Alan Garcia, Peru's president, has appointed a provincial governor, previously jailed for links to a leftist armed group, as his new prime minister, after the country's entire cabinet resigned over a corruption scandal.

Garcia said on saturday that Yehude Simon, the governor of the northern province of Lambayeque, would replace  Jorge del Castillo.

Simon replaces Jorge del Castillo, who was implicated in the scandal over oil concessions.

Though del Castillo denies any wrongdoing, his name was mentioned in taped conversations as someone who would provide favours in a plan to rig auctions of oil and gas concessions.

Simon had earlier said on Peru's RPP radio that he had been offered the position.

'Great alliance'

"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 RPP radio.

Simon served prison time for alleged links to the leftist Tupac Amaru armed group before being pardoned in 2000 and elected Lambayeque governor in 2003.

Garcia is a former leftist whose first term as president in the 1980s ended in economic disaster but has since become a champion of mainstream economic policies and was elected to lead Peru for a second time in 2006.

By replacing del Castillo with Simon, Garcia would appear to be placing a greater emphasis on social programmes and regain support with the left and in the provinces, where he is unpopular.

Oil scandal

His approval rating has fallen to 19 per cent, an all-time low for his current term, as critics say surging economic growth of 9 per cent a year has failed to lift millions out of poverty.

Before the wholesale cabinet resignation on Thursday, Juan Valdivia, the former mines and energy minister, had already been forced to quit, along with two other energy officials, as a result of the tapes.

Peru's congress has also voted to investigate all oil and gas concessions granted since 2006.

It will scrutinise dozens of contracts signed between Peru and foreign oil companies for signs of irregularities in the country's growing petroleum sector.