Crime wave hits Sao Paulo, with political effects
* Brazil's business capital hit by surge in violent crime
* Crime becoming key issue in upcoming municipal elections
By Brian Winter
SAO PAULO, July 26 (Reuters) - Murders and robberies are soaring in Sao Paulo, Brazil's biggest city and financial capital, in a crime wave that could further hurt the local economy and have national political implications.
Sao Paulo had 622 homicides in the first six months of the year, a 21 percent increase over the same period of 2011, according to government data released this week. Armed robberies grew 8 percent, and are now occurring at the rate of 319 a day in the city of more than 11 million people.
Economists say that crime is a leading factor in the so-called "Brazil cost" - the mix of logistical bottlenecks, high taxes and other costs that make Brazil one of the world's most expensive places to do business, and have contributed to a sharp economic slowdown over the past year.
For example, Brazilians spend about $8 billion a year on private security. Insurance premiums are also high by global standards as banks and other business seek to protect themselves.
Marcos Carneiro Lima, a senior police official, said the wave of murders resulted from a "snowball effect" as gangs stepped up revenge attacks on each other. He said robberies and other property crimes could be a product of recent economic growth.
"(Property crime) is not new, but it's been intensifying because it's very profitable," Carneiro was quoted as saying in Folha de S.Paulo newspaper. He said the spike in violence had already had an impact on insurance premiums.
The city's banking community has also been deeply shaken by last week's murder of a young Italian banker who had just moved to Sao Paulo in search of work.
Police say that Tomasso Lotto, 26, was riding in a car that was approached by armed thieves on a motorcycle on a busy avenue in one of the city's richest neighborhoods. Lotto got out of the car in an apparent attempt to flee, and was shot dead.
No suspects have been arrested for the killing.
Sao Paulo's murder rate has fallen by more than 70 percent in the last decade, in large part because of more effective policing, but is still more than twice the U.S. average. Property crime has largely defied that falling trend.
The city has seen a surge in activity this year by armed gangs who raid apartment buildings and restaurants in upscale neighborhoods, prompting a public outcry for a police crackdown. On Valentine's Day, police were forced to nearly double the amount of officers on the streets in areas with lots of restaurants to ensure that couples could dine out in peace.
The crime wave is becoming an issue in municipal elections in October, a key race that has become a tug-of-war between leading national figures from the main political parties.
The front-runner is Jose Serra, a former presidential candidate for the opposition PSDB party. The center-right PSDB is eager to regain control over Sao Paulo after a series of crushing electoral defeats elsewhere - including Serra's loss to President Dilma Rousseff in 2010.
However, Serra has built his candidacy around his support for incumbent Mayor Gilberto Kassab, and other candidates have been rising in the polls as they attack Kassab for being soft on crime. Serra preceded Kassab as mayor, and after that served as governor of Sao Paulo state.
Rousseff's Workers' Party has also fielded a candidate for the mayorship, former education minister Fernando Haddad. Haddad has remained a distant third in polls, despite energetic campaigning on his behalf by national figures including popular former President Luiz Inacio Lula da Silva. (Editing by Todd Benson and Vicki Allen)
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