Brazilian director Fernando Meirelles didn't choose to make City of God - it was the book that 'took him hostage', demanding that he film, he tells Michael Dwyer.

Like a bolt out of the blue, City of God arrived an unknown quantity at the Cannes Film Festival last summer - where it jolted critics and distributors with its powerful depiction of poverty and fear, drug-dealing and murder in the slums of Rio de Janeiro. Spanning the period from the late 1960s to the early 1980s, the film firmly sets its focus on the children of this ghetto as they are inexorably drawn into crime.

As directed by Fernando Meirelles, the film is shot and edited with utter assurance and terrific visual style, and it packs a visceral charge. What proves most unsettling about it is the youth of its amoral protagonists - and their shockingly casual acceptance of violence as the means to an end.

In a film that plays like GoodFellas Junior, some of the homicidal youngsters can hardly lift the guns they are wielding.

"That's how it is there," Meirelles observed matter-of-factly when we met recently at the London Film Festival. "In fact, the mood in the slums was often quite happy when I visited there, because people knew exactly how they wanted to spend their day.

"Loud music, funk or samba, comes from every house. It's like walking through a music video. A lot of people don't work there. They just hang around talking, telling jokes and drinking. They don't expect anything from the future, so they do whatever makes every day happier for them. So it can seem very happy, but then, in the spur of the moment, it can turn violent and very tragic."

Despite its period setting, the film inevitably reflects and comments on the wave of drug-dealing and crime in present-day Rio. Meirelles says he was not in the least deterred by how the film was received by politicians or tourist boards in Brazil.

"The problem is not the image. The problem is the country. It's just a reflection of that. If somebody fat looks in a mirror and doesn't like what they see, you can't blame the mirror."

He is gratified that the film has been a huge success in Brazil since it opened there at the end of August, and that it has been submitted as his country's entry for the best foreign-language film award at this year's Oscars. "It has done better than I could ever have dreamed," he says. "We were hoping that about half a million people would see the film in Brazil, but already over three million have seen it, and it's still running there. It's done better than Star Wars or Minority Report - and they spent four or five times as much on their release - and better than any Brazilian film for 10 years."

The screenplay is based on Cidade de Deus (City of God), an epic 600-page novel by Paulo Lins, and based on his experiences growing up in the Rio ghetto after which the book and the film are named.

Coming from a comfortable background in São Paolo, Meirelles was only vaguely aware of the Lins book before it was brought to his attention by a friend, who wanted to direct a film based on the book.

"Paulo Lins liked my friend, but he felt he didn't have the experience to turn the book into a film, and my friend realised this after a while," Meirelles says. "My friend is about to shoot his first film now, but he would have been lost if he tried to start out on a film with the scale of City of God.

"The problem about making a film from this book - which is such a huge book with hundreds of characters - is that it is told in an episodic way. It has no structure at all. It goes from one character to another to another. So we came up with the idea of setting it in three different time periods and introducing this boy, Rocket, and showing everything through his eyes. We needed somebody for the audience to identify with from beginning to end."

Meirelles, who is 47, says that the subject matter was so far removed from his own experience that he resisted becoming involved. "I never used cocaine," he says. "I knew very little about how the favelas (slums) or drug-dealing were organised, and I was never going to leave my family in São Paolo to shoot a film in Rio.

"I decided to read the book anyway, because I was intrigued that it had so much critical acclaim. By the time I got to page 100, I had to agree with my friend that the story was very interesting. By the time I got to page 200, I began to underline a few words here and there. By the end, I had the whole list of film locations and character roles noted down on the inside cover and I felt completely involved in the project. I am aware today that I never decided to adapt the book. It was the book that took me hostage, demanding to be adapted to film."

He felt convinced that its graphic account of "social apartheid" had to be addressed by him and by the Brazilian middle-class, who subsequently flocked to his film. At the same time, he was determined that his treatment of the film's themes and milieu would not be exploitative, and that the violence, as in a Hitchcock movie, would be powerfully suggested rather than explicitly depicted.

"I don't know if you realised," he says, "but I do not show much actual violence in the film. There are only two or three moments of very strong violence. I tried to show as little violence as possible, so you don't see the rape that happens in the story or some of the cruel things the boys do.

