Thousands march against Garcia, corruption in Peru

LIMA (Reuters) - Thousands of protesters denounced Peruvian President Alan Garcia on Tuesday, a day after his energy minister quit in a widening scandal over steering oil concessions to favored bidders.

Members of Peru's largest labor confederation, the CGTP, demanded Garcia shake up his cabinet and change his free-market economic model, which critics say has caused growth to surge but failed to lift people out of poverty quickly.

"Something stinks," said Mario Huaman, leader of the CGTP. Marchers held signs calling Garcia's party "Corrupt as ever."

The protests, held in large cities across the country, were planned weeks before the scandal broke on Sunday night. But they reflected frustration about corruption in Garcia's administration and fears the international financial crisis will spread to Peru.

Voters cite corruption as one of their top complaints about Garcia, whose approval rating has fallen to 19 percent, according to polling firm Ipsos Apoyo.

Ollanta Humala, the ultra-nationalist leader who nearly beat Garcia in 2006 and hopes to win the presidency in 2011, called on the president to fire his entire cabinet.

The scandal has forced out Mines and Energy Minister Juan Valdivia, along with two other high-ranking energy officials in Peru, which has a growing petroleum industry.

Alberto Quimper, a board member of state energy agency Perupetro, which organizes auctions of exploration lots and awards contracts, and Cesar Gutierrez, president of state oil and gas company Petroperu, were fired.

Late Sunday, audio tapes surfaced on an investigative television news show that included a conversation between Quimper and Romulo Leon, a prominent member of Garcia's APRA party, in which they apparently agreed to favor Discover Petroleum, a small company from Norway, in a round of energy auctions.

Discover, which partnered with Petroperu, was awarded five blocs for energy exploration last month, which the government has suspended. In addition, Congress voted late on Tuesday to investigate all oil contracts awarded since 2006 to scrutinize dozens of pacts signed with foreign energy companies.

"I have no doubt there's more, nobody should think this is an isolated case," Fernando Rospigliosi, a former interior minister and journalist, who obtained the audio tapes, said on RPP radio.

PAYMENTS

Garcia has moved quickly to contain the damage and demanded harsh punishment for any corrupt officials.

But on Tuesday, Discover added fuel to the scandal, releasing a statement saying that it made direct payments to Leon and indirect payments to Quimper, who was subcontracted by Discover's law firm to provide tax advice.

Between May and October, Discover reported paying $63,750 to Leon, and $60,000 to the law firm that hired Quimper.

The company did not say if it knew that Quimper, who was providing its law firm with tax advice, was also a board member at Perupetro. Still, it denied having paid bribes.

"The application process (was) completely open and transparent, and could not possibly have been influenced by any bribes," Discover said.

"The fact that these individuals were being monitored under the suspicion of corruption already before we had any business interests in Peru, indicates that we are the ones that have been deceived," the company said.

(Additional reporting by Carlos Valdez and Dante Alva, editing by Matthew Lewis and Bill Trott)