LIMA (Reuters) – Peruvian President Alan Garcia  named a member of his pro-business ruling party as prime  minister yesterday after bowing to opposition pressure to  shake up his Cabinet in the worst crisis of his term.

Garcia picked Javier Velasquez, a member of the APRA party  and the head of Congress, to take over leadership of his team  of ministers at a time when the president’s approval rating has  plunged to 21 percent.

He also retained Finance Minister Luis Carranza, a favorite  of investors who is in the middle of rolling out a $3.2 billion  stimulus programme to help the economy to grow 3 per cent this  year.

As prime minister, Velasquez will face growing calls from  unions, indigenous groups and the poor for the government to  increase social spending as unemployment rises and the economy  slows from last year’s 10 per cent surge.

Opposition parties have demanded Cabinet changes since last  month when at least 34 people died in clashes between police  and indigenous groups in the Amazon rain forest.

Outgoing Prime Minister Yehude Simon was heavily criticized  for botching negotiations with protesters, who were demanding  the government strike down laws designed to open up their  ancestral lands to foreign mining and oil companies.

Garcia also replaced the ministers of defense, justice,  agriculture and the interior after demonstrators blamed them in  part for failing to avert the deadly clashes.

A third of Peruvians live in poverty and critics say  Garcia’s agenda of pushing free-trade agreements and  encouraging foreign investment in mines and energy projects has  not lifted incomes enough.

“The country wants order and social inclusion and I am sure  the Cabinet that Velasquez leads will meet these objectives,”  Garcia said at the presidential palace.

The opposition said that Garcia should have chosen an  independent with a knack for building consensus among left-wing  and right-wing parties in Peru’s rocky political world.

“This nomination is disappointing,” said Carlos Tapia,  speaker of the Nationalist Party, whose leftist leader, Ollanta  Humala, is a top contender for the 2011 presidential race.  Garcia cannot run in the next election.

“We think it should have been somebody who was politically  autonomous,” Tapia said.
In the cabinet shuffle, Mercedes Araoz, who as trade  minister helped implement a free-trade pact with the United  States, was named minister of production and industry.

Martin Perez, a legislator from the conservative National  Unity party, was named trade minister and Pedro Sanchez was  retained as mines and energy minister.