Daniel Ortega, the former leftist revolutionary and opponent of the US, is on course to become the President of Nicaragua for the second time, according to early results from Sunday's election.

Returns from 14.7 per cent of polling stations showed Señor Ortega with 40.04 per cent of the vote and a lead of just under seven points from his nearest rival, the Washington-backed banker, Eduardo Montealegre.

According to Nicaragua's election rules, Señor Ortega will win the presidency outright if he holds on to 40 per cent of the vote or maintains 35 per cent and a lead of five points over the second-placed candidate. Should his lead narrow, a run-off vote will be required. Further results are expected later today.

News of Señor Ortega's lead prompted noisy celebrations among supporters of his Sandinista party in Managua, the Nicaraguan capital. Fireworks and red and black flags filled the streets, as well as the sound of Señor Ortega's campaign song, set to the tune of John Lennon’s Give Peace a Chance.

But Señor Montealegre refused to concede a convincing lead to Señor Ortega, insisting that a second round of voting will be necessary. "No one has won here. The Nicaraguan people, in a run-off, will determine the next president," he said.

The choice between Señor Ortega, the former guerrilla who ruled Nicaragua as a leftist President from 1984 to 1990, and Señor Montealegre, a conservative, Harvard-educated banker, represents a fork in the road for one of Latin America's poorest countries, which relies heavily on American aid.

Señor Ortega has promised to maintain Nicaragua's membership of the Central American Free Trade Agreement, which has delivered millions of dollars in foreign investment in recent years.

But his close friendship with leftist figures such as Hugo Chavez of Venezuela and outright enmity of America during the Sandinista uprising and the subsequent war between his government and the Washington-backed Contra rebels makes him a decided foe of the US.

More than 30,000 Nicaraguans died in the civil war in the 1980s when the small, volcanic country became a proxy for the larger confrontation between the US and the USSR.

The likelihood of an Ortega victory — in his fifth presidential campaign — stirred unease in Nicaragua's business community last night. "We are playing with the stability of the country," said Jose Adan Aguirre, president of the country's Chamber of Commerce, as the polls closed.

It also raised the concerns of American election observers, who said last night that it was too soon to "make an overall judgment on the fairness and transparency of the process".

The US Ambassador to Nicaragua, Paul Trivelli, has been accused of backing Señor Montealegre's campaign for the presidency.

Last night, the American Embassy issued a statement saying: "We are receiving reports of some anomalies in the electoral process, including the late opening of (polling places), the slowness of the voting process, and the premature closing of some (polling places)."

Roberto Rivas, president of the Supreme Electoral Council, overseeing the elections, responded angrily: "We have promised the Nicaraguan people transparent elections, and that’s what we’ve done. I think there were enough observers to witness that."

Señor Ortega, 60, is yet to make a comment on the early results, which place him firmly ahead of Señor Montealegre's Nicaraguan Liberal Alliance, which broke away from the ruling Constitutionalist Liberal Party, which has been tainted by corruption scandals.

Yesterday, as he voted amid intense press coverage, he only said that he was confident that there would be no need for a run-off. "Nicaragua wins today," he said.

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