UPDATE 2-Peru's finance minister could step down

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By Terry Wade

LIMA, July 1 (Reuters) - Peru's Finance Minister Luis Carranza has expressed his desire to resign, and it is up to him to decide whether he stays or quits, President Alan Garcia told reporters on Tuesday.

Garcia, who praised Carranza's work, said a final decision had not yet been made.

"In the end, I'll put it in his hands to decide ... It's not something that the prime minister or I have asked for," Garcia said.

Three cabinet aides said Carranza has talked of leaving after nearly two years in office, apparently to return to the private sector.

Peruvian ministers typically submit their resignations twice a year to give the president a chance to reshuffle his Cabinet.

Carranza, who won widespread kudos from investors, has overseen surging annual growth of 9 percent, liberalized trade rules, and helped keep inflation at around 4 percent a year.

He is considered the architect of Peru's recent economic success and won support from Garcia at a time when mainstream economics are under attack in much of Latin America for allegedly hurting the poor.

Peru's poverty rate, while falling, hovers near 40 percent and critics of the government say it has not done enough to bring the benefits of the boom to workers and the poor.

Garcia did not mention a possible replacement for Carranza, but local media reports have said it could be Luis Valdivieso, who works at the International Monetary Fund.

"Should Minister Carranza choose to leave, we would not necessarily view this exit as credit-negative," Lehman Brothers said in a statement. The investment bank said Valdivieso, if he winds up with the job, would likely keep the same policies in place.

Mario Huaman, chief of Peru's largest confederation of labor unions, demanded bigger changes.

"It is a change of man, but not a change of policy and we are asking for a change in policy," said Huaman, who has called a nationwide strike for July 9 to protest Peru's free-market economic policies. (Additional reporting by Maria Luisa Palomino, Marco Aquino and Dana Ford, Editing by Chizu Nomiyama)