The snakes come at night, darting out of the shadows and into Marcelo's subconscious. "You start thinking, 'There are people coming! The police are coming! A snake is coming! Everything is coming!' You panic. But there is no snake. No police. There's nobody there. There's nothing. You're just tripping out."

Marcelo is an illiterate 24-year-old drug addict whose home is a sliver of cardboard on the streets of Rio Branco, a riverside city in the Brazilian Amazon. His drug of choice is oxi, a highly addictive and hallucinogenic blend of cocaine paste, gasoline, kerosene and quicklime (calcium oxide) that is wreaking havoc across the Amazon region.

Oxi, or oxidado – "rust" – is the latest drug to surface in the Amazon. It is reputedly twice as powerful as crack cocaine and just a fifth of the price.

"It is terrifying," said Alvaro Mendes, an outreach worker in Rio Branco from the state of Acre's Harm Reduction Association, the NGO that first detected the drug. "The majority of first-time users become addicted on their first contact with the drug. Most of them go seven to 10 days without sleeping, without eating. They start to go into a process of degeneration. After months of use … they go into a state where they look like zombies, wandering … in search of pleasure."

Described as a cheaper and deadlier successor to crack, oxi sells for about R$2 (75p) a rock and is smoked in pipes improvised from cans, pieces of piping and metal taps. According to Mendes, whose support group works with slum-dwellers, prostitutes, transvestites and homeless people who are hooked on the drug, oxi can kill within a year.

"The difference between cocaine and oxi is like the difference between drinking beer and pure alcohol," said a federal police operative on the Peru-Brazil border, who refused to be named.

Oxi surfaced in the Amazonian border region between Brazil, Bolivia and Peru in the 1980s, and is said to have been originally used by a small number of hippies who came to the region to experiment with ayahuasca, a hallucinogenic plant native to the Amazon rainforest.

In the past five years, however, its use has exploded, particularly in the slums and rural communities of Acre state in the western Amazon, where it is peddled in street-corner drug dens known as bocadas. Mendes estimates there are at least 8,000 oxi users in Acre's capital, Rio Branco, a city of 320,000 inhabitants.

But oxi is no longer just an Amazonian drug. A series of recent suspected seizures in cities such as Sao Paulo, Brasilia and Rio de Janeiro have propelled it into the national headlines. Health workers and politicians warn of a catastrophe if its spread is confirmed.

"The Brazilian state is unprepared to face this threat and to help its victims," José Serra, a leading opposition politician and former governor of Sao Paulo, wrote in a recent column in the national daily Estado de Sao Paulo, describing oxi on his Twitter account as a "weapon of mass destruction".

Despite growing concern, authorities admit the exact nature of oxi is a mystery. "Oxi's existence has only come to our attention very recently," said Elenice Frez, the police chief in Assis Brasil, a tiny town on the border between Brazil and Peru that is a notorious route for traffickers. "It is a new thing and we don't yet have all the technical details of what oxi really is and the damage it can cause to someone who becomes addicted and uses it constantly."

Mendes says users often suffer from paranoia, vomiting and uncontrollable bouts of diarrhoea. Tooth loss can happen within months. "I've never seen such violent scenes of drug use," he said. "It is very depressing."

Oxi's route into Brazil begins in small border towns such as Epitaciolândia, next to the dust-clogged settlement of Cobija, in Bolivia, a country that is one of the world's biggest cocaine producers.

On condition of anonymity, an addict agreed to escort the Guardian to his oxi den, hidden in the jungle that encircles the town.

Crouching, he picked his way through a mesh of thorns that cut into his legs. After a five-minute trek he arrived at a clearing. A carpet of torn aluminium cans littered the forest floor and empty cigarette lighters had been tossed under the trees.

Scraping the remains of his last hit from the inside of a drinks can, the addict painted a bleak picture of the drug's powers.

"I cry," he said. "I cry because I want to give this shit up. My family say: 'Get out of it son.' I tell her: 'Mum, in the name of Jesus I will.'"

A short drive away, Epitaciolândia's police chief, Sergio Lopes de Souza, pulled two R$70 rocks of oxi, seized the previous day, from an evidence bag.

"The effects of oxi are so devastating," he said. "When a person starts using oxi they spend days just using, without eating properly. They start to become very thin, almost skeletons, and they want to use more and more. If you do not stop you are a candidate to either die of an overdose or of other consequences of the oxi."

In a shantytown on the outskirts of Rio Branco, dirt-caked fingernails fumbled with a red pipe as another of the city's users prepared yet another hit. Sitting next to a dirty metal spoon and a packet of Paraguayan cigarettes, the 21-year-old user reflected on his lot.

"This is a dog's life. This is the kind of drug that makes you sell your own clothes," he muttered. "My whole family ignores me. I used to be a worker. I liked to have my things. Today they look at me and call me a punk.

"I have lost it all," he concluded as cars raced past on a nearby highway. "I had it all, and in the same moment I lost it. All because of oxi."