* Protesters urge Rousseff to veto royalty bill
* Rousseff plans partial veto - source
* Rio says bill would cripple finances, World Cup, Olympics
RIO DE JANEIRO, Brazil, Nov 26 (Reuters) - As many as
200,000 people demonstrated in Rio de Janeiro on Monday to urge
Brazilian President Dilma Rousseff to veto a bill that local
officials say could cost Rio state billions of dollars in lost
oil revenue and cripple plans to host the World Cup and
Late Monday, a person familiar with the president's plans
said Rousseff is indeed planning to veto at least part of the
bill, particularly a portion that redefines royalty payments for
existing oil production in Brazil.
The president, the person added, instead will propose that
Rio and Espirito Santo, the two states with most of Brazil's
existing oil output, continue to get a level of royalties from
current production similar to what they received last year. The
partial veto would not change parts of the bill that redefine
oil royalties from production at new fields.
For Rousseff, the protest raised the stakes on what may be
the most sensitive decision she has faced in her nearly
two-year-old government: How to distribute tens of billions of
dollars in expected revenues from a massive offshore oil find
that Brazil discovered in 2007.
The bill, passed by Congress this month, would spread the
windfall more evenly to Brazil's 26 states and federal district.
As submitted for her approval, however, it would also alter
royalties on existing production, angering Rio and other
southeastern states where most of Brazil's oil is located.
Rousseff has until Friday to veto the bill, but is expected
to decide on the partial veto on Thursday, the person said.
Monday's event by early evening had attracted about 200,000
demonstrators, according to police calculations.
The protest began with a march through Rio's colonial center
and was followed by a series of speeches, concerts, and
impromptu revelry that at times gave it a festive air. In recent
days, state officials plastered streets and buildings with
banners advertising the protest in large black and white
lettering and a command in red for the president: "Veto, Dilma."
Rio is spending tens of billions of dollars to build
stadiums and other infrastructure for soccer's World Cup in 2014
and the 2016 Summer Olympics, two marquee events expected to
attract hundreds of thousands of visitors.
Rio Governor Sergio Cabral, a key ally of the president, led
the protest. He has cast the debate in dire language that
analysts say may exaggerate the actual financial stakes but has
nonetheless intensified political pressure on Rousseff.
"This bill will cause the financial collapse of the state of
Rio de Janeiro," Cabral warned earlier this month. "There would
be no Olympics, no World Cup, no payments for retirees and
Approving the bill could hurt Rousseff's relations with
Cabral's PMDB party, a large and ideologically shape-shifting
group that is a lynchpin of the broad coalition that supports
her ruling Workers' Party.
Rousseff has vowed to further Brazil's efforts to reduce
poverty, in part by redistributing the windfalls from its
growing commodity exports - from oil and iron ore to foodstuffs.
Throughout the day Monday, police had cordoned off large
swaths of Rio's center, along the river-like bay that gives the
city its name. State and municipal officials were facilitating
attendance by waiving subway and ferry fees and providing buses
from far-flung towns outside the capital.