Rio de Janeiro: Police killed at least three suspected drug traffickers on Monday during a day-long shoot-out in the hills overlooking one of Rio de Janeiro's wealthiest districts, the latest in a wave of violent clashes that elsewhere in the city caused 8000 children to miss school.

The shoot-out, in the Pavão-Pavãozinho slum above the beachside suburbs of Ipanema and Copacabana, highlighted what many Rio residents fear is a sharp decline in security just two months after the city hosted the Olympic Games and as public security budgets have been slashed because of Brazil's worst recession in nearly a century.

Police officers participate in an operation against alleged drug traffickers at Pavao Pavaozinho slum on Monday. Credit:AP

After several weeks of confrontations between police and suspected criminals, the neighbourhood erupted early on Monday in shooting that lasted until late afternoon. Police vehicles blocked nearby roads and police helicopters circled overhead.

A video posted online by local media showed one of the drug trafficking suspects plummeting from a stone hillside after being shot in one exchange.