Calling his corrupt underlings "rats," Peru's President Alan García has dismissed his entire cabinet in what the local media have dubbed the "Petrogate" scandal, and appointed a popular left-wing regional governor as prime minister. Allegations of kickbacks in the granting of concessions to Norwegian company Discover Petroleum arose after local TV aired a series of audio tapes in which two members of García's APRA party discussed the apparent payments. The company denies it paid any bribes. The government has called a special commission to investigate all oil concessions granted since 2006.

Energy Minister Juan Valdivia and PetroPeru CEO Cesar Gutierrez resigned their posts Oct. 6 after García fired Alberto Quimper Herrera, a board member of the sibling parastatal PeruPetro, for his apparent role in the kickback scheme, which involved the auction of several exploration blocs in the regions of Pisco and Madre de Dios.

Recordings and documents in support of the allegations were presented by reporter (and ex-Interior Minister) Fernando Rospigliosi on Cuarto Poder, an investigative news show. The footage showed Quimper and APRA political boss Rómulo León in an apparent discussion of payments in exchange for favoring Discover Petroleum in oil bloc auctions.

When Valdivia stepped down, García said, "I accept the resignation so that it is known that our administration is a politically responsible one." But León refuses to step down and has challenged the government to send authorities to his home.

On Oct. 8, Peru's Congress voted to create the multi-party investigative commission, and the following day the entire cabinet stepped down at García word. So far only the prime minister, Jorge del Castillo, has been replaced. Some key ministers are believed likely to remain in the new cabinet, including Foreign Minister José García Belaunde and Trade Minister Mercedes Araoz.

The new prime minister is Yehude Simon, governor of northwestern Lambayeque region and a congress member during García's first administration in the late 1980s. Simon served time in prison for alleged links to the Tupac Amaru Revolutionary Movement (MRTA) before being pardoned in 2000. He was elected Lambayeque governor in 2003. His appointment is clearly an attempt on the part of García, his popularity at an all-time low, to reclaim credibility with Peru's popular movements.

"I want to build a great alliance, friendship between sectors of the left and the government, and I have no doubt that businessmen of the so-called right will also draw near," Simon told Lima's RPP radio upon accepting his appointment. (Financial Times, Oct. 13; AlJazeera, Oct. 12; 24 Horas Libre, Lima, Cronica de Hoy, Mexico, Oct. 9; EFE, Oct. 8; Living in Peru, Oct. 6)

State-owned PeruPetro is responsible for overall regulation and licensing of the oil and gas industries, negotiating contracts with private companies to explore and produce in Peruvian territory. PetroPeru, a separate state-owned company, runs refineries, pipelines and gasoline stations, often in partnership with private firms approved by PeruPetro. (Oil and Gas Insight Company Profile, Business News Americas Company Profile)

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