UPDATE 2-Venezuela's Chavez taps Brazil for $4 bln in loans

Tue May 26, 2009 5:37pm EDT
* Brazil to finance up to $4.3 bln in Venezuelan projects
* Loan helps leftist Chavez fill budget gap
* Financing to help Brazilian contractors (Recasts, adds details, quotes, background throughout)
By Raymond Colitt
SALVADOR, Brazil, May 26 (Reuters) - Brazil plans to finance over $4 billion worth of investment projects in Venezuela as leftist President Hugo Chavez struggles to cope with low oil prices that have created a cash crunch for his OPEC nation.
Until a few years ago, Chavez was using petro-dollars to compete with his Brazilian counterpart, President Luiz Inacio Lula da Silva, for influence among left-wing South American leaders such as Ecuador's Rafael Correa and Bolivia's Evo Morales.
On Tuesday, Chavez welcomed Brazil's aid offer.
"Brazilian companies should be certain that in Venezuela they will have all of our support," said Chavez, who met Lula in the northeastern Brazilian city of Salvador.
"We are so happy, Lula, we are so grateful," Chavez said after a signing ceremony.
Venezuela faces a yawning budget deficit sparked by last year's crash in crude oil prices that prompted Chavez to seek new ways of financing the social programs and unrelenting nationalizations typical of his self-styled revolution.
The agreement signed by Brazil's state development bank BNDES paves the way to finance Venezuelan infrastructure projects carried out by Brazilian companies seeking a foothold in Venezuela. Brazil's Industrial Development Agency said it had provided a list of 26 companies that are interested in developing industrial projects in Venezuela.
"The proposed projects so far total $4.3 billion," Luiz Antonio Dantas, the BNDES's superintendent for international affairs, told Reuters.
Venezuela has 45 days to choose and detail the projects.
Chavez said the loans would finance a range of projects such as new infrastructure, petrochemicals production and electricity generation, which involve Brazilian companies.
The funds could ensure Venezuela has enough cash on hand to pay companies such as Odebrecht, a construction giant helping expand the subway of the Venezuelan capital or petrochemicals giant Braskem, which is helping build plants in Venezuela.
Cash flow problems since last year created nagging conflicts with oil service companies that complained of months of non-payment by state oil company PDVSA, leading Chavez to nationalize a group of them earlier this month.
State oil company PDVSA, which bankrolls most of Chavez's social programs, has built up close to $13 billion in debt to service providers and contracts -- a key factor in this month's oil service takeovers.
Chavez has sought similar state-to-state financing in recent years, borrowing some $8 billion from China since last year and around $3.5 billion from Japan in 2007.
Despite Venezuela's revenue shortfall, Chavez said he would continue with a wave of nationalizations launched in 2007. "We will continue," he told reporters on Tuesday.
Last week his government paid $1.5 billion to Spain's banking conglomerate Grupo Santander to buy the company's local unit and nationalized a group of iron producers. (Writing Brian Ellsworth; editing by Stuart Grudgings and Dan Grebler)