Mutilated body parts have washed up on Rio de Janeiro's famous Copacabana Beach - just yards from where the Olympic beach volleyball competition is set to take place.

The gruesome discovery was first reported by a city street vendor and has sparked a police investigation.

It is the latest incident to unnerve the city as it grapples with rising crime, a recession and exhausted state finances in the lead up to the first Olympics ever held in South America.

Body parts have been discovered on Rio de Janeiro's famous Copacabana Beach, just yards from where the beach volleyball Olympic athletes are set to compete. Pictured, the beach volleyball courts that are still a building site with just five weeks to go before the Games

The gruesome discovery was first reported by a city street vendor and has sparked a police investigation. Pictured, the unfinished courts where the volleyball will take place

Police officers are guarding the spot where the body parts were found, as the investigation probes the circumstances of the death.

The Olympics, which kick off on August 5, were intended to show off an economic boom that has since fizzled in the Latin American country.

Now the games come as the state of Rio de Janeiro awaits emergency funding of £663million ($892million) to ensure financing for public services.

It will also play out against a backdrop of political instability as Brazil's Senate tries suspended President Dilma Rousseff, who is accused of accounting tricks in the government budget, to determine whether she will be ousted for good.

The trial is expected to finish after the games.

The state in recent months, even as it races to complete a new subway line and other key pieces of infrastructure promised for the Olympics, has missed crucial debt payments and has been forced to postpone purchasing and salary payments for everyone from public health workers to police.

Police officers are guarding the spot where the body parts were found, as the investigation probes the circumstances of the death (file image of Copacabana beach)

Rio's acting governor, Francisco Dornelles, earlier this month declared a financial emergency in the state because of budget shortfalls caused by a recession, plummeting oil revenues and a run-up in public expenditures in recent years.

He has fretted publicly that the Olympics could be 'a big failure' if financing does not come through but Brazil's federal government has said that it will.