You can call it a peculiar kind of poll, but today’s markets are betting that Lourdes Flores may well be able to win the presidential election in Peru. This candidate’s got to fight hard but apparently she can do it. That’s why markets in Peru are up today.

The dynamics are curious in Peru. Roughly, they go like this: early polls have always shown that Flores comes in second place in a three-way race with the two leftists, Alan Garcia and Ollanta Humala. But in a two-way race, Flores can defeat Humala. Logic would suggest that the two leftists would naturally join forces in a two-way race, but that’s not the way it works in Peru. My own opinion is that Humala must have high negatives if Garcia’s voters would rather go to center-right Flores than ultra-left Humala in a two-way race. But this is the way it is in Peru.

If I am not mistaken, I think it’s something I’ve read on Boz’s blog, not sure exactly where, but in some of his earlier posts. Anyway, since yesterday’s vote, that’s what’s so far happened in Peru.

Alvicho has the latest poll results from Peru’s election, and they show Humala in first place and Flores in second. His excellent writeup is here. The margin of victory was not quite as big as expectations so this is an extremely optimistic sign.

There are two interesting details: One is that South American polls tend to undercount the far-left underclass voters, as did happen in Bolivia last December. Their voting numbers are far more numerous than pollsters are able to ascertain. So, Humala’s first-place finish, despite polls showing Flores in the lead, was about to be expected. But it wasn’t as high as it could have been. In fact, it was not nearly as powerful as Evo Morales’ victory in Bolivia. Morales got at least 51% of the vote, the highest presidential vote-getter in all of Bolivia’s history. There was a clear consensus for him based on the votes of Bolivia’s poor. Humala was not able to get those numbers, despite having a pretty similar demographic makeup in the country and a lot of alienated people. He did not do nearly as well! That’s why the market is rallying today.

Anyway, now Goldman Sachs, via Bloomberg, is reporting that markets are up in Peru this morning on confidence that Flores can defeat Humala in the second round, perhaps based on these dynamics described earlier. This is a very good sign.

Markets exist as forward-looking instruments. They have to be ahead of various factors. If they’re not worried, I am not going to argue with them. Markets are never wrong.

I am very relieved.