ASUNCION - LEFTIST former bishop Fernando Lugo won a historic presidential election in Paraguay on Sunday as he defeated ruling party candidate Blanca Ovelar to end 61 years of Colorado Party domination.

Mr Lugo was declared the winner by the Electoral Tribunal with 41 percent of the vote compared to 31 per cent for Ms Ovelar, crushing her dream of becoming the South American country's first woman president.

'Today we can dream of a different country,' Mr Lugo, 56, told reporters.

'I recognise the triumph of Fernando Lugo,' she said. 'We acknowledge with dignity that the results for the presidential badge are at this point irreversible.'

Another candidate, Lino Oviedo, 64, a retired army chief who helped stage a coup that ended the 35-year military dictatorship of Alfredo Stroessner (1954-1989), trailed far behind in third place.

Mr Lugo earlier addressed jubilant supporters of his leftist Patriotic Alliance for Change coalition at his campaign headquarters, saying the election showed that 'the little people can also win.' 'You are responsible for the happiness of the majority of the Paraguayan people today,' he said as supporters chanted his name.

'This is the Paraguay I dream about, with many colours, many faces, the Paraguay of everyone,' said Mr Lugo, who was suspended from his religious order by the Vatican in late 2006 for his entry into politics.

His supporters began celebrating their anticipated victory setting off fireworks even before polls closed.

The Colorado Party has been in power for 61 years, including Stroessner rule. Paraguay chose its first democratically-elected president in 1993.

There is no runoff vote in Paraguay. Outgoing President Nicanor Duarte constitutionally could not seek re-election after serving a five-year term.

Former Colombian President Alfredo Pastrana, one of the election observers, said turnout among the 2.9 million eligible voters was high: 'it's going to reach 60, 65 and hopefully even 70 per cent.'

Mr Lugo's coalition earlier had feared fraud would mar Sunday's vote, but as 70 observers from the Organisation of American States monitored ballot stations, electoral court chief Rafael Dendia said voting went smoothly.

International Transparency, an organisation monitoring for voter fraud, reported some cases of corruption.

'We've seen voting cards being bought and money going around in some polling booths,' one of the group's observers, Pilar Callizo, told Channel 4.

'We also saw Colorado Party teams inside and outside some polling stations creating an atmosphere of intimidation,' she added.

Mr Lugo's opponents have said he is in line with leftwing presidents Hugo Chavez of Venezuela and Evo Morales of Bolivia.

But Mr Lugo, while championing the rights of the poor, says he is more centrist as he seeks to overhaul a country with a per-capita income of just US$1,900 (S$2,584).

While Paraguay's formal economy relies on agriculture, corruption is pervasive.

Mr Duarte made little headway in stamping out graft, which also sullied his own administration. Paraguay is a prime source of contraband electronics and cigarettes, most smuggled into neighbouring Brazil, Argentina and Bolivia. -- AFP