New Cabinet Comes Together

LIMA, Peru (Reuters) -- Peru's new President Alan Garcia named a Cabinet mixing left-leaning party members and independent technocrats on Thursday, promising an investment "shock" to alleviate the country's acute poverty.

Garcia, who takes office on Friday anxious to atone for his disastrous 1985-1990 first term, appointed APRA party leader Jorge del Castillo as premier, giving him the task of unifying a fractured Congress and providing a base for economic growth.

"This is a Cabinet whose main focus is to attend to Peru's poverty ... We're going to generate an investment shock to end poverty," Garcia said on announcing his ministers.

Del Castillo, 56, a skilled deal-maker and an old friend of Garcia, will need to balance promises of high public spending with a low budget deficit to keep holders of Peru's $30 billion debt happy.

Investors ranging from Canada to China are eager to see Garcia calm a deeply-divided country where half the population lives on $1.25 a day or less to take advantage of Peru's copper, gold, oil and natural gas wealth.

Most poor Peruvians did not vote for Garcia and could take to the streets in protests if he does not quickly meet campaign promises of jobs, clean drinking water and schools.

The United States wants Peru, the world's No. 2 cocaine producer, to cut its rising narcotics output, even if that means Garcia confronting the hundreds of thousands of farmers who live from growing coca, the raw material for cocaine.

Still, many analysts say Garcia is likely to put bondholders and economic growth before his populist campaign promises because he is desperate to rewrite his legacy.

"Garcia is playing a leftist tune, but his real plan is to play along with the right and help the business sector," said analyst Giovanna Penaflor, director of pollster Imasen.

Garcia had already tapped ex-deputy finance minister Luis Carranza as his economy minister, a move welcomed by Wall Street.

Nevertheless, Garcia's choice of APRA party lawmaker Juan Valdivia as energy and mines minister could raise concern.

Valdivia voted to levy royalties on mining companies over the past two years in Congress. Miners are worried by Garcia's campaign pledges to impose a new windfall tax on their "excessive" profits to generate more government income.

Peru, the world's No. 3 copper-producing nation, needs some $10 billion in investment over the next five years to develop 270 mines and meet demand from Asia. Miners say royalties and new taxes scare off that investment to Mexico and Chile.

"The role of mining companies is not just to generate profits but to help the development and progress of nearby communities," Valdivia told Reuters after being appointed.

Garcia named a record six women in his Cabinet with the aim of tackling social issues such as the rising sexual violence against women and the high rate of Peruvian women who die during childbirth, one of Latin America's highest levels.