Rio Olympics Can't Pay Debts, Offers Used Air-Con Units Instead

(Bloomberg) -- The final contest of the 2016 Rio Olympics looks a lot like "Let's Make a Deal." With 100 million reais ($32 million) in outstanding debts, the organizing committee is trying to pay off suppliers with stuff -- air conditioners, portable energy units, electrical cables -- in lieu of or in addition to cash.

The cash crunch is a legacy of the financial crisis that hit Brazil just as preparations for the Olympics were getting underway. Rio 2016 is now asking creditors to agree to settle debts for 30 percent less than they're owed, said Mario Andrada, Rio 2016's head of communications.

Andrada said Rio remains hopeful it will meet its obligations by June, when the organizing committee shuts down. If it doesn't, the burden will pass to local and state governments that backed the committee's credit. Both governments now have financial trouble of their own, and it's not clear whether they can pay off Olympic debts either. The state government, on the verge of bankruptcy, is already struggling to pay public servants.

"We are confident we will come to an agreement and will honor our commitments," Andrada said. He said the committee is still waiting on some money from sponsors.

Brazil's economic crisis also coincided with the biggest corruption scandal in the country's history, which led to the trial and conviction of some prominent business and political leaders. Among those are heads of construction companies that built projects related to the Olympics, which cost about $20 billion, as well as Sergio Cabral, Rio's governor when it won the bid to host.

Andrada said Cabral and others jailed in Rio may be using some of the furniture from the Athletes Village after mattresses and blankets were sent to a local prison for former police officers.

"He's probably sleeping on an Olympic mattress," Andrada said.

The severe national recession put the Olympics in financial jeopardy even before the games started. Plans for the opening ceremony as well as hospitality infrastructure and other non-essential elements were scaled down, and last-minute emergency public funds were sought to stage the Paralympics.

Overall, organizing the games cost about $2.8 billion. The IOC paid a little more than half, much of it before it was due to help keep the committee afloat. A promise of 250 million reais from local and national governments amounted to just 90 million reais and is partly to blame for the failure to pay creditors, Andrada said.

The local organizing committee will disband in June 2017.

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

To contact the editors responsible for this story: Janet Paskin at jpaskin@bloomberg.net, Peter Millard