Ecuador's Correa wins re-election, faces tough times

* Early results give Correa about 50 percent of vote

* Slowing economy threatens spending, leader's popularity

* Correa party close to absolute majority in assembly

By Alonso Soto and Frank Jack Daniel

QUITO, April 27 (Reuters) - Ecuador's President Rafael Correa sailed to a re-election victory on Sunday but will face tough times during his second term as a weak economy threatens his popularity in the politically volatile country.

The socialist Correa won about 50 percent of the vote with a 20-point lead over his nearest rival, former president Lucio Gutierrez, according to preliminary official results.

Correa's party is close to securing an absolute majority in the 124-member assembly, exit polls showed.

The resounding win ratifies him as the most successful leader for 30 years in the Andean country, which is known as much for repeatedly toppling presidents during political and economic turmoil as for its Galapagos islands and remote Amazon tribes.

The result also is a victory for the generation of left-wing Andean leaders like Venezuelan President Hugo Chavez who have won repeated elections and are challenging U.S. policies and influence in Latin America.

But the tough-talking former economy minister could quickly fall from grace if lower oil prices limit his spending on the poor and middle-class that have benefited from his social programs.

A weakening economy could rekindle street protests that have subsided since Correa took office two years ago, bringing some stability after a parade of seven presidents in a decade.

AGGRESSIVE STANCE ON INVESTORS

Correa, a U.S.-educated economist, has vowed to keep a hard line on investors, heralding tough negotiations to boost state participation in mining and oil deals.

Correa shocked Wall Street last year by defaulting on $3.2 billion in debt he considers illegal and is now pressuring holders of those bonds to sell the paper at a steep discount.

The aggressive stance on investors already has hurt foreign investment mostly in the key oil industry at a time when the global financial crisis curtails the OPEC-nation's revenues.

"The current nationalist ... and heterodox policy approach is likely to remain in place," Goldman Sachs analyst Alberto Ramos told clients. "Unless rectified this should lead to growing economic underperformance in the years ahead."

Correa is a former missionary who keeps a photo of the Pope by his desk along with photos of his friends Chavez and Brazilian President Luiz Inacio Lula da Silva.

That mix of Roman Catholic morals with left-wing policies has proved highly popular but he now faces tougher-than-expected opposition from Gutierrez, whose support jumped in the last days of the race.

The retired colonel Gutierrez was ousted from power by an angry mob in the capital Quito four years ago but is still popular in some mainly indigenous regions of Ecuador.

The former coup leader, who accuses Correa of autocratic tendencies, said he could not accept defeat until official results were published. He charged fraud had been detected at some polling stations.

"We can't lower our guard. The war continues and we are going to keep fighting in defense of our country," Gutierrez said late on Sunday.

Gutierrez rose in the polls in recent weeks as opposition voters realized he was the strongest of the seven candidates who ran against Correa.