By Alonso Soto and Lisandra Paraguassu
BRASILIA (Reuters) - Brazil will accept payment from Iran in euros and other currencies for planes, cars and machinery to sidestep lingering U.S. sanctions on the oil-rich nation, Trade Minister Armando Monteiro told Reuters on Tuesday.
Monteiro is the first Brazilian official to confirm that Latin America's biggest economy could accept payment in currencies including the euro from Iran, which is forbidden from using the U.S. financial system under the sanctions.
Brazilian President Dilma Rousseff could visit Iran this year to bolster exports, he said.
"Everyone is racing after Iran now ... The trade potential is very big," said Monteiro. "We will find ways to settle payments, the type of payment and currency."
Following a nuclear deal that lifted crippling sanctions last month, Iran has sought to settle debts and sell oil in euros to reduce its dependence on the U.S. dollar.
Monteiro said Brazil aims to triple trade flows with Iran to $5 billion by 2019, a rare bright spot as the country sinks into what could be its worst recession in more than a century.
Rousseff lifted UN-imposed sanctions against the OPEC nation last week after meeting with the Iranian ambassador, hoping to bolster trade between the two nations, which have enjoyed warm ties for years despite tensions with the West.
Although it is not clear whether any attempt to circumvent the U.S. financial system could raise tensions with Washington, Brazil's leftist government in the past has annoyed the United States by drawing closer to Tehran.
The U.S. embassy did not respond immediately to requests for comment.
Iranian President Hassan Rouhani signed a raft of deals with European companies in January, many of them priced in euros.
With a population of 80 million and annual output of some $400 billion, Iran is the biggest economy to rejoin the global trading system since the Soviet Union broke up over two decades ago.
"FIRST ITEM ON TABLE"
Facing the crippling recession, the Brazil government is shifting policy and moving quickly to open up its economy to reap the benefits of a sharp depreciation in the real <BRL=>.
The Iranian government has already contacted Brazilian planemaker Embraer <EMBR3.SA> for the purchase of commercial jets for regional aviation, Monteiro said.
Embraer, the world's No. 3 commercial plane maker, confirmed that Iran was interested in its aircraft. The Islamic republic is eyeing the four models of Embraer's E1 family of regional jets, because of their low maintenance costs, said an official spokesman for the company.
"Iran is a very interesting market because there is a lot of repressed demand and it is a huge country so there is great potential for regional aviation," the spokesman said.
Monteiro said Iran is also interested in Brazilian cars and trucks as well as machinery to renew its aging network of oil refineries.
"Our focus is to expand our participation in manufacturing, which is the first item on the negotiating table," said Monteiro, who visited Tehran last year with a group of Brazilian businessmen.
On the other hand, Brazil is interested in importing natural liquefied gas from Iran, Monteiro added.
Despite the weaker real, Brazilian industries continue to struggle as dwindling confidence, high interest rates and rising unemployment sap local demand.
Brazilian steelmakers such as Usiminas <USIM5.SA> and CSN <CSNA3.SA> have been particularly hard hit by the recession and global production glut.
Monteiro said the government has ruled out raising tariffs on steel imports, but is ready to use other tools such as anti-dumping measures to protect local industry.
He said the government could also offer new credit lines for local steelmakers to bolster exports.
Monteiro, the former head of the country's biggest trade group, said he also supports increasing foreign ownership in local airlines to bolster investment in the struggling sector.
The government is considering removing restrictions that currently allow foreign groups to hold up to 20 percent in local airliners, according to Monteiro.
(Additional reporting by Anthony Boadle; Editing by Daniel Flynn, Jeffrey Benkoe and Andrew Hay)