Mexico stumbles toward crisis in chaotic election

MEXICO CITY, July 3 (Reuters) The spectre of political chaos hung over Mexico's young democracy today after two rival presidential candidates both claimed victory in a bitter election that divided the country between left and right.

Election officials said the race was too close to declare a winner and a recount was needed, but that didn't stop combative left-winger Andres Manuel Lopez Obrador and ruling party conservative Felipe Calderon from insisting they had won.

Rival celebrations erupted just a few miles apart in the early hours of Monday morning, including thousands of people in Mexico City's vast central square.

It could be days before a final vote count is in, and some feared Mexico could be lurching toward a nightmare scenario of political deadlock, street protests and volatility in financial markets.

Unrest would also worry the United States, which relies on Mexican help in securing its borders and tackling immigration and violent drug smuggling gangs.

Lopez Obrador supporters, remembering a 1988 presidential election widely believed to have been stolen from another left-wing candidate, claimed foul play.

''They are up to their tricks because everyone knows Andres Manuel won,'' said Gabriela Ramirez, a Mexico City student.

Critics of Lopez Obrador, a feisty and austere figure who pledged to put Mexico's poor first if elected, said the close race played into his hands and that he was looking for an excuse to mobilize supporters and cause trouble.

''Now if he loses, he can say the rich guys stole it from us. It could lead to chaos,'' real estate agent Victor Perera said at an upscale Mexico City neighborhood restaurant.

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