Early one recent morning, Antonio Iberio da Silva, the president of the Santa Amelia shantytown, picked up his family and did what he had sworn he would do more than a year before. He moved out.

A few people came out in the drizzly grayness to watch him go, and not just because he was shantytown president. In this narrow, rugged gorge on city-owned property, brimming with improvised shacks, cut by a stream of raw sewage and populated by 2,500 of Sao Paulo's poor, moving out is a special event.

Moving out is usually considered a kind of wondrous good fortune by residents of Sao Paulo's shantytowns, or favelas. It is the symbol of success in the city, the proof of passage from outcast to the ranks of the working class. Sao Paulo has more than 500,000 illegal squatters and homeless. For the very poor, a permanent home makes a world of difference.

This morning, however, Antonio Iberio was not taking his family to a modest tenement apartment, or even a shack on legally zoned land. Instead, he was packing them on the bus to Fortaleza, 72 hours away in Brazil's backward Northeast. It was the town Iberio left six years ago, hoping like hundreds of thousands of other migrants to find work in the booming industrial heartland.

What he found was 3 1/2 years of employment as a janitor in a television factory. When arthritis and poor circulation stiffened his legs, he was laid off. Then, he spent two years working at odd jobs and struggling to raise the money to go home. He never lived outside the shantytowns, and he was returning to Fortaleza the way he left, broke and unemployed.

For Antonio Iberio, Sao Paulo had failed.

"This was the place that people believed had a lot of opportunities," he said as he stuffed clothes into a paper carton the night before. "But it is all a disillusionment when you get here. You can't live here. You're a nobody. My health only went bad here, and I couldn't go on."

In all the stories to be found in Brazilian development, Antonio Iberio's has become one of the most important as the country struggles to overcome its economic crisis. When as an 18-year-old farmhand Iberio started his family in 1958, Brazil was beginning an industry-led economic boom that would make it one of the Third World's fastest growing countries.

But partly because of the way the country grew, tens of millions of Brazil's 120 million people were hardly helped by the development. Instead, many migrated to the big cities only to join slums that have now grown so large and so poor that they threaten to strangle the economy that spawned them--or ignite a social explosion.

In the dozen years since it first formed, Santa Amelia, the shantytown Iberio left, has only reflected Brazil's economic spurt with its own, even more rapid expansion. Since 1971, Brazil's official per capita income has increased from $545 to $1,959, an impressive growth of 259 percent.

But in those same years, the number of shacks in Santa Amelia and other shantytowns in the southern Sao Paulo district of Santa Amaro has increased by nearly 1,000 percent. At least 100,000 people live in shantytowns in Santa Amaro, according to estimates by city officials, and the number of squatters throughout Sao Paulo is estimated to be between 500,000 and 1.5 million.

The first shacks in Santa Amelia were built at night in 1971 of scrapwood and tin in a gulley reserved by city officials for a future road. Many of them still stand today; their owners have never moved. Instead, they have watched as 430 other improvised homes have multiplied around them, and the base of the gulley has been turned into a brisk stream of sewage.

These shantytown dwellers are not the only poor, nor are they even the poorest of Sao Paulo's 13 million people. About a third of the city's workers make less than $75 a month. Many have no fixed homes. The pressure for a bare spot to build a shack in Sao Paulo--legally or illegally--has grown so great that the illegal sites in Santa Amelia are sold privately for as much as $800.

The history of Santa Amelia has corresponded with the broader development of Brazil in one way, and it is in that sense that its people have taken on increasing importance. With Brazil's gradual opening to democracy in the past four years, Santa Amelia has been both organized and politicized. For the first time, authorities eager for mass support have turned from repression to promises of improvements in the shantytowns.

If the slum dwellers remain a political force, they are likely to bring dramatic changes in the urban development policies conducted by conservative military rulers for the past 19 years.

If their hopes for change are frustrated, they could destabilize the fragile new political opening. In April, a march of the unemployed in Santa Amaro led to two days of rioting in Sao Paulo. Some Brazilian leaders fear that was only a hint of what could happen.

In Santa Amelia, ironically, some people seem unaware of changes in the economic situation.

"Well, there is always an economic crisis," said Iraci Pereira de Andrade, a six-year resident of the shantytown. "It's the same as always. There are days when people have food to eat and days when they don't have any."

"The shantytowns don't notice the difference," said Ruth Cardozo, a sociologist who has studied Sao Paulo slums for a decade. "It's a different world. People live on small jobs, and there's a notion that work is something one is always looking for."

In fact the shantytowns, shaped by Brazil's economic boom but cut off from the consumption-oriented industrial society it created, have evolved their own subculture. Santa Amelia is a world alienated even from the working-class neighborhood that surrounds it. Its myths, rules and traditions reflect the ethic of progress less than its side effects, its perverse distortions.

For all of its residents, it is a refuge. There are debtors and criminals tucked away in its depths, as well as people who came to Sao Paulo to escape a bad past in the interior. Mostly, however, a shantytown is a strange blend of two groups of outsiders. There are the newly arrived migrants, and there are those who never found a home in Sao Paulo--or were forced out.

