Brazil may buy Portugal debt, Rousseff says-report

LISBON, March 30 Wed Mar 30, 2011 3:38am EDT

LISBON, March 30 (Reuters) - Brazil is studying ways to help Portugal through its debt crisis, including possible limited purchases of the country's bonds, President Dilma Rousseff was quoted as saying on Wednesday.

Rousseff, who is in Portugal for an official visit, told Diario Economico newspaper that "our economic teams have been having a permanent and fluent dialogue on the matter".

"One of the possibilities is buying part of Portugal's sovereign debt. We are also examining other alternatives such as early buyback or Brazilian bonds held by the Portuguese government," she told the newspaper.

Lusa news agency earlier quoted Rousseff as saying any possible purchases of Portuguese debt by its former colony Brazil would be subject to limits and guarantees imposed by law on the use of the Brazilian currency reserves.

Portuguese bond yields have spiked to euro lifetime record levels after last week's resignation of Prime Minister Jose Socrates that followed a rejection by opposition-parliament of his government's latest austerity plan.

The country is widely expected to follow Greece and Ireland in requesting an international bailout. Standard & Poor's agency on Tuesday downgarded Portugal's credit rating to just one notch above junk status, causing a further rise in bond yields.

Rousseff has cut her visit short and will return to Brazil later on Wednesday due to the death of former Vice-President Jose Alencar. (Reporting by Andrei Khalip; Editing by Toby Chopra)

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