UPDATE 2-Uruguayan economy minister quits amid airplane sale scandal

Sat Dec 21, 2013 3:26pm EST

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(Adds context on scandal, quote from outgoing minister)

By Malena Castaldi and Felipe Llambias

MONTEVIDEO Dec 21 (Reuters) - Uruguay's economy minister resigned on Saturday in the face of allegations he took part in the irregular sale of government airplanes during the closure of the country's flagship carrier, President Jose Mujica said.

Mujica defended the conduct of Fernando Lorenzo, his minister since March 2010, as local television broadcast images of the economist entering a courthouse Saturday morning.

"He has been a brilliant minister," Mujica told reporters. "We have no doubt about his ethical integrity."

Lorenzo was widely respected by investors, but faced growing criticism after the government sold seven airplanes that once belonged to Pluna, the airline the state took over and shuttered in the wake of its bankruptcy last year.

Pluna was previously 75 percent controlled by the Leadgate financial group, with the government owning the rest.

The state has yet to receive anything in payment for the planes - bought in October 2012 by businessman Hernan Calvo, who used a different name when bidding on them.

Calvo is linked to an influential Argentine businessman who controls several big businesses in Uruguay, including BQB, an airline that once competed with Pluna.

The attorney general's office suspects Lorenzo of using his position to speed up the $137 million deal, which his ministry was not charged with overseeing.

Lorenzo has said he did nothing wrong and is appealing the attorney general's request to move the investigation to trial.

"I am at peace with the decisions I made," he was quoted by the website El Observador as saying after leaving court on Saturday.

Fernando Calloia, the president of Uruguay's state bank, was also summoned to provide statements to investigators on Saturday about a $13.6 million guarantee the bank made for the purchase of the planes.

Mujica is considering replacing Lorenzo with the current president of Uruguay's central bank, Mario Bergara, who would in turn be replaced by Jorge Polgar, a former president of the bank Hipotecario, a source with the president's political party told Reuters.

Interior Minister Eduardo Bonomi will temporarily head the economy ministry until a new minister is sworn in.

Lorenzo's departure from government will allow him to make statements about the scandal that he might not be able to make as minister, a source with the ruling party told Reuters.

Mujica vowed to adhere to any judicial rulings.

"We will respect the decisions of the court entirely, as is natural in a law-abiding society," Mujica said.

A source in the economy ministry said that Mujica did not ask Lorenzo to resign. (Reporting by Malena Castaldi and Felipe Llambias; Writing by Mitra Taj; Editing by Jackie Frank)

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