New Mexico Auditor Hector Balderas announced Tuesday that he is running for Senate, setting up a primary between two rising stars in the state’s Democratic Party.

If Balderas can compete financially, state insiders expect a competitive primary battle with Rep. Martin Heinrich, who announced his Senate candidacy earlier this month.

Balderas made a thinly veiled reference to Heinrich in an announcement video posted to his campaign website.

“In this campaign, I won’t have the most connections in Washington. I won’t be the candidate of the lobbyists or the insiders,” Balderas said. “But I’m not running to be their Senator, I’m running to be yours.”

New Mexico political analyst Brian Sanderoff said the race could come down to fundraising, and as a Member of Congress, Heinrich should have the edge there. However, Balderas has an inherent advantage as well.

“Our state is 40 percent Hispanic among adults, so they have a big proportion of the votes cast,” Sanderoff said. “Heinrich has a fundraising advantage, but Balderas having a Spanish surname might help him. So therefore you cannot discount him.”

On that point, Balderas caught a break Monday when Rep. Ben Ray Luján (D) announced he would not seek the Senate seat, as Luján would have cut into a portion of Balderas’ base. That leaves Heinrich and Balderas as the only top-tier Democrats expected to run.

In the 2008 open-seat race, Heinrich won the Democratic primary in the 1st district with 44 percent, defeating two Hispanic women who split 49 percent of the vote.

“Balderas definitely has a chance,” said Stephen Clermont, a Democratic consultant who has worked extensively in the state. “The one thing about New Mexico primaries is the turnout is not great, and the electorate is much, much older and more conservative than the overall pool of registered Democrats and those who vote in general elections.”

Clermont, the principal of Washington, D.C.-based Third Eye Strategies, also noted that Balderas will still have to organize his base, which he now has more than a year to do. “If he doesn’t raise a lot of money, he’s not going to get a cheap win based on demographics,” he said.

One outside group has already thrown its weight behind Heinrich. Defenders of Wildlife Action Fund announced Monday that it is endorsing the second-term Congressman, whom the group has supported in his past two Congressional campaigns.

Heinrich led with 32 percent in a four-way Senate primary poll commissioned by the group last month. Former Lt. Gov. Diane Denish took 25 percent, Luján took 15 percent and Balderas took 5 percent. But Luján is out, and NMpolitics.net reported Denish is looking at the open 1st district, so a majority of voters appear to be up for grabs.

As it is for both parties, Democrats would have preferred to avoid a primary, which could make it that much harder to hold the seat of retiring Democratic Sen. Jeff Bingaman.

“The biggest threat to Democrats is if it becomes very negative. But the way it is structured, neither candidate is likely to go negative first,” Clermont said. “It’s actually easier for a race to be negative in a three-person contest. You don’t really want to be known as the negative candidate hurting Democrats in the fall.”

Former Rep. Heather Wilson is running on the Republican side and is facing two conservative opponents. Lt. Gov. John Sanchez (R) is also seriously considering running, and his entrance would ensure tough primaries in both parties.

Sanderoff said that either Democrat could have a good chance of winning in November and that a primary does not necessarily hurt the eventual nominee.

“The winner of the race in 2012 — whether it be a Democrat or Republican — will really come down to the mood of the state and nation at that time,” Sanderoff said.

As an attorney and first-term state Representative from Wagon Mound, Balderas became the youngest Hispanic statewide official in 2006 when he was elected state auditor. He was re-elected in 2010 with 55 percent, outperforming all other Democrats on the ticket in two out of the three Congressional districts.

His current office is fairly low profile, insiders said, but Balderas stands to gain from the Senate race even if he loses.

“The hardest thing for Balderas is to differentiate himself,” Clermont said. “But if he runs a good campaign, loses narrowly, doesn’t do anything to hurt his image — he sets himself up for statewide primaries for governor or attorney general” in 2014.