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Thousands of carefree sun-worshippers packed Rio's Ipanema beach on a hot September day, some just soaking up the rays, others playing volleyball and football - a postcard scene framed by lush mountains..

The host city for the 2016 Olympics will be announced on Friday October 2nd.

A short drive away, about 100 police troops were storming the city's biggest slum, trading gunfire with drug traffickers in an operation that left 2,000 school children without classes.

More so than any of its three other competitors bidding to host the 2016 Olympics, Rio de Janeiro is a city of extremes with a daily capacity to delight and disturb.

The "Marvellous City," as its residents never tire of calling it, was blessed with mountains, forest and beaches that can take even a seasoned traveller's breath away.

The six million Cariocas, as Rio residents are known, have a warmth and passion that explodes in their fierce football rivalries and during Carnival - the raucous annual festival that unites rich and poor in a blur of Samba and Bacchanalia.

Increasingly overshadowed as an economic and cultural hub by the southeastern city of Sao Paulo in recent years - Brazil's largest and most populous - Rio is showing signs of a revival.

Its finances are in the black for the first time in years thanks to a competent state government, and the discovery of one of the world's biggest oil reserves off its coast promises a flow of investments and jobs in the coming years.

Yet Brazil's former capital remains sharply divided between the world of about 1,000 slums spread throughout the city and that of the "asphalt" - the slum dwellers' term for the paved roads of middle-class areas.

Copacabana beach, Sugarloaf mountain and the iconic Christ the Redeemer statue are all squeezed into the wealthy, narrow strip of Rio's South Zone. Beyond that, much of the Rio tourists rarely see is a sprawling jumble of lower middle-class areas and slums with little or no state presence.

Many of the more than one million slum dwellers are caught in the middle of a brutal war between drug traffickers who rule the "favela" with impunity and a police force that tends to shoot first and ask questions later.

The police, whose tactics are regularly condemned by human rights groups, shoot dead an average of about three people a day, often young, black youths from favelas, who are uniformly classified as "resisting arrest".

Visitors can go for weeks in Rio oblivious to the drug war, but the signs of problems are there to see in the desperate street kids who roam tourist areas such as Copacabana, begging and sniffing glue from plastic bags.

Still, Rio is making efforts to become more inclusive and has benefited from Brazil's economic progress under the presidency of charismatic leftist Luiz Inacio Lula da Silva.

Several favelas are receiving federal public works money to build apartments and health centres, while an experiment in community policing has taken hold in several others, including the City of God slum made famous by the 2002 movie.

Rio's new mayor, Eduardo Paes, has embarked on a "Shock of Order" campaign since taking office early this year, making a serious effort to rein in Rio's unruly elements such as a chaotic transport system and thousands of unlicensed vendors.

"We are going through same process that many US cities went through in the 1980s and 90s," Paes said this month.

In the downtown Lapa district, a revival has been under way for years as investments have helped transform what was a shady area into Rio's most vibrant nightlife scene.

Young Cariocas pack its Samba bars every weekend to dance and down caipirinhas -- the delicious Brazilian-rum drink that can prompt even rhythm-less gringos to hit the dance-floor.

If all else fails, there are always the beaches -- the playgrounds where Cariocas unfailingly flock at the first glimpse of sun.

There are few better ways to pass a day than lazing on Ipanema's sands, perhaps followed by a game of pick-up football and a cool "choppe" (draft beer).

Q&A with Rio 2016 bid chief Carlos Nuzman

REUTERS: Why should your city be awarded the 2016 Olympics?

NUZMAN: "The Olympic Games have always been the greatest when they have explored new territories and touched the lives of new people. There have been wonderful Games in Europe, Oceania, North America and Asia but the dream of Rio 2016 is to bring the Games to South America for the first time.

"Rio is ready to stage unforgettable Games on a new continent that would inspire young people while being fully aligned with the long term needs of the city and country.

"The official IOC poll confirmed that 85 percent of Rio State residents back the bid - people are very excited about the Games coming to Brazil and their support continues to grow."

REUTERS: What is the strength of your bid and what would you want to improve if you had more time?

NUZMAN: "With full Government support for the Games, Rio is ready to start working on October 3 if selected by the IOC, without the need for bank loans or initial sponsorship revenues.

"Hosting it in South America for the first time has the potential to transform the lives of millions of young people.

REUTERS: Given that some recent Games have left behind little in terms of legacy what would the legacy be for your city and the IOC should it win the Games?

NUZMAN: "Rio 2016 will not be a stand-alone investment project but fully integrated into the development plans for the city. The Games masterplan is the city masterplan.

"The people of Brazil will benefit from urban regeneration, including improvements in transport and accommodation -- funded by the US £148 billion Federal Plan for Growth Acceleration.

"The most significant legacy for sport will be the Olympic Training Center - a high performance competition and training centre - providing world class facilities for athletes in all Olympic and Paralympic disciplines and scholarships for young athletes worldwide.

"The venues built for the 2007 Pan Am Games form part of the 2016 plans and reflect the commitment to achieving legacy.

