September 15, 2010 / 12:38 AM / 9 years ago

Peru's Garcia shuffles cabinet before elections

LIMA (Reuters) - Peruvian President Alan Garcia chose a new prime minister and economic chief on Tuesday in a widely expected cabinet shuffle to pave the way for his party to launch a candidate in next year’s presidential election.

He picked one of his longtime aides, Education Minister Jose Chang, to replace Prime Minister Javier Velasquez, who wants to become the ruling APRA party’s nominee for president ahead of a nationwide vote slated for April.

Ismael Benavides, a well-respected banker, was chosen to replace Mercedes Araoz as finance minister.

Araoz was recently criticized by the central bank for allowing public spending to rise too quickly in Peru, where the economy is forecast to surge 7 percent this year, one of the fastest paces in the world.

Garcia praised Chang for improving the quality of public education and said he “would guarantee continued economic stability and be neutral in the run up to elections.”

The cabinet changes had little impact on financial markets as Garcia’s centre-right government is not expected to abandon policies emphasizing free trade and foreign investment. Peru’s sol hovered near a two-year high of 2.79 against the U.S. dollar on Tuesday.

“This is a transitional cabinet. I don’t think there will be any major changes in economic policy, though Chang must guarantee that Garcia leaves office looking good and is well remembered,” said political scientist Alberto Adrianzen.

In August, three sources in APRA or the government had told Reuters that Araoz would leave in the cabinet shuffle and that Benavides would replace her, prompting Garcia to strenuously criticise the report and call it “false”.


Chang has worked for Garcia for years and, like Velasquez, is a core member of Garcia’s APRA party. The cabinet shakeup had been repeatedly postponed, as members of APRA jockeyed over who should be on its presidential ticket.

By law, Garcia, whose disapproval rating is a lofty 60 percent despite swift economic growth, cannot run for a second straight term. Many Peruvians feel left behind by the country’s economic boom and the poverty rate is around 35 percent.

Opinion polls have shown any APRA candidate will likely be trounced in the next presidential election by one of two conservative frontrunners: Lima’s mayor Luis Castaneda or Keiko Fujimori, a popular lawmaker and the daughter of former president Alberto Fujimori.

Earlier on Tuesday, a government source said Velasquez had asked the telegenic Araoz to be his vice presidential running mate in a bid to strengthen his chances of victory.

By choosing his old friend Chang to lead his cabinet, critics will likely accuse Garcia of manoeuvring to boost public spending so that APRA picks up seat in Congress during next year’s general election.

With a strong base in Congress, Garcia would have a better chance of winning the presidential race in 2016, the next time he will be eligible to run, said political analyst Fernando Rospigliosi. Garcia, whose first term was in the 1980s, has said that he would like to be president for a third time.

The lead up to elections in April has already provoked controversies about how to manage lingering social conflicts over natural resources and how to try people for human rights crimes committed during a 1980-2000 civil war.

The rights controversy contributed to the firing of Defence Minister Rafael Rey on Tuesday.

Additional reporting by Patricia Velez and Terry Wade

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