By Terry Wade

LIMA(Reuters) - The run-up to presidential
elections, drug violence, strikes by miners and environmental
disputes are all points to watch in Peru this year.


Alberto Pizango, an indigenous leader, said last month he
will run for president, a move that could further undermine the
chances of left-wing ultranationalist Ollanta Humala in the
race. Polls put Humala at fourth place in the race before
Pizango announced his candidacy and now Humala could slip
further. Members of Humala's Nationalist Party at times tried
to strike a strategic alliance with Pizango but their overtures
were rebuffed.

A split in the leftist vote will leave the contest to a
clutch of parties in the center or on the right and remove a
potential source of downward pressure on Peruvian markets,
which plunged when Humala nearly won the 2006 election.

Still, Humala has tried to strike a more moderate tone this
time. He recently told Reuters his government would not be
"extremist" but would renegotiate energy contracts with private

So long as Humala looks weak, mainstream economic policies,
which have helped Peru win investment grade ratings, will
likely be kept in place at least for the next presidential term
as the country's economy surges at one of the fastest paces in
the world. The economy grew 10 percent in the second quarter
from the same period a year earlier.

What to watch for:

-- A big drop by Humala in the polls.

-- Clearer moves by Humala to cast himself as a moderate.


Peruvians will elect mayors and regional governors in
October, and the results could show which parties are best
positioned for next year's presidential race.

President Alan Garcia's APRA party will try to pick up
posts, but it does not have a serious candidate for the next
presidential race. Garcia's approval rating is a low 30
percent, despite swift economic growth.

Political analysts say Garcia may throw his weight behind
Lima's mayor, Luis Castaneda, who is second in the polls at
around 20 percent but belongs to the tiny National Solidarity

Keiko Fujimori, a conservative lawmaker and the daughter of
jailed former President Alberto Fujimori, is slightly ahead of
him and could benefit from a sizable party infrastructure left
behind by her father. She has a cordial relationship with
Garcia and told Reuters she was confident that Peruvians won't
elect a leftist leader next year.

Former President Alejandro Toledo, in third place in polls,
may also announce a bid and as a prelude could try to forge
coalitions in regional elections for his small party, Peru

Congressional seats will not turn over until 2011.

What to watch for:

-- Clearer signs from Garcia about which of the two
front-runners he will support, Castaneda or Fujimori.

-- Toledo's party engineering a strong showing in regional
elections, which would bolster his own chances if he makes a
presidential bid.

--A scandal over blown budgets for a costly bus transit
system could hurt Castaneda's presidential run.


Social conflicts over natural resources are likely to
trouble Garcia as a third of Peruvians live in poverty and many
have been left out of a commodities boom that fueled the past
decade of strong economic growth.

Peru's ombudsman's office says more than 100 communities
have mobilized to stop big mining or petroleum projects, and
has blamed the government for failing to effectively mediate
conflicts that pit poor towns in the Andes mountains or Amazon
jungle against foreign companies.

Hundreds of millions of dollars in capital spending have
been delayed. Farmers opposed to Southern Copper's Tia Maria
project, which they say will take their water, recently forced
the company to delay for several months its $1 billion mining
project in Peru, the world's No. 2 copper producer.

Garcia's push to lure foreign investors to build new mines
in Peru has angered environmental and indigenous groups, which
are becoming increasingly assertive politically but still lack
their own party. Deadly clashes broke out several times last
year and there is little evidence that tensions will ease as
the economy regains steam this year.

In April, six people died when police tried to break a
blockade of wildcat gold miners protesting a bill Congress
passed to force them to pay taxes and stop polluting. The
protest only ended after the government gave into pressure from
miners to amend the law.

What to watch for:

-- Strikes that could halt mineral or natural gas exports.

-- Violence that prompts Garcia to lose support in Congress
or pull bills he has backed.

-- A series of investigations by Sunat, the government's
tax agency, into tax fraud by mining companies could hurt the
credibility of the sector.


Garcia has struggled to capture a remnant band of left-wing
Shining Path rebels who run drugs in a violent region rife with
cocaine known as the VRAE, the most densely planted coca region
in the world. More deaths or clashes with the army could hurt
Garcia's popularity ratings and lead to more calls for a shift
in policy as the United Nations says Peru has overtaken
Colombia as the No. 1 coca leaf producer. Lawyers for the
Shining Path have also talked about forming a political party
to run candidates, but observers say it may be a ploy to win
more favorable treatment for their jailed clients.

What to watch for:

-- Arrests of key leaders of the insurgency.

-- Any serious attacks against the army that undermine its
ability to win control of the region.
(Reporting by Terry Wade; Editing by Kieran Murray)