UPDATE 1-Peru's Humala swears in fourth prime minister, retains finance minister
LIMA Oct 31 (Reuters) - Peru's President Ollanta Humala swore in a widely praised regional politician as his fourth prime minister in a Cabinet reshuffle on Thursday, but retained his finance minister despite rumors he might quit.
The new prime minister, Cesar Villanueva, has twice been elected president of the northern Amazonian region of San Martin and is affiliated with center-left parties.
In his first interview after being sworn in, Villanueva said he supports the free-market economic policies that have been in place for years in Peru.
"The major lines have been drawn," Villanueva, 67, said on the state television channel. "Growth is needed, more private investment is needed, and we have to seek strategic alliances between public and private investment to keep growing."
Villanueva, who replaces Juan Jimenez, is the first prime minister picked by Humala to have been elected to a previous office. His appointment marks a shift away from decision-making typically dominated by a tiny political elite in Lima.
Humala, a former army officer and leftist radical before becoming president, has been criticized for being too reliant on insiders including his wife - the co-founder of his nationalist party - military chiefs and technocrats.
Finance Minister Luis Miguel Castilla, who has served in the post since Humala's election in July 2011, remains in place even though he is widely believed to want to leave for personal reasons.
A government source told Reuters that Castilla had agreed to stay on until next July.
Humala made just one other switch, replacing Education Minister Patricia Salas with Jaime Saavedra-Chanduvi, the acting vice president for poverty reduction and economic management at the World Bank.
The shake-up, a month earlier than usual for this Andean country, comes as the president's public approval has dipped to its lowest level and the economy has slowed on weaker mineral exports.
Peru's economy last year grew 6.3 percent, one of the fastest rates in the region. But in the first eight months of this year it expanded only 4.9 percent.
Villanueva has been described as a pragmatic, effective and influential leader by political figures ranging from former President Alan Garcia, a Humala critic, to left-leaning Salomon Lerner, who resigned as Humala's first Cabinet chief in 2011.
Central Bank President Julio Velarde told state news agency Andina on Thursday that Villanueva inspired optimism because of his strong record as president of San Martin.
Outgoing Prime Minister Juan Jimenez, a human rights lawyer, said this week that he had talked with Humala about resigning for months, and that the president told him Monday that the time had arrived to "refresh" the Cabinet.
Humala's administration, which turned to the right during massive anti-mining protests in 2011, settled in the political center during Jimenez's 15-month stint as prime minister.
As a regional president, Villanueva promoted zoning rules to prevent land disputes and backed a new indigenous rights law.
He also has been a director for the coffee-trading consortium Rainforest Trading, a project chief for a Canadian-Peruvian financial group and a manager with the non-governmental organization Cedisa, which advocates sustainable development.
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