Brazil drug violence spills into 5-star Rio hotel

RIO DE JANEIRO (Reuters) - Brazilian police on Saturday arrested 10 heavily armed men and rescued 35 people who had been held hostage for almost two hours at a five-star hotel in one of Rio de Janeiro's richest neighborhoods.

The gunmen, armed with automatic weapons and grenades, were driving in several cars on a scenic road along the ocean when they met with police patrols.

A shootout followed in Rio's Sao Conrado neighborhood and the hooded suspects escaped into the Intercontinental Hotel, which last year hosted the World Economic Forum on Latin America. A woman bystander was killed and two police officers were hurt in the exchange of gunfire, police said.

"I have never seen so many criminals together. All of them were wearing the same outfit, like uniforms, and were on the streets shooting into the open air," a resident who witnessed the event and asked not to be named told Reuters. "It was a war zone."

TV images showed suspects wearing black bullet-proof vests and hiding behind a garbage truck during the shootout with police, before running into the hotel.

Colonel Lima Castro, a spokesman for Rio's military police, said the 35 hostages were freed without harm. Police swept the entire hotel and arrested 10 people.

Violent crime is a major concern in Rio, where heavily armed drug gangs control its many slums. The sprawling city is Brazil's biggest tourist destination and will host the 2016 Olympic games, as well as be a venue for the 2014 World Cup.

(Reporting by Rodrigo Viga Gaier; Writing by Elzio Barreto; Editing by Eric Beech)