"If this was an American movie like Black Hawk Down, I am sure they would have shown all of that. You would see boys killed in front of the camera and blood exploding. I shot a lot of those scenes in the dark or when the camera is positioned very far away from them. I wanted to avoid any sense of taking pleasure in showing violence."

However, given its subject matter, the project proved so difficult to finance that Meirelles broke one of the cardinal rules of the film industry by putting up his own money to get the film made. Not many directors could or would take such a risk, even on a movie with a relatively low budget of $3 million.

"I know that was a stupid thing to do," he says. "It's a violent film with unknown actors, so I had no reason to believe I could get my money back. I had discussions with Wild Bunch in Paris and Miramax in New York and with backers in Brazil, and I thought I would get money from them. I started pre-production, but the money never came. A month before we were due to shoot the movie, I had two choices - stop everything and wait for some money, or just move on with it." With two partners, Meirelles owns 02 Filmes, the biggest production company in Brazil. "We produce 400 commercials a year," he says. "I talked to my partners in the company, and they agreed we would take the risk to finance it with our own money. When I was finished the first cut of the film, I went to New York and showed it to Miramax.

"We did a deal, and I got all our money back from that. Then Wild Bunch took care of selling the film at Cannes and they sold it to 62 countries. I never expected that. It's a pity in one sense because I could have sold the film myself at Cannes and made more money. Next time I'll know what to do."

The film was shot over nine weeks, using a huge cast of almost entirely non-professional actors, more than 100 of them children. With Katia Lund, whom he credits as co-director on the film, Meirelles organised a workshop process for the children over six months before the first frame was shot.

"Each scene was rehearsed numerous times during the workshop period," he says. "Each time phrases were added or cut out, reactions or jokes were incorporated, and intentions sharpened. These contributions were passed on to the screenwriter, Braulio Mantovani, and the script began to grow and grow.

"But the contributions of the cast were not limited to rehearsals. If a situation or any dialogue generated no response from them, if it didn't seem part of their universe, it was cut. There would have been no point in keeping it. It was only when I was transcribing the screenplay for the English and French sub-titles that I realised how much the kids had contributed."

Walter Salles, the leading Brazilian director of Central Station and Behind the Sun, helped out by signing on as a producer on City of God. Afterwards, he marvelled at the knowledge and mastery of film grammar exhibited by Meirelles. "I've directed two feature films and around 1,000 commercials - six or seven a month for the past 10 years," Meirelles shrugs. "My company has made a whole lot more. I've worked everywhere - under the ground, under the sea, all over and with all sorts of cameras and other equipment. It's like you when you write. If you do something every day and you want to express some ideas, you know how to tell it using the right words, the right nouns or verbs, or whatever, and it's just the same with making films."

At university in São Paolo, Meirelles studied architecture and went on to apply his skill for drawing in cartoons. "I also tried making some experimental videos and documentaries that were journalistic or humorous. I did a few with a friend who pretended to be a reporter, and they were very funny and became well-known. As a result of that, I was invited to direct a campaign for a telephone company in Brazil, and they wanted me to create another character like that, so that's how I started out in commercials. I also did 180 episodes of a TV programme for children from about two to six years of age." There used to be a patronising view of directors who came from commercials to feature films - especially in the 1970s when so many British directors made the transition: Alan Parker, Ridley Scott, Tony Scott, Hugh Hudson and Adrian Lyne.

"People said the same thing about my first films," Meirelles says. "But that's how I learned all I know about film-making. It's the same with so many of the really interesting new films coming from Mexico, Brazil and Argentina - all the directors worked on commercials at one stage. Walter Salles has made commercials, too, you know. It's cool, I think, and it makes sense."

However, Meirelles says he has put his days of directing commercials firmly behind him to concentrate on feature films, and he is quite happy to hire other directors to make the commercials for his company. "The hardest part of the job was all the meetings with clients and marketing people," he says. "I've had enough of that. I enjoyed shooting the commercials, but not having to explain to 10 people around a table what I was doing and why I was doing it. That was really boring."

Much more stimulating for him is the prospect of his highly ambitious next feature to be shot next year. "It's about globalisation, about the relationship between the First World and the Third World, and it will be in five different languages," he says. "I'm very excited about it. I will need to get other directors to help me when we're shooting in China and Kenya, because I don't speak any Chinese or Swahili. The other places I think I can handle. This is going to be big, much bigger than City of God. I think I like trouble."

City of God was released Friday at selected cinemas