Jan. 17 (Bloomberg) -- Billionaire Sebastian Pinera won Chile’s presidential election as voters cast aside fears his victory would mark a return to power for former members of Augusto Pinochet’s dictatorship after two decades.

Pinera defeated former President Eduardo Frei 52 percent to 48 percent with more than 99 percent of ballots counted. Frei, whose Concertacion coalition has ruled Chile for 20 years, went to Pinera’s Santiago headquarters to congratulate his opponent.

Pinera, even while drawing on support from former Pinochet allies, tried to turn the page on the dictatorship by promising to double the rate of economic growth while embracing the Concertacion’s social programs. During the race he condemned human rights abuses by the Pinochet regime and ran television ads featuring a gay couple to emphasize a message of change.

“The right can at last bury Pinochet and can say it’s part of the democratic game,” said Robert Funk, a political scientist at the University of Chile. “They’ve show they can not only play the game of democracy, but also win it.”

Chilean stocks, which outperformed the rest of Latin America since Pinera won the first-round of voting, may extend gains on a Pinera victory, BCI Corredor de Bolsa SA wrote in a note to clients Jan. 15. The Ipsa index has jumped 9.4 percent to a record since the first-round vote Dec. 13. The MSCI EM Latin America Index was little changed during the same period while the peso’s 1.8 percent gain against the dollar beat all seven regional currencies tracked by Bloomberg.

Stock Celebration

“You will have a celebration day in the stock exchange,” Eric Conrads, a hedge fund manager at Armada Capital SA, a Mexico City-based partnership with ING Investment Management, said in a telephone interview. “You should have an extra little run.”

Whatever the outcome of today’s vote, economic policy in Latin America’s most stable economy was never in doubt, RBS Securities Inc.’s Benito Berber said. Pinochet-era policies preserved by the Concertacion, including low tariffs and privatized pensions, earned Chile membership last month in the Paris-based Organization for Economic Cooperation and Development.

Still, Frei tried to surmount a 14 percentage point gap from the first round by telling voters that two decades of progress were at risk by choosing Pinera’s “experiment.” A television ad parodying one by MasterCard Inc. suggested Pinera was trying to buy Chile’s “priceless” presidency as easily as he would a $2,000 silk tie.

Thousands of Pinera supporters danced, waved flags and threw confetti at Santiago’s central square.

Third Richest Chilean

Pinera, whose father was the Ambassador to the United Nations for Frei’s father, Eduardo Frei Montalva, in the 1960s thanked the Concertacion for its 20-year stewardship.

“We have legitimate differences, but we all share the same country,” he told thousands of supporters at an outdoor rally in downtown Santiago. “We must never forget that countries that tear themselves apart in fratricidal struggles among their children destroy their future.”

Pinera, the third-richest Chilean according to a March ranking by Forbes magazine, downplayed such concerns, telling voters his business experience prepared him for the task of reviving growth that slowed to an average annual rate of 3.6 percent this decade from 6.6 percent in the 1990s.

Pinera said he would sell a 26 percent share in Santiago- based Lan Airlines SA, Latin America’s largest airline by market value, and allow a foundation to run his Chilevision television network. He also owns a stake in Chile’s reigning national soccer champion Colo-Colo.

Pinera will face a divided congress when he’s sworn in March 11, hampering his ability to push through proposed changes such as a sale of up to 20 percent stake in state-owned Codelco, the world’s largest copper producer.

Divided Congress

The Concertacion won 58 of 120 congressional deputies in December’s poll, versus 57 for Pinera’s coalition. In the Senate, the Concertacion will have 19 seats versus 17 for Pinera’s supporters. The biggest party in the lower house will be the pro-Pinera Independent Democratic Union, which was founded by former Pinochet aides.

“The Concertacion was incapable of adapting to new demands for change from the electorate,” said Marcelo Leiras, a political scientist at San Andres University in Buenos Aires.

Pinera began amassing his fortune by bringing Visa Inc. and MasterCard Inc. to Chile in the early 1980s. The Harvard University-trained economist pledges to accelerate economic growth by cutting taxes and government red tape.

Throughout the campaign he distanced himself from the Pinochet regime, repeating that he voted against Pinochet in a 1988 referendum on his rule and promising that rights abusers would have no place in his government. Among his supporters is Fernando Flores, a finance minister to socialist President Salvador Allende who Pinochet overthrew in 1973.

He also emphasized his plans to continue with President Michelle Bachelet’s social policies, which are behind an 81 percent approval rating according to a December poll by Adimark Gfk.

Pinera’s victory “changes the pilot but Chile’s destination remains the same,” said Patricio Navia, a Chilean political science professor at New York University.

-_With assistance from Matthew Craze in Santiago.--Editors: Joshua Goodman

To contact the reporter responsible on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net

Last Updated: January 17, 2010 20:06 EST