UPDATE 2-Venezuela prepares PDVSA issue, sees recession end

* Bond would be second major debt issue this year

* Fourth-quarter marginal economic growth expected (Adds details)

By Eyanir Chinea and Marianna Parraga

CARACAS, Aug 25 (Reuters) - Venezuela is preparing a $2 billion dollar-denominated bond issue by state oil firm PDVSA for September, a senior government source said on Wednesday.

The source, speaking on condition of anonymity, also said that Venezuela should emerge from recession at the end of the year to register marginal fourth-quarter growth.

The PDVSA issue would be the OPEC member nation's second big debt issue this year after the government sold $3 billion of 2022 BONDS VENGLB22=RR earlier in August. [ID:nN16259736]

"We're getting it ready for the start of September, during the first two weeks," the source told Reuters.

"In the fourth quarter we should grow, modestly," the source also said. He added that the economy would still fall overall in 2010, but register growth in 2011 and 2012.

Venezuela's economy began contracting in early 2009 and saw a 1.9 percent fall in the second quarter of 2010, compared with the same period of last year. [ID:nN19271117]

The source said the PDVSA issue would be intended to raise money to pay debt to service providers, who are owed about $3 billion-$4 billion by the state firm. He said the central bank bought $1.4 billion of a reopened 2014 bond sold by PDVSA earlier this month. The oil company used the proceeds to reduce service provider debt.

"There is plenty of monetary liquidity, especially bank liquidity, and the opportunity is there to pick that up and pay providers," he said.

Venezuela usually issues foreign debt denominated in dollars but buyable in the local bolivar currency, making it attractive as an instrument to sidestep the nation's stringent exchange controls.

President Hugo Chavez had announced the upcoming PDVSA issue, saying it would be sold via a new state-run "Public Financial Market" the government has said it wants to set up to scoop up business from the shrinking private brokerage sector. (Additional reporting by Marianna Parraga; Writing by Andrew Cawthorne; Editing by Leslie Adler)