President Alan Garcia of Peru has refused to sign a law that would give indigenous people more power to stop oil and mining projects on their lands.
The law was approved by Congress, but Mr Garcia said he could not let indigenous communities stop development that would benefit all Peruvians.
Native groups and opposition politicians have criticised the move.
Last year, more than 30 people died in clashes between police and Amazon tribes opposed to oil projects.
Indigenous groups say they have seen little benefit from the rush to develop Peru's rich natural resources, and they fear their traditional ways of life will be destroyed.
Mr Garcia sent the law back to Congress just days before MPs begin a two-month recess at the end of this week.
He said it went too far, as it did not rule out the possibility that native groups could veto infrastructure projects.
Human rights groups say that in approving the bill, Peru's Congress was complying with UN and International Work Organisation treaties which the country had signed.
But Mr Garcia said he could not allow native communities to hold back Peru's economic growth.
"If you want to build a road or gas pipeline and the locals say 'no', then there is no road or electricity. Peru is for all Peruvians and for there to be democracy we can't place limits on future legislation or governments," he said.
China's demand for raw materials has helped to make Peru one of the world's fastest growing economies, and there have been billions of dollars of investment in mining and the emerging oil and gas sector.
But President Garcia's aggressive drive to attract foreign investment has caused massive social friction.
Poor communities in Peru's Amazon jungle and Andes mountains say they are often neither consulted nor informed about big projects on their ancestral lands, and they say they do not see the benefits of the billions of dollars of profit from Peru's natural resources.
Mr Garcia's critics say his refusal to sign means the chances of resolving the country's many conflicts will be thwarted.