"The building of the innovative X Park -- hosting BMX, mountain bike and canoe/kayak slalom at Games time -- is also planned for development in the most youthful area of Rio which will further strengthen the connection of the Games with young people and serve as an innovative space blending Olympic sport, music and lifestyle into an engaging experience post-Games."

REUTERS: With bids forced to follow a strict set of IOC guidelines and criteria, what is the innovative aspect of your proposal that makes it unique?

NUZMAN: "All sports during the Rio 2016 Games will be staged within the one city in four venue clusters; among the lush forests of Deodoro, centred around the legendary Maracana, alongside the iconic beaches of Copacabana and in the vibrant and thriving neighbourhood of Barra.

"Thanks to the city's unique natural attributes and already existing venues, Rio will provide locations for sports such as rowing, sailing, shooting and equestrian within the city limits, bringing the athletes closer to the heart of the Games.

"All venue clusters will be linked by a high performance transport ring and a network of Olympic lanes.

"We will fund a £9.25 million four-year programme - in partnership with the IOC, International Paralympic Committee and the International Federations - to develop and implement ideas to improve sport presentation, enhancing the spectator experience for fans at the stadium and around the world.

"The Olympics Live initiative is also a key aspect of our bid which will broaden the global experience and help engage youth with the Olympic Movement by funding a network of 15 Live Sites worldwide, with at least two in each continent.

"The Rio Games will connect with young people in new and innovative ways, such as our pioneering 'full stadiums' program, an initiative aimed at driving young people to Games venues.

"Rio 2016 will benefit all athletes and Games officials by having a single Olympic Village. The Village has been planned to maximise the experience for the athletes, including an entertainment boulevard and a private Olympic Beach -- both exclusively for athletes.

"The IBC and MPC will be within walking distance of many of the Games Venues, placed within the Olympic Park and in the Barra Cluster which will host nearly 50 percent of competitions.

"One of the most significant sporting legacies will be the development of the Olympic Training Center (OTC), a unique element of the Rio 2016 bid. The OTC will bring together a number of existing venues from the 2007 Pan American Games as well as new state-of-the-art facilities to act as a major regional sports hub for South America."

REUTERS: How is your Games budget structured and what sort of guarantees are you offering the IOC?

NUZMAN: "The three levels of government are providing absolute financial guarantees to the IOC.

"The Organising Committee (OCOG) budget is 2.8 billion (USD, 2008). The non-OCOG budget is 11.6 billion (USD, 2008) and contains a combination of planned and ongoing infrastructure investments in Rio.

"The bid is strengthened the US$ 700 million government investment directly into the OCOG budget, which means that Rio 2016 can be operational the first day following the Host City announcement, without the need for bank loans or initial sponsorship revenues.

"The Government's US$ 240 billion Accelerated Growth fund has been put in place to strengthen Brazil's development.

"More than four billion of that budget is already being invested on important infrastructure enhancements, such as roads, airport renovations and metro extensions. All these improvements will be completed before the 2014 FIFA World Cup, at least two years before the 2016 Games."

REUTERS: What impact has the financial crisis had on your plans and do you see it affecting the vote?

NUZMAN: "The Brazilian economy continues to be robust, with President Lula one of the leaders in the global economic recovery. In 2008, Brazil's economy grew by 5.1 per cent with GDP close to US$ 2 trillion.

"The strength and growth of Brazil's economy has allowed the three levels of government to guarantee finance for the necessary infrastructure to deliver the Games and to cover any potential economic shortfall in the OCOG budget, providing certainty in delivering the Games."

REUTERS: In terms of major venue construction what still needs to be built and what is already existing?

NUZMAN: "Within the Rio 2016 Games Plan, 74 percent of venues are built. The core venues - the Aquatics Center, the Velodrome, the Arena and the Deodoro complex - were built for the 2007 Pan American Games and continue to be used today.

"The Joao Havelange Stadium, hosting athletics, and the 90,000 seat Maracana Stadium, proposed for the opening and closing ceremonies and the football finals, exist already and will be further improved by 2016 thanks to planned renovations for the 2014 FIFA World Cup."

REUTERS: How much do you believe sponsors/broadcasters can influence the 2016 vote as major deals are still pending?

NUZMAN: "On the broadcasting front, the Bid Committee was delighted by the IOC's announcement that the Brazilian broadcast rights for the 2014 and 2016 Games had been awarded to a consortium of three media organisations in Brazil led by TV Globo in a historical deal valued at more than US £130 million.

"Although we know that there are still a number of agreements that have yet to be confirmed for 2014 and 2016, we feel that Brazil's agreement for rights has sent a very strong signal to the IOC about the strength of the Brazilian market today as well as our passion and commitment to the Games."

REUTERS: What political support will you have on-site in Copenhagen?

NUZMAN: "President Luiz Inacio Lula da Silva will be in Copenhagen as part of the official delegation and will also be participating in the bid's final presentation to the IOC.

"The President's presence in Copenhagen symbolises the support of the entire Brazilian people for the Olympic project and of his confidence in the bid.

"The President will be joined by Governor Sergio Cabral, Mayor Eduardo Paes and Sports Minister Orlando Silva, who have all been firmly behind the bid from the outset."

Reuters