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Rio 2016 Olympics May Need to Tap $700 Million Contingency Fund

Aug. 3 (Bloomberg) -- Organizers of the 2016 Rio de Janeiro Olympic Games say they may need to tap a $700 million contingency fund from Brazil’s government to cover a shortfall.

Leo Gryner, chief operating officer at the local organizing committee, said yesterday that a deterioration in Brazil’s economy will make it difficult to pay for the games through private funding alone.

Officials are revising the organizing budget, which is likely to be higher than the $2.8 billion they said the games required when they won hosting rights in 2009.

“Right now as our budget stands we need this $700 million,” Gryner told reporters after a news conference to mark the three-year countdown to the event, which begins Aug. 5, 2016. “We are doing our best not to use it. The variable is the revenue. It depends on the economic situation.”

Gryner’s comments come two months after protestors took to the streets in Brazil’s biggest demonstrations in two decades to complain about corruption, poor services and public spending on sporting events. The country has pledged to spend about $15 billion on projects linked to next year’s soccer World Cup and a further $11.6 billion in public and private spending has been forecast for the Olympics.

Rio 2016 officials had said in the past they hoped to meet hosting requirements without needing government resources. Organizers had planned to make up the budget for the 2 1/2-week event through sponsorships, ticket sales, merchandising and a $1.1 billion grant from the International Olympic Committee.

Two Sponsors

Rio 2016 surpassed the 1 billion real ($438 million) mark in 2011 with two sponsors: Bradesco and America Movil, Rodrigo Frazao, the group’s sponsorship sales director said last month. Sponsorship sales since then have slowed down, along with the country’s economy.

First-quarter growth slipped to 1.9 percent compared with 7.5 percent in 2010, when Bradesco signed on.

“You always have to look to the economic scenario,” Gryner said. “You see our inflation was a little higher than planned, the growth of the Brazil GDP was less than expected before. How this will impact on our revenue we can’t tell right now.”

Gryner said he plans to speak with government officials to discuss ways of working together.

“What we are trying to achieve here with the government is some exchange in services,” Gryner said, explaining that his team may ask the government to purchase goods like beds for the estimated 10,000 athletes who will take part in the games.

“They could lend to us, and use for army and social projects later,” he said.

To contact the reporter on this story: Tariq Panja in Rio de Janeiro at tpanja@bloomberg.net

To contact the editors responsible for this story: Jessica Brice at jbrice1@bloomberg.net; Christopher Elser at celser@bloomberg.net

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