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Brazil Considers Emergency Loan to Three States

Workers are pictured at the construction site of the beach volleyball venue for 2016 Rio Olympics on Copacabana beach in Rio de Janeiro, Brazil, June 9, 2016.

Brazil is considering an emergency loan to aid, as many have called it, the broken state of Rio de Janeiro, according to two senior federal government officials.

News reports said the federal loan would be shared with Rio Grande do Sul, and Minas Gerais states, where employees and pension beneficiaries are not getting paid.

If the federal emergency aid is approved, the three states would transfer stakes in state companies to the federal government, which in turn could then sell them to private companies.

The O Estado de S.Paulo newspaper reported Rio de Janeiro failed to make an $8 million payment last month to a French development bank.

“These states need a cash injection," a member of the government's economic team, who asked not to be named, told Reuters.

"There is no other way," the source added. "These loans will be backed by states' assets such as banks, utilities, gas and sanitation companies.”

Rio Grande do Sul secretary of Finance, Giovani Feltes, attested to the loan negotiations and said the money would give his state a “much-needed breather.”

“This loan will not go to current expenditures, because the law does not allow us to use loans to pay our employees,” he said.

By January, the price tag for the 2016 Olympics in Rio de Janeiro had risen by $99 million from August, mainly because of the increasing costs of supplying temporary power and seating at venues.

The projected total cost for the Games, including large infrastructure projects such as an extended subway system and reconstructed port area, is $11.5 billion.

Rio de Janeiro hosts the 2016 Olympic Games from August 5 to 21.