UPDATE 1-Opposition steps up protests against Peru's Garcia

* More pressure on Garcia government

* Teachers, transportation workers lead protests

* Garcia cabinet changes expected this weekend

* Humala presents himself for 2011 race (Recasts, adds Humala paragraphs 4, 5)

By Dana Ford

LIMA, July 8 (Reuters) - Thousands of Peruvians marched on Wednesday to protest the pro-business policies of President Alan Garcia, who has bowed to pressure to shuffle his Cabinet as an emboldened opposition gears up for the 2011 elections.

Garcia, whose approval rating is 21 percent and is prohibited from running again for the presidency, has been reeling since last month when indigenous protests in the Amazon turned violent.

At least 34 people died after police broke up roadblocks set up by protesters who were demanding repeal of laws that encourage foreign mining and oil companies to invest in the rainforest.

Ollanta Humala, a self-described nationalist who spooked investors when he nearly won the presidency in 2006, told a rally in the capital Lima that he could lead the left to victory in the next elections.

"Starting in 2011, together with all social movements, left-wing groups, Amazon tribes and indigenous people, we will win power so we can rule together and build a new Peru," he told a crowd who waved indigenous flags.

Anti-government protesters have tapped into widespread discontent with Garcia's investor-friendly policies, which they say have failed to lift the incomes of workers and the poor despite spurring economic growth.

More than a third of Peruvians live in poverty.

Garcia said on Tuesday he will unveil Cabinet changes this weekend but has said he wants to stick to his agenda of promoting free trade and free markets.

Finance Minister Luis Carranza, a favorite of investors, is expected to be reappointed.

Teachers and transportation workers leading demonstrations on Wednesday demanded the government spend more on education and anti-poverty programs, and roll back new laws that will stiffen penalties for traffic infractions.

"Garcia might change his ministers, but the policies will stay the same," said Manuel Pena, 55, a bus driver participating in a rally in Lima. "Garcia has blood on his hands for what happened in Bagua (in the Amazon). His loyalties are to foreign companies, not with the people."

With social discord increasing and the economy slowing, analysts say a left-wing candidate may make a strong run in the next presidential race. Garcia has told investors he wants to prevent a leftist from winning.

Demonstrations snarled traffic and slowed commutes in Lima. Cuzco and Arequipa, home to a number of large mines in the country's vast minerals sector, also were affected by the protests.

Officials at Southern Copper and Cerro Verde, two of Peru's biggest copper producers, said operations were normal.

Interior Minister Mercedes Cabanillas said 32,000 police and 6,000 soldiers were deployed to keep order on Wednesday and no violence was reported.

Opposition parties have called for Cabanillas and Prime Minister Yehude Simon to resign for failing to prevent deadly clashes last month in the Amazon.

Garcia, who often trades barbs with Bolivian President Evo Morales and Venezuelan President Hugo Chavez, both leftists, has blamed outsiders for instigating the recent protests in Peru but has offered no evidence to support his claims.

"We want a change in economic policies," said Mario Huaman, head of Peru's largest labor confederation. (Additional reporting by Marco Aquino and Terry Wade; Editing by Paul Simao)