Uruguay's economy minister has resigned as a judge investigates alleged fraud in the failure of the national airline Pluna.

President Jose Mujica took no questions on Saturday after announcing that Fernando Lorenzo resigned just before his interrogation by an investigative judge.

Pluna flew for 75 years before going bankrupt last year, costing the state millions of dollars.

Lorenzo tried to sell the company's assets in an auction where the only buyer turned out to be a stand-in for Pluna's competitor, Argentine businessman Carlos Lopez Mena.

His Buquebus company dominates travel between Montevideo and Buenos Aires.

A prosecutor wants Lorenzo and Banco Republica president Fernando Calloia charged with abuse of power, and Pluna's last private owner Matias Campiani charged with fraud.

Any charges will likely be settled by Uruguay's Supreme Court.

'Brilliant minister'

Mujica defended the conduct of Fernando Lorenzo, his minister since March 2010, as local television broadcast images of the economist entering a criminal courthouse.

"He has been a brilliant minister," Mujica said. "We have no doubt about his ethical integrity."

Mujica is considering replacing Lorenzo with the current president of Uruguay's central bank, Mario Bergara, a source with the president's political party told Reuters.

Lorenzo was widely respected by investors, but faced growing criticism after the government sold seven aeroplanes that once belonged to Pluna, the airline the state took over and shuttered in the wake of its bankruptcy last year.

The government has yet to receive payment for the planes, which were bought by a Uruguayan businessman who changed his name before making the purchase. Pluna had been 75 percent owned by the Leadgate financial group.

Source: Agencies