September 15, 2014 / 1:20 AM / 4 years ago

REFILE-UPDATE 2-Peru's Humala abruptly replaces his finance minister with key adviser

(Refiles to fix spelling of “less” in paragraph 3)

By Marco Aquino

LIMA, Sept 14 (Reuters) - Peru’s President Ollanta Humala replaced his influential finance minister with the ministry’s chief adviser late on Sunday in a surprise shake-up that comes amid the worst economic slowdown in five years.

Incoming Finance Minister Alonso Segura said his priority would be to consolidate reforms already underway in Humala’s government, with an eye toward jump-starting economic growth.

Segura said the global minerals exporter’s economy would likely expand by less than 4 percent this year - lower than the government’s last official forecast of 4.2 percent and far below the annual average of 6.4 percent in the past decade.

However, Segura, who previously worked as an economist with the International Monetary Fund and with Banco de Credito, Peru’s biggest bank, called the economic lull “transitory” and said he would evaluate new measures to stimulate growth.

“It is very important that we do all we can to reactivate expectations,” Segura said in an interview on state television shortly after being sworn in.

Outgoing Finance Minister Luis Miguel Castilla, a former World Bank economist, was considered the most powerful person in Humala’s cabinet.

He was central to easing investors’ fears that Humala, a former leftist military officer who rose to power in 2011, would not veer from the orthodox economic policies that had been in place for two decades in Peru.

Leaders in Peru’s business community were quick to praise Segura, who worked under Castilla for a year-and-a-half as his main adviser.

“Castilla maintained macroeconomic stability, and Alonso Segura is no leap into the void, Alonso Segura is also going to provide that stability,” mining magnate Roque Benavides said on Peruvian broadcaster RPP.

It was not clear what prompted Castilla’s departure, although he mentioned wanting to spend more time with family.

He was one of Humala’s few ministers to survive more than six cabinet reshuffles in three years.

However, criticism of Castilla and the government’s inability to ward off the slowdown mounted in recent months as Peru posted its worst economic expansions since 2009.

Late last month, Congress voted to undo one of Castilla’s key reforms, a law requiring independent workers to pay into a pension fund.

Humala’s party had offered to suspend the pension law in a deal to deliver enough votes to ratify his sixth cabinet, upsetting Castilla and setting the stage for his departure, one cabinet source said.

Humala is expected to sign off on the repeal of the pension law soon.

After the swearing-in ceremony, Castilla thanked Humala and said he would continue to support him.

“My departure from the ministry does not imply that I will distance myself from the government,” Castilla told reporters. (Reporting By Marco Aquino, Additional reporting by Mitra Taj; Editing by Eric Walsh, Mohammad Zargham and Paul Tait)

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