Volkswagen to build $2 bln Brazil factory-report

* Volkswagen seeks funding from Brazil, Valor reports

* Calls made to company were not immediately answered

* Comes as government slapped tax on imported vehicles

SAO PAULO, Oct 26 (Reuters) - Volkswagen (VOWG_p.DE), Europe's largest carmaker, is negotiating with Brazilian authorities the construction of a $2 billion factory in the nation's northeastern corner, Valor Economico newspaper said on Wednesday, citing people with knowledge of the situation.

Wolfsburg, Germany-based Volkswagen and Brazil's state of Pernambuco are finalizing details on the funding for the plan, Valor said. The company seeks 2 billion reais ($1.12 billion) in a 30-year loan from state development banks BNDES to seal the deal, Valor added.

An announcement on the investment is likely on Nov. 8, Valor noted, adding that the new facility could produce as many as 200,000 subcompact vehicles a year. The model that is being considered for the factory is the Up! subcompact, which was introduced at a car fair in Frankfurt this year, Valor said.

The news comes as the government is seeking to stimulate investment in the industry to fend off a surge in car imports. [ID:nE5E7JC06X]

The government last month hiked a tax on imported cars by 30 percent, aiming to encourage local sourcing of components and protect the domestic auto-industry from a deluge of cheap imports.

Calls made to the Sao Paulo-based Brazil media office of Volkswagen were not immediately answered.

($1=1.77 reais)

(Reporting by Guillermo Parra-Bernal.editing by W Simon