WARLORDS' PARALLEL GOVERNMENT THREATENS BRAZIL'S DEMOCRACY

RIO DE JANEIRO, Brazil - A journalist on an investigative assignment is
decapitated and dismembered. Prominent politicians are accused of ties to
death squads. Warlords financed by drug money rule large swaths of territory.

It sounds like Afghanistan or Pakistan, but it's happening in Brazil, a
fragile democracy into which Americans have poured billions of dollars and
considerable diplomatic effort. Both investments are now at risk from the
lawlessness and the growing power of drug-financed gangs. Many Brazilians
say theirs is a nation of two governments these days: an official one and a
parallel state ruled by criminals.

"They have usurped the constitutional powers of the state," said Walter
Maierovitch, a former Brazilian anti-drug czar. "In a state of law, you
cannot have areas controlled by criminals. This is an issue of national
security."

The poor slums and shantytowns of Brazil have long been no-man's lands, but
the volatile mix of easily obtainable modern weaponry, corrupt police and
the new violent swagger of drug traffickers are rattling a country that 17
years ago was a military dictatorship.

In the favelas, or slums, of Rio de Janeiro, not far from the city's famed
Copacabana and Ipanema beaches, drug-trafficking organizations with names
such as the Red Command and the Third Command rule more than 1 million
people, about one in five Rio residents. Outside Sao Paulo, South America's
largest city, the gang-ruled slums of Jardim Angela and Capao Redondo have
the highest murder rates in the world.

Traffickers close down streets and schools in their domains at will. They
tax storekeepers. Power and phone companies can't work without their
permission. Like conventional authorities, drug lords pay salaries and
benefits to foot soldiers, often teen-agers. If police or rival
organizations kill one, their survivors receive the equivalent of life
insurance.

Last month, traffickers seized Globo TV investigative reporter Tim Lopes,
Brazil's equivalent of Mike Wallace, while he was secretly filming in
territory controlled by Elias Pereira da Silva, or "Crazy Elias." According
to police, the powerful trafficker had Lopes shot in the leg to prevent his
escape, then decapitated and dismembered with a samurai sword.

The message from Crazy Elias, now the subject of a national manhunt, was
clear: Don't threaten the drug trade.

Gang assailants punctuated the message by spraying Rio's mayor's office a
few days later with hundreds of rounds of automatic-weapons fire and two
grenades that failed to explode. Mayor Cesar Maia pleaded vainly with the
president for special emergency war powers to fight back, but policing in
Brazil has not been a federal job.

In the neighboring state of Espirito Santo, a right-wing death squad known
as Scuderie Detetive le Cocq runs rampant. Brazilian congressional
investigators and human-rights groups think it is involved in drug
trafficking and illegal gambling. A Brazilian congressional investigation
found that the group, one of whose units operates legally as a police
organization, had ties to high-ranking judges and local and national
politicians.

The Justice Ministry's human-rights division recommended earlier this month
that the federal government intervene in Espirito Santo because of the
murder of a human rights lawyer and because organized crime had infiltrated
democratic institutions. President Fernando Henrique Cardoso, who leaves
office in five months, overturned that effort, prompting Justice Minister
Miguel Reale to resign July 8.