* Rio investing heavily to integrate slums into city
* Favela clean-up likely to boost Rio economy
* Residents wary after broken promises, violent tactics
By Stuart Grudgings
RIO DE JANEIRO, Dec 22 A sparkling Christmas
tree atop a hill in Rio de Janeiro's Alemao slum is a powerful
symbol of the community's recent liberation from gun-toting
The fact that the tree was funded by a major bank
symbolizes something less obvious -- that Rio's
heavily-populated slums, or favelas, are open for business
after years being partly shut out by the city's drugs war.
Nearly a month after troops drove traffickers out of Alemao
and nearby areas, banks, utility firms and telecoms companies
have joined government officials rushing to fill the void in
this long-neglected favela of more than 100,000 people.
The operation, part of Brazil's most determined drive yet
to bring the rule of law to its slums, raises the prospect that
the one million or so residents of Rio's favelas will come much
more fully into the formal economy in coming years.
The incentive for firms is clear -- one telecoms executive
told a newspaper that the equivalent of a small city of
customers had been created overnight in the middle of Rio.
While trappings of modern life like credit cards,
cellphones and even high-end televisions have become common in
Rio slums, residents' access to services and jobs has been
complicated by the lack of security.
The recent economic renaissance of Brazil's former capital
-- property prices are rocketing and the city is preparing for
an offshore oil boom -- also stands to get a further boost as
the number of bill- and tax-paying citizens rises.
Officials say they intend to expand police occupations to
all of the remaining major gang strongholds by 2014, when Rio
will be a World Cup host city and two years before it showcases
itself to the world again as host of the Olympic Games.
"The benefits of the integration of favelas are
exponential, it's huge," said Andre Urani, an economist at the
Rio-based Institute for Studies on Work and Society.
Take energy costs. Urani says that electricity firm Light
(LIGT3.SA) loses $200 million a year to the theft of its energy
in Rio's slums -- one reason why electricity is more expensive
in Rio than in Sao Paulo, Brazil's financial capital.
The legalization of slums should enable Light to cut its
bills and make Rio more attractive for firms to invest here, he
said. That will also require a change of culture in favelas
where cheap, pirated services such as cable television and
telecoms are common.
Alemao's Christmas tree was funded as a goodwill gesture by
Banco Santander (SANB11.SA)(BSBR.N), one of several banks that
are planning to expand in the favela. Bradesco bank (BBDC4.SA)
(BBD.N) and state-run Caixa Economica also plan to operate in
Alemao for the first time. Telecoms firm Oi TNLP4.SA said it
would invest 15 million reais ($8.8 million) in Alemao to
expand its telephone, broadband and TV services.
Workers have been rushing to fix tangled telephone and
power lines and put the final touches on a cable car system --
mostly built before the invasion -- which outgoing President
Luiz Inacio Lula da Silva inaugurated on Tuesday.
"People are understanding that the state is not something
that is distant," an emotional Lula said after riding the cable
car. "When we pacify the Alemao complex, all the favelas in Rio
de Janeiro and Sao Paulo ... Brazil will be a different
Yet there is a long battle ahead to win back the trust of
residents who have long been treated as second-class citizens
in the self-styled "Marvelous City."
"In this phase it's really about winning hearts and minds,"
said General Fernando Sardenberg, who will command a
2,000-strong "peace force" in Alemao mostly made up of army
troops who served in Brazil's United Nations mission in Haiti.
An afternoon downpour in Alemao last week showed how much
work remains. Water surged up through broken drains, sending
raw sewage into the narrow streets.
"It's too early to say anything," said Ester Avanci, the
owner of a hole-in-the-wall clothes store, echoing a common
view among residents. "We lack a lot of investment, there are a
lot of poor people. The government has to invest a lot for it
be a real neighborhood."
A pervasive fear is that the government and the police
could abandon Alemao and leave residents vulnerable to gang
Officials say the state is now here to stay -- specially
trained police have already occupied about a dozen of Rio's
hundreds of slums over the past two years, slowly improving the
police's reputation for brutality and corruption in favelas.
Urani said it is vital that the government follow up on
security measures with a second wave of investments to ensure
"income-generating" opportunities for residents.
"This is only the first step," he said. "The day after the
police gets inside the community, you still have all the
fundamentals that have thrown those communities into the hands
of the gangs."
FROM SLUM TO NEIGHBORHOOD
The crucial next stage of transforming the slums will fall
to urbanists like Luiz Carlos Toledo, a 67-year-old who has
dreamed of bridging Rio's vast social divide since he was a
young architecture student.
His firm was one of 40 chosen to redesign 582 slums by 2020
with initial public investments of 8 billion reais ($4.7
Beyond installing basic services like sewage, the plans
envisage planting trees to create more green spaces, funicular
railways for steep hillsides and the construction of sports and
leisure centers. First, Toledo said, planners need to win
residents' trust by listening to them and making small changes
that improve the quality of life, such as cleaning up garbage.
"Architecture can accompany a revolution in these places,"
said Toledo, who has already led a partial remodeling of Rio's
biggest slum, Rocinha, that includes a sweeping walkway
designed by famed Brazilian architect Oscar Niemeyer.
"The biggest barrier I found in Rocinha was the huge
disbelief of the population. They didn't believe in anything
after so many years being fooled by politicians' promises."
Rio's mayor, Eduardo Paes, has already promised Alemao and
the neighboring Penha complex an invasion of services including
day-care centers, health centers and even a cinema.
With the new benefits come obligations and costs that will
come as a shock to many residents who are used to receiving
services cheap or free. If that's what it takes to be a real
neighborhood, so be it, said clothes store owner Avanci.
"People are too used to using things without paying the
real cost. When it hurts in the wallet people will have to
economize," she said.
(Editing by Kieran Murray)