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* Correa: Mining contracts best ever negotiated
* Protest aims to hurt gov't ahead of poll, Correa says
* Thousands of indigenous demonstrators march in capital
By Eduardo Garcia and Alexandra Valencia
QUITO, March 21 (Reuters) - Ecuador's President Rafael Correa insisted on Thursday he will push ahead with plans to develop large-scale mining, seeking to ride out the arrival in Quito of ind igenous de monstrators who fear their lands will be wrecked.
Indigenous protesters have been marching for weeks to reach the capital, where thousands took over streets waving flags and shouting slogans. Some had their faces painted black and held wooden spears, while others wore the colorful ponchos typical of the Andean highlands.
Meanwhile, several thousand supporters of the leftist Correa gathered in other parts of the city. He says the anti-mining march was whipped up by the opposition to hurt his government before a Feb. 2013 presidential election.
The U.S.-trained economist said he needs more foreign investment to fuel welfare spending - a key contributor to his high popularity during five years in power.
"We know that mining is necessary for modern life. As well as the raw materials, we need the revenue so that we can care for handicapped people, pay for social security, build roads," the president told local radio on Thursday.
Correa said the country's first ever large-scale mining deal, which was signed with Chinese-owned Ecuacorriente earlier this month, guarantees the government - not the miners - will receive most of the income from mineral exports.
"These are the best negotiated contracts ever in world history," he said. "We got as much out of them as was possible."
Ecuador hopes to sign three contracts this year with Canadian gold miners Kinross, International Minerals and IAMGOLD, and a second deal with Ecuacorriente, which should help the OPEC nation diversify its economy away from oil exports.
Mining sources say they are confident Ecuador's government will not revise its policies in the face of pressure from local communities - but that they are concerned by signs the opposition is getting more involved in the anti-mining movement.
"The possible problems that mining can cause have been exaggerated and demonized," Santiago Yepez, head of Ecuador's mining chamber, told Reuters.
"We have to give mining a chance to prove it can bring development without causing the types of environmental disasters some are talking about."
Indigenous protesters played a key role in popular uprisings that forced two Ecuadorean presidents to step down in 1997 and 2000, and similar protests forced Bolivian leader Evo Morales to cancel plans to build a road through an Amazonian national park and indigenous territory.
Rural towns in Peru have also rallied against mining, at times paralyzing big projects, though that country's indigenous organizations lack the unity and political clout to stage national protests like their peers in neighboring Bolivia and Ecuador.