BRASILIA (Reuters) - A friend of Brazil's former President Luiz Inacio Lula da Silva arrested in November for allegedly taking out a fraudulent loan for the ruling Workers' Party is negotiating a plea bargain deal with prosecutors, newspaper Valor Economico reported on Monday.
Jose Carlos Bumlai, a powerful rancher who also controls a sugar mill, has discussed a potential collaboration with Brazilian investigators during the past two weeks, Valor said. He has remained in custody since Nov. 25.
Under Brazilian law, plea bargain deals are strictly confidential until the testimonies are collected by prosecutors and accepted by a judge.
The strategy has been widely used in the sweeping corruption investigation into political kickbacks centered on state-run oil company Petroleo Brasileiro that threatens to topple President Dilma Rousseff.
Economists said uncertainty generated by the probe has helped to deepen Brazil's worst recession in decades.
Prosecutors expect Bumlai to give details about the loan under investigation. They suspect the engineering branch of the Grupo Schahin, Schahin Engenharia, was awarded a contract in 2009 to operate a drillship for Petrobras in exchange for the bank canceling Bumlai's loan repayments.
The prosecutors' office in Curitiba in the southern state of Parana, where the investigation is centered, declined to comment on the reported plea bargain. Bumlai's lawyer did not immediately respond to a request for comment.
Valor said prosecutors are looking for evidence linking two country estates in Atibaia worth 1.5 million reais to Bumlai and the former president. Lula was briefly detained for questioning on Friday, in the highest profile development in the two-year-old graft probe.
(Reporting by Silvio Cascione; Editing by Dominic Evans and Richard Chang)