Brazil's state-run Banco doBrasil (BBAS3.SA: Quote, , Research, ) will increase its car loans to boost autosales through a partnership with manufacturers or by buying alending institution, Brazilian officials said on Thursday.



'We decided this because the auto industry is anextraordinary production chain. We don't want the sector tostop being the flagship of the Brazilian economy,' PresidentLuiz Inacio Lula da Silva told reporters in the capitalBrasilia.



'Obviously, Banco do Brasil doesn't have the expertise incar loans and would need a partner with an investment bank thathas expertise in financing the auto industry,' Lula toldreporters in Brasilia.



Minas Gerais state Gov. Aecio Neves supported the measureearlier on Thursday.



'The president acknowledges, and I think it's absolutelyright, that Banco do Brasil may directly operate in carfinancing, in partnership with an auto manufacturer or buying alending institution,' Neves told reporters after meeting withLula to discuss fallout of the global financial crisis.



Banco do Brasil already offers car loans but would nowincrease its portfolio to help ease a credit crunch.



Lula signed a decree on Wednesday allowing Banco do Brasiland another state-run bank, Caixa Economica Federal, to acquirestakes in other financial institutions.