In this article we develop a model to explain the choice between different criminal activities in favelas. Criminals in these communities may choose between being muggers, drug dealers, militiamen or working honestly. We show that this choice depends on the agent’s wealth, his community’s average wealth and the wealth of the communities near him. Also, we have shown that the transition from drug dealing to militia is abrupt, even in the absence of externalities across criminal activities and that furthermore this change depends exclusively of the ratio between the favela’s wealth and the wealth of its vicinity. This article’s second part is empirical. In the basic estimations, the effect of this ratio over the probability of a favela being ruled by a militia in opposition to drug dealers is estimated as positive and significant. However, when we control for measures of distance to public institutions, the coefficient associated to this ratio loses significance.