By Chris Arsenault
RIO DE JANEIRO (Thomson Reuters Foundation) - The sleek concrete and glass rooftop Bar da Lage is nestled in a sea of illegally built red brick houses in one of Rio De Janeiro's notoriously tough hillside favelas.
Once considered a no-go area because of gang violence, the bar, in the city's posher south, offers postcard perfect views of Ipanema beach and lush green mountains.
At night, middle class Brazilians and foreigners rub shoulders sipping cocktails as the Olympic Games unfold around them.
Bar Da Laje is a vivid example of what is becoming known as 'favela chic', a phenomenon that has seen some parts of the enormous informal settlements once synonymous with poverty and violence become fashionable, home to edgy art galleries and up-market cafes.
And while many residents living in and around Vidigal welcome gentrification that has seen an influx of new businesses serving more affluent clients, other long-time residents fear they will be priced out of their homes.
"These changes aren't good for us," Barbara Nascimento, a Vidigal-born activist and literature professor told the Thomson Reuters Foundation.
"I have many friends who have had to leave because they couldn't afford the rent anymore."
The tension sparked by wealthy outsiders gentrifying working class neighborhoods is not unique to Rio de Janeiro. It's a well documented phenomenon, from London's East End to Sydney's inner west and San Francisco's mission district.
However it is even more complex in the vast, informal settlements of growing cities in developing nations like Brazil due to the lack of formal property title deeds, campaigners say.
On one hand, many residents want formal title deeds, both to allow them to use their property as collateral for bank loans and to provide protection in case of land disputes.
On the other hand, the lack of formal title plays a key role in the supply and demand cycle, ensuring that these neighborhoods remain as a stock of affordable housing.
Additionally, legal titles can pave the way for access to services such as electricity and water, improving quality of life.
But they also formalize residents' relationship with the state authorities and the taxation system - a status not always welcomed by poorer residents.
Ultimately, property experts say, developers are more likely to buy up land in slum areas if titles are available, pushing prices up and locals out.
"The interest of real-estate developers in the favela areas is huge," Edison Ferrari, director of investment for the multinational property brokerage firm CBRE, told the Thomson Reuters Foundation.
Rio's unique geography, where a series of tunnels through mountains separate different parts of the city, has made Vidigal especially appealing to foreigners and investors.
"In the south zone (where Vidigal is located) it is almost impossible to find pieces of land for new developments."
However while land around Vidigal is clearly seen as a potentially lucrative investment, laws governing favelas and the "big problem in terms of titles" has stopped institutional investors from buying properties there, Ferrari said.
SMALL BUSINESS PUSH
In the absence of large property firms developing high-end apartment blocks or other major construction in the area due to a lack of clear property deeds, niche investors have seen big opportunities.
And it is here that locals say they are feeling the effects.
Nascimento estimates that rents in Vidigal have tripled since 2007, though formal statistics on rent increases or the number of people moving into the neighborhood do not exist.
"The prices are abusive; they've gone up so much," said Jose Ferreira, a coffee vendor who has lived in Vidigal for more than 40 years.
Ferreira said rent for his one-bedroom apartment has doubled to 800 reais ($255) since 2011, when police "pacified" the community as part of a drive to cut crime ahead of the Olympics.
"Foreigners started coming in and the prices started going up," Ferreira told the Thomson Reuters Foundation, a sentiment that was echoed by other residents.
It's unclear exactly how many foreigners live in Vidigal today, but some estimate there are more than 10,000 residents - and locals observe many more outsiders are moving in.
"Sometimes it feels like there are more foreigners than locals," Aline Gomes, a student shopping in a local news agent, told the Thomson Reuters Foundation.
Local residents don't have the money to party at the new bars or eat in pop-up sushi restaurants, leaving some feeling like outsiders in their own neighborhood, Nascimento added.
"People who are coming in want the favela experience without the favelados (locals)."
Marcos Brandao, the owner of Bar da Laje, doesn't see it that way. His business near the top of the favela is designed for everyone, he said.
He wants the bar to appeal to a mixed clientele, not only local drinkers, in order to make it a "destination" in Rio.
"People think that if you stay in the favela you have to have low prices - our prices are medium," Brandao told the Thomson Reuters Foundation.
About 80 percent of the bar staff are locals, he said and they're proud to be working in an up market establishment so close to home.
A lawyer by training, Brandao has experienced the problem of insecure land rights first-hand, along with complaints over high prices from some locals. But he still thinks Vidigal is a good place to do business.
"Here on the mountain poor people built houses that weren't recognized - it was a squat," Brandao told the Thomson Reuters Foundation.
Getting approval from the fire department to build his bar and other formal paperwork wasn't easy given the community's untitled status, he said.
The complexities of hazy ownership are what has kept the larger investors away.
But individuals who want to experiment with something new, off "the beaten track" were still willing to give it a go despite the lack of titles, Brandao said. "Vidigal has a special kind of energy."
Pointing to construction on the hillside, he said houses were being built for Brazilians and foreigners coming to the area.
Brandao said celebrities seeking the "favela experience" recently included the U.S. singer Queen Latifah and film director Spike Lee, as waiters in T-shirts marked "Vidigal" served drinks and customers posed for selfies.
"The adventure starts with the trip up the hill - take the motorcycles," one foreign patron wrote in a review of the bar, underlying what draws travelers to the favela.
"Locals pay $5, gringos will pay more than $10. Negotiate! This place has one of the best views in all of Rio."
(Reporting By Chris Arsenault, editing by Jo Griffin and Paola Totaro; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking and climate change. Visit news.trust.org)