Rio declares financial emergency, requests funding for Olympics

Thomson Reuters
Trouble in Rio ahead of the Olympics
Trouble in Rio ahead of the Olympics

RIO DE JANEIRO (Reuters) - The governor of the Brazilian state of Rio de Janeiro declared a state of financial emergency on Friday, requesting federal funds to help fulfill obligations for public services during the Olympics, which start Aug. 5.

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Emergency measures are needed to avoid "a total collapse in public security, health, education, transport and environmental management," a decree in the state's Official Gazette said. The state's revenue has slumped in the last two years as global oil prices have collapsed.

The announcement followed this week's visit to the Olympic city of Rio de Janeiro by Interim President Michel Temer, who said the federal government would ensure obligations are met.

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The city is expecting about 500,000 foreign visitors during the Olympic Games. The local organizing committee for the games did not immediately respond to requests for comment.

While the majority of Olympic infrastructure costs have been spread across city, state and federal budgets, with some financing from private companies, the state is responsible for most day-to-day security and health services in Rio.

The state of Rio expects a budget deficit of over 19 billion reais ($5.56 billion) this year as spending planned before oil prices fell outstrips revenue that is tumbling during Brazil's worst recession since the 1930s.

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Rio state's debt has been downgraded several times.

On Wednesday, Fitch Ratings knocked Rio's debt rating to B- from B+, saying the state was suffering "a fast-deteriorating liquidity position."

Since late last year, the state has been forced to delay pension and salary payments and shutter some schools and hospitals, where crucial supplies, including medicines and syringes, are lacking.

Brazil is also facing an outbreak of the Zika virus, which has been linked to the birth defect microcephaly in which babies are born with abnormally small heads frequently associated with developmental issues.

(Reporting by Paulo Prada, Stephen Eisenhammer and Brad Brooks; Editing by Diane Craft and Richard Chang)