For migrants, who arrive in Sao Paulo at an average rate of 1,000 a day, even entering a shantytown in Santa Amaro can be a long struggle. When Jaimunda Maria and Antonio Mora de Sosa arrived in Santa Amelia in February with their three small children, they were charged $300 from previous owners for a small shack precariously perched on one sloping side of the gulley.

Then in early June, during a heavy rainstorm, a brick wall of a neighboring shack slipped on the muddy ground and fell on the young couple's home. The entire structure collapsed. Now the family, refugees from a drought-stricken farm in the Northeast state of Ceara, must pay $120 they still owe on the old shack--on Antonio Mora's $100 monthly salary--before starting over.

For more settled families, Santa Amelia is a haven from rent payments on small houses or apartments. For them, the problem is getting out. Once a shack has been paid for, the leap to a monthly rent payment can be immense. Even bus tickets back to the interior can be out of reach; the passage for Antonio Iberio's family to Fortaleza cost about $500.

For most Santa Amelia families, it can take years of saving to collect $500. Last year, the average total income for a family of six in Santa Amelia was $160 a month, according to a study by the local group Community Action of Brazil. In contrast, a Sao Paulo city agency recently estimated that a family of four needs at least $100 a month to cover only basic food necessities.

Few families in the shantytowns have a regular source of income, however. Santa Amelia is awash in stories of irregular employment and long periods of joblessness brought on by frequent illnesses--most people are in some way unfit--bad luck or the simple coldness of an industrial market whose international competitiveness depends on its ability to pay low wages and ignore employe benefits.

Pedro Oliveira de Aragon, for example, used to work on the cleaning crew of a local metallurgical plant until his wife became pregnant with their third child. Consigned to the night crew, he asked to be switched temporarily to a day shift as the birth grew near, but was turned down. When he took off the night his wife gave birth, he says, he was fired. Now, he has been unemployed for a year.

For these families, the dream of leaving the shantytown never ends. It can become an obsession. There are people who spend their savings year after year on furniture and electrical appliances "for the future home," even though they have no prospect of leaving and no electricity in their shacks.

Others take a perverse pride in their length of residence in the shantytown. A visitor encountered at least a dozen Santa Amelia residents who claimed to be one of the settlement founders.

"It was all bush when I got here," each one of them said.

This unlikely community is bound together largely by its estrangement from those around it. The poor, working-class residents of the neighborhoods surrounding Santa Amelia, although living in much the same conditions, regularly complain to the authorities about the shantytown. Some even refuse to attend masses with the slum dwellers at the local Roman Catholic church.

"The people of the neighborhood, who have houses, who have their own land, don't want to associate with us," said Antonio Iberio. "They won't even meet with us. The problem is that everyone wants to reject the people below them. Those people are poor, but they think we are bad people."

As a result, Santa Amelia for years had no kind of organization or public representation. Instead, it was regularly visited by police, who arrested those who were not at work, and municipal authorities, who repeated threats to raze the settlement for the planned road.

Then, in 1978, a young, former church missionary and political organizer named Dora Lopez arrived in the area. Soon, she had set up a local affiliate of the Sao Paulo community council system in Santa Amelia, and linked its new leaders to both a nascent shantytown residents' movement and an opposition political party.

It was the beginning of the most dramatic changes in Santa Amelia's history. Brazil was headed toward nationwide state and local elections, and the shantytowns suddenly were swamped with attention. Political parties had completed canvassing of the shacks three years before last November's vote, and government officials--members of the military-backed Social Democratic Party--began promising improvements.

"The elections changed everything because they mobilized the shantytowns," said sociologist Cardozo. "Now, things like property rights and services have suddenly become issues. Five years ago this was a thing you could not even discuss."

In fact, after a new municipal decree allowed for the installation of services in squatters' shantytowns--it was previously illegal--Santa Amelia was visited by work crews in 1980. The shacks along its outside perimeter were attached to electrical and water lines, although most of those spilling down into the gulley were not reached.

Now, with a new opposition government in power in Sao Paulo state, Santa Amelia is being drawn into a new campaign for the ultimate goal of its residents--property rights. That prospect has given a new sense of expectation to much of the shantytown.

"It will change the way we live," said Joao Canceo, who built his home by lantern light a decade ago to avoid being arrested. "It will give us all the security we have never had. We will have real rights to our homes. None of us will have to move."

And yet, Antonio Iberio, the shantytown president, just moved out. "We poor people are used to hearing promises from rich people," he said on his last day. "Rich people don't know what it's like to be poor, and they really don't want to hear about a poor man with nine kids, the problem that that is, and what it means to go hungry."

"What can you do?" he said. "In the end you can only wait, wait and count on their good will to do what is right for a poor man. But I've suffered a lot, and I can't wait anymore."

He was gone, carrying a bundle and leading one small grandchild by the hand, before it was fully light. Next: The automotive age CAPTION: Picture 1, Handmade shanties crowd gulley where first residents of Santa Amelia built makeshift homes in 1971. Now plots of land sell illegally for $800; Picture 2, Antonio Iberio da Silva, whose quest for opportunities in Sao Paulo failed, stands outside his house in Santa Amelia before returning to Fortaleza. Photos by Jackson Diehl; Map, BRAZIL. By Dave Cook--The Washington Post