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Smashed Baby Red Potatoes with Ancho Chiles and Dry Jack Cheese

['2 dried ancho chiles,* stemmed, halved, seeded', '3 pounds baby red potatoes (about 1 1/2 inches in diameter)', '1/2 cup extra-virgin olive oil', '3 garlic cloves, chopped', '1 cup grated dry Jack cheese or 2/3 cup grated Parmesan cheese and 1/3 cup grated sharp white cheddar cheese', '1/2 cup plus 1 tablespoon chopped fresh Italian parsley', '1/4 cup chopped fresh cilantro']

Place chiles in small bowl; cover with hot water. Let stand until softened, about 15 minutes. Drain; chop. Transfer to mini processor; process to coarse puree (or finely chop chiles). Measure 1/4 cup puree and set aside (reserve any remaining puree for another use). DO AHEAD: Can be made 3 days ahead. Cover and chill.
Bring potatoes to boil in large saucepan. Reduce heat to medium and simmer until potatoes are tender, about 16 minutes. Drain. DO AHEAD: Can be made 2 hours ahead. Let stand at room temperature.
Heat oil in same saucepan over medium-low heat. Add 1/4 cup chile puree and garlic; stir 30 seconds. Add potatoes; stir to coat. Using back of wooden spoon, smash potatoes until largest pieces are about 1-inch cubes. Stir to heat through. Stir in cheese, 1/2 cup parsley, and cilantro. Transfer to bowl, sprinkle with remaining 1 tablespoon parsley, and serve.
*Available at many supermarkets and at specialty foods stores and Latin markets nationwide.

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