Rio's Olympic Plans Hit Snag

City's share of oil wealth could drop 80 percent

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    NEWSLETTERS

    TK
    Rio 2016

    Hosting the Olympics costs money. A lot of money.

    Because of the recent discovery of billions of barrels of oil off Rio's shores, the city's bid committee had been counting on a bonanza of oil revenues to help them foot their Olympic bills. But now, the Brazilian congress has stepped in with a plan to spread the oil wealth throughout the nation. And Rio's Olympic planners are crying foul.

    "It's huge!" said energy analyst Phil Flynn of PFG Best in Chicago. "This oil find makes Brazil, potentially, one of the world's largest producers. It's going to be a trickle at first, eventually it's going to be a gusher. And everybody wants a piece of this gusher."

    Thousands jammed the streets this week at a noisy demonstration in downtown Rio, waving banners decrying what they called the "cowardice" of the decision by the lower house of Congress, which would force the three largest oil producing states to share more revenue from the new oil fields with other states across Brazil.

    Some state officials believe Rio's share of the oil pool would drop by an estimated 80 percent -- from over $4 billion -- to about $134 million. And they warned that public works projects for the 2014 soccer World Cup and 2016 Summer Olympic Games could be imperiled.

    There is some question how much impact the decision would have on Rio's ability to prepare for the Games. Brazil's federal government has already passed legislation guaranteeing the city's Olympic efforts.

    But the head of the Rio Olympic Committee, Carlos Nuzman, released a statement this week, suggesting that a lack of funding could lead to a breach of Rio's Olympic contract.

    "The reduction in revenues from oil exploration would leave the state of Rio de Janeiro without the resources to do the necessary construction work for the 2016 Games," Nuzman said. "Any decision that affects the capacity of the State of Rio de Janeiro to fulfill their many obligations has a negative impact on the organization of the games."

    Indeed, state governor Sergio Cabral actually cried in front of cameras last week after the decision was handed down, warning that the oil cuts would "break" Rio, and that people could forget the World Cup and Olympics if the reforms were not repealed.

    Even the city's iconic Christ the Redeemer statue on Corcovado Mountain now sports a giant protest banner. "With oil, it has always been, for countries that discover it, a blessing and a curse," says Flynn. "And this could lead to political instability in the country."

    "You know, President Lula has designs on where he thinks the money should go. But the rest of the country is saying, 'Not so fast! You know, we're a big country. We think this money should be spread around!'"