MercoPress. South Atlantic News Agency

Brazil denies financial support for Varig.

The Brazilian government is not considering any form of capital injection to the country's flag carrier Varig, according to Finance Minister Antonio Palocci.

His comment follow remarks from the Chief of Airport authorities Carlos Wilson who a day before said the government had plans to temporarily take control of Varig and then resell it to private investors.

"Currently there are no such plans?the Constitution does not allow me to extend loans to private companies or individuals", stressed Mr. Palocci.

The Brazilian federal government and other government companies hold liabilities over two thirds of Varig's total debt equivalent to two billion US dollars.

"The company is practically in the hands of the government" anticipated Mr. Wilson "since no government office is executing the loans and debts".

The Brazilian flag carrier has been virtually broke for the last few years given the successive devaluations of the Brazilian currency which have increased domestic costs, the increase in fuel prices and leasing of airplanes, all of which must be paid in foreign currency.

However local analysts also point out that the company is overstaffed and has been poorly managed.