Brazil denies suspending Ecuador loan for jets

BRASILIA, Nov 25 (Reuters) - Brazil's government denied a newspaper report that it had suspended a loan for Ecuador to buy 24 Embraer aircraft, a spokesman for the presidency said on Tuesday.

Last week Ecuador filed an international lawsuit seeking to suspend payments on the loan from Brazil's national development bank, or BNDES, alleging the terms were unlawful. The row over the loan has strained ties between the South American countries, with Brazil recalling its ambassador to discuss the government's response.

Citing an unnamed government source, O Estado de Sao Paulo daily reported on Tuesday that the government suspended a $261 million loan through the BNDES to finance a planned purchase by Ecuador of 24 Supertucano turboprop trainers made by Brazil's Embraer.

"The story is wrong. The government has not suspended any loans," a spokesman for the presidential palace told Reuters.

Foreign Minister Celso Amorim said on Monday that Brazil would closely evaluate any new financing to Ecuador but did not want to harm the people of the Andean nation.

Embraer shares had fallen nearly 1 percent before turning around by late morning to gain 2.5 percent to 8.2 reais. The benchmark Bovespa index .BVSP> was up 2 percent.

The Supertucano aircraft was used by the Colombian military earlier this year to attack a rebel camp inside Ecuador, triggering a diplomatic spat that pushed the Andean region to the brink of an armed conflict.

Brazil has played a key role in financing regional infrastructure projects and its President Luiz Inacio Lula da Silva had enjoyed good relations with his also leftist Ecuadorean counterpart Rafael Correa. (Reporting by Raymond Colitt, editing by Dave Zimmerman)