By Marco Aquino

LIMA, July 11 (Reuters) - Peruvian President Alan Garcia was to name a member of his pro-business ruling party as prime minister on Saturday, government officials said, amid nationwide protests over his handling of the economy.

Aides to Garcia said Javier Velasquez, a member of the APRA party who now is the head of Congress, would become prime minister and take over leadership of a shuffled Cabinet at a time when the president's approval rating is at 21 percent.

Garcia also was expected to retain Finance Minister Luis Carranza, praised by investors for overseeing surging economic growth before the global slowdown, officials said.

Velasquez will face growing calls from unions, indigenous groups and the poor for the government to increase social spending as the economy, which is largely dependent on mining, slows and unemployment rises.

Opposition parties have demanded Cabinet changes since last month when at least 34 people died in clashes between police and indigenous groups in the Amazon rain forest.

Outgoing Prime Minister Yehude Simon was heavily criticized for botching negotiations with protesters, who were demanding the government strike down laws designed to open up their ancestral lands to foreign mining and oil companies.

A third of Peruvians live in poverty and critics say Garcia's agenda of pushing free-trade agreements and encouraging foreign investment in mines and energy projects has not lifted incomes enough.

The government is rolling out a $3.2 billion stimulus program to enable the economy to grow 3 percent this year. It grew 10 percent in 2008.