UPDATE 6-Peru’s Garcia says to reshuffle cabinet

* Shuffle would allow ministers to run for office

* Peru economy sizzling

* Little policy change seen (Recasts, adds comments from
Garcia)

By Patricia Velez and Terry Wade

LIMA, Aug 17 (BestGrowthStock) – President Alan Garcia said on
Tuesday he will shuffle his cabinet at the appropriate time,
but brushed aside comments by three people in his party and
government that Finance Minister Mercedes Araoz will go.

The cabinet changes would be carried out as some ministers
want to step down to run in regional elections in October,
Garcia said. The shakeup, which is widely expected to include
Primer Minister Javier Velasquez, would come as Peru’s economy
surges at one of the world’s fastest paces.

“With the economy you have to be calm,” Garcia said when
asked if he would replace Araoz.

Garcia spoke late on Tuesday at a public works project and
when asked when the changes would be made, he said: “Not yet,
the truth is that I will announce them at an opportune time.”

Three sources told Reuters earlier on Tuesday the shuffle
would be announced in the coming days and that Araoz would be
on the departure list.

Expectations of the pending cabinet changes had little
impact on financial markets as no marked shift in economic
policy by Garcia’s center-right government is expected.

Araoz, an economist who recently got into a public row with
the central bank’s monetary policy director over whether she
was spending too much money and contributing to inflation, has
been in the job for about nine months.

She has been encouraged by some members of Garcia’s APRA
party to run for office. Ismael Benavides, who once led one of
Peru’s largest banks and previously served as agriculture
minister for Garcia, is seen as her most likely replacement.

“It’s going to be Thursday,” one source said. “We know that
Mercedes Araoz will leave no matter what,” said another source.

Benavides, who declined to comment, is trained as an
agricultural economist and is respected in Peru’s banking
world.

POLITICAL AMBITION, POLICY RIFT

Araoz recently said Peru would meet this year’s fiscal
deficit target of 1.6 percent of gross domestic product. She
has been able to ramp up spending because tax receipts are
surging on a sizzling economy — which grew nearly 12 percent
in June from a year ago.

Inflation, while speeding up, is expected to be around 3
percent this year, at the top end of the central bank’s
inflation target range.

Economic growth is seen at 7 percent with some forecasts
being revised upwards as surging domestic demand, led by
construction and easier credit, replace the traditional engine
of minerals exports. [ID:nN16264275]

Araoz, who helped craft numerous free-trade deals in her
previous role as trade minister, has discarded talk of her own
departure and one of her aides denied she would leave.

Her policy rift with the central bank was not mentioned by
the sources as a reason for her potential departure.
[ID:nN12107360]

They said a replacement for Velasquez, who has struggled to
keep a lid on social conflicts over natural resources, has yet
to be identified.

Leaders of Garcia’s party have mentioned Araoz as desirable
candidate to have run on their ticket, perhaps for the
presidency in general elections next year, when Garcia cannot
run.

Araoz, who is not currently affiliated with any party, is
telegenic and seen as having political ambitions but a poll
showed that her candidacy would draw little support.
(Additional reporting by Teresa Cespedes and Marco Aquino;
Editing by Gary Hill and Tomasz Janowski)

UPDATE 6-Peru’s Garcia says to reshuffle cabinet