Some local media said Workers' Party (PT) president Jose Genoino's departure was almost certain after Veja magazine reported over the weekend that party treasurer Delubio Soares received a loan from an entrepreneur allegedly involved in a bribes-for-votes scandal, and Genoino was a guarantor of the loan.

"Genoino and Delubio represent the leadership of the majority camp inside the PT who brought the party to power in 2002, so if Genoino steps down it generates an internal crisis with that camp possibly losing command," political analyst Christopher Garman of the Eurasia group consultancy said on Monday.

The Workers' Party has been under fire since June when the head of a small party allied to the government accused it of making cash payments to some legislators to secure their support in Congress.

"What it might lead to is an eventual schism between Lula's government and the rest of the PT, where many criticize the government," Garman added, noting that the party had an election of its leadership scheduled for September.

The snowballing scandal has tarnished a corruption-free image the party cultivated for many years while it was in opposition. Investigating the allegations has preoccupied the Congress, stalling economic reforms.

"There is no way the thesis of Lula's complete lack of responsibility (for the scandal) can be maintained and there are evident signs that new accusations will emerge," Goes consultants said in a research note, adding that a possible solution could be for Lula not to run for re-election next year.

Lula last week opened a probe into a state energy company and unveiled anti-graft measures that make it easier to investigate and imprison corrupt public officials.

The Workers' Party denies the allegations, but Lula's Cabinet chief Jose Dirceu had to resign last month.

Lula is trying to woo allied parties closer to the government in an effort to increase his power in Congress.

A majority of lawmakers from the leading Brazilian Democratic Movement Party said last week they would give Lula's government full support in return for Cabinet posts promised by Lula earlier and a say in public policies.

Government sources said Lula is likely to give four ministries to that party and another portfolio to a nonpolitical appointment, possibly the head of Rio de Janeiro state industry federation, Eduardo Vieira.

The sources said the details of the reshuffle, in which the ruling party is likely to lose five ministries and possibly the presidency of state-run Petrobras oil giant, should be completed by Monday evening or Tuesday. Central Bank President Henrique Meirelles, who is being investigated for tax evasion, may also lose his job.