Rio protests: Sharing Brazil's oil revenues will hurt 2016 Olympics

Thousands of Brazilian schoolchildren and city and state workers were given the afternoon off to gather in Rio de Janeiro today and protest a federal law that would reduce the amount of petroleum royalties the energy-rich state now gets.

Less oil money, they say, could also hamper plans to host the 2014 soccer World Cup and the 2016 Olympics in Brazil.

Rio’s governor said the proposed law, which would share Brazil's oil revenues more evenly among the country's 26 states, was “a lynching” for his state, and openly wept when discussing the legislation.

If passed, the amendment would cost Rio at least $2.8 billion in annual income and be calamitous for the state’s future, said Gov. Sergio Cabral.

“With this amendment the Olympics and World Cup are no longer viable,” Cabral said. “Towns will grind to a halt. The state won’t have the resources.”

Rio became South America’s first Olympic city last year when it was chosen to host the 2016 Olympics. Brazil will also hold soccer’s 2014 World Cup, with Rio hosting the media and the final match.

Much of the resources needed to prepare the city for those events come from oil royalties. Almost 90 percent of Brazil’s oil comes from fields off the Rio coast and much of the deep-water reserves discovered in 2007 and 2008 – the second biggest in the world this century – lie in the same area.

Under current laws, about half the oil profits go to states and municipalities producing the oil, about one third goes to federal coffers, and the rest goes into a fund for social welfare programs. The new legislation aims to send all the money to the central government to divide up equally, including to those states and municipalities that have no involvement in the oil industry.

The new amendment, which passed by a wide margin in the lower house and awaits a reading in the Senate, is one of several laws being updated to provide a new framework for the rapidly growing oil industry. If the bill became law it would boost revenues for states that get no oil income now.

The country’s energy minister has called on the Senate to tone the bill down, saying that it is too “radical.” And many analysts expect Luiz Inácio Lula da Silva to veto the bill, which will likely lead to more negotiations over sharing the growing oil wealth.

Samba to save our oil?

Cariocas, as residents of Rio are known, agree and an estimated 150,000 people are expected for the march and rally against the plan today.

Samba singers and rock bands are to play concerts in the city center afterward and huge banners have been hung from the "Christ the Redeemer" statue and from the Maracana soccer stadium, the proposed site of the 2014 World Cup final.

Protesters have been supported by Olympic and World Cup officials, who warned the amendment could cripple plans to build arenas, update transport infrastructure and improve security. Rio de Janeiro has budgeted on spending $14 billion to prepare the city for the Olympics.

“The reduction in income from the exploration of oil will leave Rio de Janeiro unable to carry out the necessary work for the Rio 2016 Games,” the Brazilian Olympic Committee said in a statement.

The proposal to redistribute oil wealth comes as concern grows over Brazil’s slow rate of preparations for the 2014 World Cup. Although it was awarded the event in October 2007, work has yet to begin on any of the stadiums.

Normally, the stadiums must be ready a full year in advance to host the Confederations Cup, a kind of dress-rehearsal soccer tournament for the World Cup. Officials from soccer’s governing body said earlier this month they were worried at the lack of urgency.