Feb. 20 (Bloomberg) -- Peruvian farmers ended a two-day protest that disrupted transportation and left five dead and hundreds under arrest, the government cabinet chief said today.

The government, which yesterday declared a state of emergency in three areas after protesters battled police and blocked roads, airports and railway lines, will resume talks with farming organizations, Jorge del Castillo said.

``There will be dialogue,'' del Castillo told reporters in Lima. ``But we will press ahead with penal sanctions against those who took control of highways and attacked passengers.''

Farmers called the nationwide protest to push for state subsidies as part of a free-trade agreement with the U.S., for lower prices on fertilizer and for a halt to farm seizures by banks. Peru, the world's largest exporter of organic coffee, asparagus and paprika, boosted agricultural exports to the U.S. and China by 10 percent to $2 billion last year.

``We've told our people to return to normality,'' Enrique Malaga, president of the National Irrigation Board, which is organizing the protest, said in a telephone interview. ``We will be discussing issues which have yet to be resolved with the government.''

The protest left more than 140,000 passengers stranded yesterday at a dozen roadblocks around the country, causing 25 million soles ($8.6 million) in losses for Peru's transport industry, according to the Transport Ministry. A protester was shot dead today during rioting in the southern Andean region of Ayacucho, Lima-based Canal N television reported.

Higher Social Spending

The government will increase social spending this year in a bid to ease poverty, Peruvian President Alan Garcia said today. About half of Peru's 27 million people live on $1 a day, according to the National Statistics Institute.

``This year, social spending and regional government budgets will double,'' Garcia told reporters in Lima. ``We're investing a great deal in social programs and land improvement.''

Peru's sol was little changed at 2.9005 per dollar in New York, near a nine-year high, after the central bank bought $129 million on the exchange market today in a bid to slow the sol's gains. The currency has gained 3.3 percent this year.

Lima's General Index rose 157.74 points, or 1 percent, to 16,597.54, a six-week high.

To contact the reporter for this story: Alex Emery in Lima at aemery1@bloomberg.net

Last Updated: February 20, 2008 17:18 EST