Paraguayans on Sunday elected a president from the right-wing party in power for nearly eight decades, rejecting a centre-left challenger who had railed against endemic institutional corruption.

Economist and former finance minister Santiago Peña, 44, took the election with more than 42 percent of the vote to continue the hegemony of the conservative Colorado Party, results showed.

Challenger Efrain Alegre, 60, of the Concertacion centre-left coalition garnered nearly 27.5 percent despite having gone into the vote with a narrow lead in opinion polls.

The outcome bucked a recent anti-incumbency trend in Latin American elections with voters repeatedly punishing establishment parties, often in favour of leftist rivals.

The Colorado Party has governed almost continually since 1947 through a long and brutal dictatorship and since the return of democracy in 1989, but has been tainted by corruption claims.

Peña's political mentor, ex-president and Colorado Party leader Horacio Cartes, was recently sanctioned by the United States over graft.

Peña thanked Cartes in his first public address as president-elect for his "stubborn dedication to the party," to loud cheers from supporters at party headquarters.

Conceding defeat, Alegre stated: "The effort was not enough."

Some 4.8 million of Paraguay's 7.5 million inhabitants were eligible to vote on Sunday for a replacement for President Mario Abdo Benitez, who is leaving office after a constitutionally limited single five-year term.

They also voted for new lawmakers, with the Colorado Party winning the highest share of the upper house Senate votes at 43 percent.

Voting is mandatory in Paraguay, though only 63 percent turned out.

Key issues for voters were endemic corruption, a spiraling crime problem and poverty.

Like challenger Alegre, Peña is socially conservative, with strong stances against abortion and same-sex marriage in an overwhelmingly Catholic nation.

Alegre repeatedly pointed to corruption in the Colorado Party.

Paraguay is ranked 137 out of 180 countries on Transparency International's Corruption Perceptions Index.

Paraguay's GDP is expected to grow 4.8 percent in 2023, according to the central bank, and 4.5 percent according to the IMF, one of the highest rates in Latin America. But poverty plagues a quarter of the population. (AFP)