A top government tax lawyer (Procurador Geral da Fazenda Nacional), Luis Inácio Adams, says that if Varig is sold the new owners' priority should be the payment of company debts to the government.

Next in line would be government-linked suppliers, such as BR Distribuidora, and then the payment of worker rights and benefits. After that would come regular suppliers and banks.

Meanwhile, as Varig's agony is prolonged, its stock has fallen over 60% since the middle of May. Does that sound bad? Investors say that if the 79-year-old company collapses in bankruptcy the stock could become worthless.

BR Distribuidora, a fuel distributor that is a subsidiary of Brazil's state-run Petrobras, has announced that it will guarantee fuel for Varig jets until today, June 27.

"In view of recent events we are now negotiating a new payment plan that will take the company (Varig) through to the end of July," says a note from BR Distribuidora.

ABr

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