* Renault plant deal marks return to Algeria]
* President Hollande to sign deal on visit Weds
* Local demand rose 57 pct in first 10 months
* Initial 25,000 capacity to rise to 75,000-paper (Adds detail, background)
By Gilles Guillaume
PARIS, Dec 18 (Reuters) - Renault plans to build a factory in Algeria, aiming to bolster its position as the leading carmaker in the fast-growing market and marking a return to local production after more than three decades' absence.
Renault will sign the deal during a visit by French President Francois Hollande on Wednesday, a company spokeswoman said.
The carmaker's push to develop overseas sales, helped by its range of low-cost cars such as the Logan sedan, has helped to protect it from the worst of a slump in Europe, where car sales are set to decline a further 8 percent this year to the region's lowest rate in close to 20 years.
In February, Renault opened a major new plant in Tangier, Morocco, to assemble the no-frills Lodgy people-mover and Dokker delivery truck for export markets around the Mediterranean.
The Algerian factory, located near the western city of Oran, will be 51 percent-owned by Algeria and 49 percent by Renault, according to Le Figaro.
Its initial production capacity of 25,000 vehicles in 2014 would later rise to 75,000, according to the report. Renault would not confirm details.
Unlike the Morocco factory, which has a planned capacity of 400,000 vehicles a year, Renault's Oran facility will build cars exclusively for the local market.
Renault has a 27 percent share of the Algerian market where registrations jumped 57 percent year-on-year in the first 10 months of 2012.
Renault abandoned its last Algerian factory after the former French colony's 1962 independence led to nationalisation seven years later. The new plant deal, which promises to make Renault the first carmaker to restore local production, confirms a framework accord struck in May.
The final agreement will be signed by Renault's regional manager Jean-Christophe Kugler and Algeria's industry minister, the company spokeswoman said.
With the French own economy spluttering, its presidential delegation will include senior executives from some of the country's top companies including oil major Total, which is vying to sign a $5 billion deal to build an ethane steam-cracking plant.
Algeria has 12 billion barrels of oil reserves, yet annual trade with its one-time colonial master is just 10 billion euros.
Paris and Algiers are also likely to ratify a defence agreement that would allow French contractors to bid for major arms deals in a market that has been closed to France until now.
That could also improve intelligence cooperation as international efforts to oust al Qaeda-linked Islamists from neighbouring Mali gain momentum. (Writing by Elena Berton and Laurence Frost; Editing by Christian Plumb and David Holmes)