Fri May 22, 2009 8:51am EDT

SAO PAULO, May 22 (Reuters) - Venezuelan President Hugo Chavez, whose government is facing cash shortages as oil revenues plunge, is negotiating loans from Brazil's state development bank to fund projects, a Brazilian newspaper reported on Friday.

The investment projects, which involve the participation of large Brazilian companies, would allow Chavez to stimulate economic growth without having to tap his nation's dwindling cash reserves, the Folha de Sao Paulo daily said.

BNDES, a state bank and Brazil's biggest lender to companies, could commit up to $4.3 billion in loans, Folha cited BNDES President Luciano Coutinho as saying.

Speculation has been growing that Venezuela's external and fiscal finances are quickly deteriorating. Ratings company Standard & Poor said recently the government may be forced to devalue the currency, which is pegged to the dollar at a fixed rate, as falling oil prices cut revenues by $10 billion.

Coutinho visited Venezuela this week to negotiate the final details of the loan accord, which could be announced when Chavez visits Brazil on May 26, according to Folha

Some of the loans may involve trade finance deals and two credit facilities worth a total $723 million to expand the subway in the capital city Caracas. Odebrecht SA, Brazil's largest construction group, is handling the expansion.

Other Brazilian companies with projects in Venezuela include Braskem (BRKM5.SA) and builder Andrade Gutierrez.

However, a potential obstacle to the accord is a current limit on financing of exports to Venezuela, the newspaper said. The Brazilian Finance Ministry and a government council for exports might have to raise such limit for the loans to be made, Folha said. (Reporting by Guillermo Parra-Bernal; Editing by Theodore d'Afflisio)