An excellent blog post by a researcher/organizer who recently returned from São Paulo yields a much more subtle understanding of the situation in Paraisópolis, where state police took over the favela after a police shooting last month. Details at democracia urbana.
Essentially, the massive police occupation is the latest of at least a dozen such actions against squatter communities in São Paulo since 2005, and the second against Paraisópolis. The paramilitary shows of force -- officially known as Operação Saturação (Operation Saturation) -- have ranged from 1 month to 3 months. Sometimes they are combined with social programs.
Democracia Urbana details the 'he said/she said' descriptions of the original violence in the favela (the police claim they were restrained and that the community riot after the shooting was planned by the local drug gang) and concludes, with great good sense, that "regardless of whether the rioting was ordered by the imprisoned drug lord or was simply a spontaneous response to police brutality, it is hard to argue that a full-scale occupation of the community for an 'unforeseeable amount of time' is justifiable or humane."