Peru's Garcia signs mining royalty rule into law

LIMA, Nov 25 (Reuters) - Peru's government approved on Tuesday a law that changes how mining royalties are distributed in the Andean country, a major minerals producer, where protests over the rule have flared in recent months.

The law, which Congress passed last month, was signed by President Alan Garcia and printed in Peru's official gazette.

Under the new legislation, royalties will be worked out according to how much mineral wealth a mine produces. The previous system measured the amount of earth a mine moves.

The reform sparked violent protests in November in the southern province of Tacna, because it looked set to cut the amount of money Tacna receives from taxes paid by Southern Copper (SPC.LM) (PCU.N), a unit of Grupo Mexico (GMEXICOB.MX).

Southern Copper runs the Toquepala mine in Tacna and the Cuajone mine in the neighboring province of Moquegua.

Earlier this year, protesters in Moquegua took to the streets to call for the royalty law to be reformed. They stand to gain from the change.

Politicians in both provinces say they need the mining revenue to pay for basic services like water and education.

Despite some seven years of strong economic growth in Peru, some 40 percent of the population lives in poverty and critics of Garcia say he has not done enough to make sure the boom in mining exports benefits the poor.

Peru is the world's second-largest producer of copper and zinc and ranks fifth in gold production. The Andean country is first in silver output. (Reporting by Maria Luisa Palomino; Writing by Dana Ford; Editing by Walter Bagley)