DRUG TRAFFICKERS TERRORIZE UPSCALE ZONE IN RIO

RIO DE JANEIRO, Dec 28 (Reuters) - Shops and restaurants near the
governor's palace in Rio reopened on Monday after drug traffickers forced
them to close over the weekend to honour a drug lord killed by police,
community leaders said.

Residents and business owners in the middle-class neighbourhoods of
Laranjeiras and Cosme Velho said shootouts between rival gangs in the
nearby shantytowns were common, but the forced closings showed a new level
of brashness.

"I've lived in the neighbourhood for more than 20 years and I've never seen
businesses shut down like this," said Thereza Amayo, a former president of
the residents' association. She said it felt like they were living in a war
zone.

The most recent spate of violence began early Saturday with a fierce gun
battle between rival gangs in a shantytown. Police said they got involved
when four armed men leaving the fight on motorcycles engaged them in
gunfire in Laranjeiras.

One officer was wounded and convicted drug lord Claudio Passos da Rocha,
known as "Portuguesinho" or "the little Portuguese boy," was shot and
killed. At the same time, police gunned down two alleged drug traffickers
in another shantytown near Cosme Velho.

Later on Saturday and Sunday business owners in the two neighbourhoods
apparently received phone calls warning them to close their restaurants and
shops or risk them being targeted in drive-by shootings.

"They said that people were showing disrespect toward the dead," said a
worker at a grill called Gaucha, which normally serves some 1,500 people
for Sunday lunch. "The grill has existed since 1939 and I've never seen
anything like this."

Residents took to the streets to protest the violence earlier this year
after four men armed with assault rifles blocked a car driven by an
18-year-old student in Laranjeiras and killed her with a spray of bullets.

Also in Laranjeiras in April, a thief brazenly walked through security at a
Rio state government building and robbed a bank branch inside.

"The question of security is national. It's unacceptable that armed bands
control areas of the city as if they were safe-havens," said former
presidential candidate Alfredo Sirkis, a local resident.

Police say Brazil is battling a growing drug trade as pressure on
traffickers has increased in the neighbouring cocaine-producing nations of
Colombia, Bolivia and Peru. In the state of Rio alone, police confiscated
more than 1,000 pounds (450 kg) of cocaine and four tonnes (3,600 kg) of
marijuana in the first nine months of this year.