key to the economy. The U.S. recession has dampened demand for El Salvador's factory exports and Funes says his first priority will be to tackle a looming economic crisis.
Vice President-elect Salvador Sanchez is a veteran FMLN hard-liner who many fear could take policy to the left.
But Funes reassured foreign investors that he will keep the U.S. dollar as El Salvador's currency and model his policies on those of Brazil's moderate leftist President Luiz Inacio Lula da Silva, a personal friend.
The FMLN's founders were schooled in Cuban socialism, but Funes wants to include market-friendly technocrats in his team and told CNN the party would not "take up all the space."
"The cabinet is chosen by the president," he said. "At the end of the day I am the president elect ... and I'm the one who will have the last word in defining and building the cabinet."
WAR SCARS, NERVOUS INVESTORS
Funes urged unity and reconciliation with the ARENA party, which was founded by an army major closely associated with right-wing death squads in the 1980-92 civil war.
Scars from the war mean the left-right breach runs deep, and it will take time to move on from a barbed election race in which ARENA called the FMLN "communists" and "terrorists".
ARENA leaders were visibly smarting after their defeat. "The country is totally divided," snapped ARENA's San Salvador director Adolfo Torres, pushing past dismayed supporters.
Investors reacted nervously. The country's credit default swaps, which offer protection against default or restructuring, weakened, widening by 18.2 basis points to a mid-price of 553.75, according to data provider Markit. CDS prices have slid since October but inched up in recent weeks.
"Overall this is a very positive thing for democracy," said Rice University political science professor Mark Jones.
"But the main potential concern is knowing what exactly they will do once in power. There are elements in the FMLN that have different ideas from Funes."
Eurasia Group analyst Heather Berkman said Funes was likely to mix FMLN hardliners with centrists and noted he will need the backing of small opposition parties to pass laws in the divided Congress. "Difficult economic circumstances should dictate cooperation and force moderation," she said.
After years as a peaceful opposition party, the FMLN cashed in on electoral fatigue and economic gloom to win by nearly 3 percentage points, scotching the notion it was unelectable.
ARENA, the Nationalist Republican Alliance, was a close Washington ally, even sending small troop contingents to help U.S. forces in Iraq.
But rampant poverty and crime have helped the FMLN, whose fighters laid down their arms under a 1992 peace deal.
Funes plans to fight tax evasion by the wealthy and use the funds to create jobs for returning migrants. He also vows to invest in farming to reduce dependence on imported food.
Avila said ARENA would not let El Salvador turn authoritarian. "We will be a constructive opposition, an opposition that is vigilant so that liberties are not lost."
(Additional reporting by Anahi Rama and Alberto Fajardo, and Frank Jack Daniel in Caracas, Sue Pleming in Washington)
