Blockades and strikes this week exposed deep rifts in Peruvian society and more protests are likely unless the government finds a way to spread the wealth from an economic surge to workers and the poor.

With global prices rising for the natural resources that Peru exports, social conflicts are becoming more frequent and are putting President Alan Garcia in a bind.

Garcia wants foreign mining and oil companies to invest billions in Peru to help cut the poverty rate of 40 percent, but many people complain they have yet to reap the benefits from an economic boom now in its seventh year.

Protests and conflicts about how to redistribute wealth are inevitable because expectations are high and there is lots of poverty, said Santiago Pedraglio, a political analyst. The government must figure out how to avoid more conflicts.

Before lifting a blockade on Thursday, 20,000 residents of Moquegua occupied roads, took 60 police hostage, and severed access to a smelter and mine of Southern Copper (SPC.LM) (PCU.N), Peru's largest copper producer, to demand that their province receive a bigger share of taxes paid by the company.

Workers at two important copper mines in Peru also held strikes this week, pushing up global prices until they were persuaded to return to their jobs.

Garcia, whose approval rating hovers at 35 percent, is under pressure to reduce poverty quickly or risk losing support for his free-market policies at a time when left-wing parties are eyeing Peru's next presidential election in 2011.

The latest round of protests only ended after Garcia's chief of staff promised to boost economic aid to poor provinces and beef up anti-poverty programs.


Still, more strife looms. Peru's ombudsman's office says there are 116 unresolved conflicts over natural resources nationwide.

Poor indigenous communities in the mountains are demanding a bigger slice of huge profits generated by foreign mining companies, while tribes in the Amazon rain forest are worrying that oil drilling will contaminate their lands.

Incidents of strikes, roadblocks or protests in the past six months doubled to 65, over the number in the previous half year, at a time when Peru's economy is growing faster than ever. It expanded 9 percent in 2007 and 13.25 percent in April from the same month a year earlier.

More discord is a sign that record metals prices have raised public expectations and intensified the frustration felt by those who think Peru's swift growth has passed them by.

In at least one case, resistance to mining on environmental grounds forced a foreign company, Manhattan Minerals, to scrap plans for a mine in a town in northern Peru. Currently, a nearby town is trying to stop Chinese miner Zijin (2899.HK) from building a $1.4 billion copper mine.

Unions are also intensifying their demands for better pay and benefits. Peru's largest federation of mining unions has called a walkout for June 30, and the country's leading confederation of workers plans a general strike for July 9.

Nonoy Lanatta, director of the nongovernmental organization Grufides, says the central government has failed to fairly share mining tax revenue with the provinces, especially poor ones that desperately need help.

Many poor towns where new mines or oil and gas wells are being built lack water, electricity, schools and hospitals.

The state is totally absent in many provinces, and it only arrives once people start protesting, Lanatta said. Mines are always beneficial for mining companies, but mines don't always end up benefiting communities and towns.

(Additional reporting by Marco Aquino; Editing by Jackie Frank)

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