* Defence minister Filipe Nyusi to run in Oct 15 election
* President Guebuza seen seeking to retain influence
* Frelimo faces opposition and security challenges
* New president should preside over resource-led boom
By Manuel Mucari
MAPUTO, March 2 (Reuters) - Mozambique's ruling Frelimo party early on Sunday picked Defence Minister Filipe Nyusi, a close ally of current two-term President Armando Guebuza, to be its candidate for an election in October that will choose the country's next leader.
Frelimo's Central Committee voted by a two-thirds margin for Nyusi, 56, after an internal debate in which Guebuza loyalists beat off a challenge from a rival group backing former Prime Minister Luisa Diogo to be the candidate.
Whoever wins the Oct. 15 vote is expected to help bring to fruition major coal and offshore natural gas investment projects that have the potential to bring billions of dollars to a nation that was in ruins two decades ago after a long civil war.
Buoyed by accelerating foreign investment, Mozambique's economy is forecast to grow by up to 8.3 percent this year from 7 percent in 2013, according to the IMF, which calls it "one of the most dynamic economies in Sub-Saharan Africa".
Guebuza, now 71, has served two terms as Mozambique's president and under the constitution cannot stand again.
But he holds the presidency of Frelimo, a former liberation movement which has ruled since Mozambique's independence from Portugal in 1975, and if Nyusi wins in October, Guebuza's strong influence over the affairs of government will be assured.
"Guebuza will retain a lot of power initially," Joseph Hanlon, a senior lecturer at Britain's Open University and an expert on Mozambique, told Reuters. He said that out of three candidates pre-selected by Frelimo's pro-Guebuza political commission, Nyusi was most closely dependent on the president.
A northerner whose family was involved in the independence struggle, Nyusi graduated as an engineer from a military academy in then-Czechoslovakia in 1990, just before the break-up of the Soviet bloc.
He served as a senior administrator in Mozambique's state railways before later becoming defence minister.
Frelimo has dominated Mozambique politics since the introduction of multiparty politics and a market economy in 1990, repeatedly defeating the main opposition party Renamo, its old foe from the 1975-92 civil war, in one-sided elections.
Over the last year, the ruling party has faced a renewed armed insurgency from Renamo, whose leader Afonso Dhlakama accuses Guebuza of monopolising economic and political power.
Since April last year and up to early this year, Renamo partisans carried out raids on police and military posts in parts of central and southern Mozambique and ambushed vehicles on the country's main north-south highway, killing several dozen people, disrupting traffic and causing cancellations in the country's tourism industry.
These security worries and a spate of criminal kidnappings of wealthy individuals have cast some uncertainty on otherwise bright prospects for a resource-led boom involving investors like Brazil's Vale, London-listed Rio Tinto, Italy's Eni and U.S. oil firm Anadarko.
Frelimo is also challenged by a newer opposition party, the Mozambique Democratic Movement (MDM), which includes Renamo dissidents and scored gains in Nov. 20 municipal elections, winning control of several major cities outside Maputo.
Earlier this year, apparently pressured by the raids and MDM's showing in the municipal polls, Frelimo agreed to Renamo demands to expand the electoral commission, whose composition critics said favoured the ruling party.
After boycotting the November local vote, Renamo is expected to contest the October elections, as will MDM.
Guebuza and his government also face growing criticism from international donors for not doing enough to stamp out corruption and over priorities in its anti-poverty strategy and questions of financial transparency.
An anti-Guebuza camp in the Frelimo Central Committee is led by former President Joaquim Chissano who made peace with Renamo in 1992. Chissano's group backed former premier and ex-finance minister Diogo as the party's presidential choice.
Graca Machel, who was married to Mozambique's late independence president Samora Machel and is also the recent widow of South Africa's anti-apartheid hero, Nelson Mandela, is a member of the Chissano faction and supported Diogo for the presidential candidacy.
Our Standards: The Thomson Reuters Trust Principles.