Favelas are a world fenomenon. We call them by various names, chantytowns, slums, whenever there is a long-term concentration of low-income classes without access to infrastructure but requiring living quarters near middle and upper income classes due to work reasons these tend to appear.
Check out recent documentaries on Favelas, it will probably surprise you in both positive notes and also on horrible notes as well. Favelas are a cultural part of Rio in a way that most slums elsewhere are not. Favelas are intertwined with higher-income classes in the urban areas where they occupy the many hill areas of Rio. They dictate music and trends for millions of people and are a huge part of what makes Rio into Rio.
Still our corrupt governments, crimelords, militias, and consumerist culture makes those places prone to crime and violence.
Talking to you and taking you as an "isolated white american", pick some violence-prone neighborhood in your state and imagine if you could break it up into small areas and sprinkle that on top of your most prized real state area. This is Rio, where poor and rich live couple streets away from each other. In many places in the U.S. such neighborhoods occur away from higher-income regions in suburbs or far away districts, here, it is all mixed and that leads to a lot of confusion for foreigners.
Favelas are also a sympton of the lack of infrastructure. Mass transit in Rio is a joke and living/real state is very expensive. Favelas are the only solution for millions that need to work in the city but can't afford to live anywhere better. It is a self-perpetuating problem where people are born to these neighborhood and lack the access to education and opportunities that would enable life changing events that would move them and their families into better conditions.
Long story short: our governments (federal, state and city) sucks. People keep electing corrupt people. No one knows a way out of this mess.