Peru's Humala says to boost social spending to avert conflicts

LIMA, July 28 Sat Jul 28, 2012 3:56pm EDT

LIMA, July 28 (Reuters) - President Ollanta Humala vowed on Saturday to ramp up social spending for the poor as he tries to spread the benefits of an economic boom to all Peruvians and defuse conflicts over mining that have marred his term.

Humala, in an annual address to Congress just days after anti-mining protests prompted him to shuffle his cabinet for the second time in his year-old government, said he would extend the rollout of social programs in a bid to cut the nation's poverty rate to 15 percent by the end of his term in 2016.

The poverty rate has been cut in half to 27 percent in the past decade but still tops 60 percent in remote provinces.

Many rural towns have not seen the fruits of the country's long expansion, which was initially led by surging metals exports from one of the world's biggest mineral producers but is now being led by surging public investment and sizzling domestic demand.

"We have made significant advances in twinning growth to inclusion, but we must admit we haven't attained all we proposed. All beginnings are tough," he said.

Since taking office a year ago, Humala has introduced a minimum monthly pension for the elderly poor and grants for students while augmenting programs for infants and families in poverty. He said the number of the people enrolled in some of the programs would double during his term.

Humala's approval rating fell to a fresh low of 40 percent this month, according to pollster Ipsos, after a crackdown on protesters opposed to Newmont Mining's $5 billion Conga project in the northern region of Cajamarca that killed five people this month.

Humala responded to an outcry over the violence on Monday by naming Justice Minister Juan Jimenez, a human rights lawyer, to replace Oscar Valdes, a former army officer, as prime minister.

"The conflicts of today worry all Peruvians. We need to overcome this culture of conflict," Humala said on Peruvian Independence Day.

There are more than 250 disputes nationwide over natural resources, according to Peru's human rights office. Critics have said Humala, a one-time radical leftist, has been too quick to rely on sending in police and suspending civil liberties to quell anti-mining protests and moved too far to the right.

AWARE OF 'SOCIAL DISCONTENT'

Humala deflected criticism by calling on mining companies, which plan to invest $50 billion in Peru in the next decade, to do more to win support from local communities that fear pollution, a loss of scarce water supplies, or a lack of direct economic benefits from new projects.

"The government is aware of the persistence of social discontent and unsatisfied hopes among a sector of the population that wants a better quality of life," he said.

Humala did not specifically mention the controversy over Newmont's Conga project, which would be the most expensive mine in Peruvian history, in his speech.

Instead, he sought to underscore that the government can still ensure a safe environment for foreign investors - emphasizing that global miners Anglo American and Freeport-McMoRan said this month they will proceed with a combined $7 billion in projects in the Andean country.

Anglo will build its $3 billion Quellaveco copper project and Freeport plans to carry out a $4 billion expansion to the plant at its sprawling Cerro Verde copper pit.

Despite political turbulence over how to manage its vast natural resources, Peru's economy is on track to grow 6 percent this year - potentially the fastest pace of the larger Latin American countries.

Public investments rose 130 percent in the first half of this year to 22 billion soles ($8.3 billion) - far outpacing private investment, which has risen a more modest 12 percent, held back by doubts about a weak global economy.

Although investments by the private sector have eased, domestic consumption i s strong. Car sales rose 50 percent in the first half of this year, while the construction and banking sectors both grew about 15 percent.

"We have one of the world's most dynamic economies," Humala s aid.