> an insane number of 'illegal' immigrants

Immigrants can request a CPF (the 'national ID'). I don't think being in the country 'legally' is a requirement, that isn't enforced the way it is in the US.

> people living in Favela who essentially don't even recognize the state

Most people get assigned an ID at birth. And people who live in a favela often have to work outside it, and they interact with most companies/state services that aren't utilities as usual.

Utilities OTOH often get MITM'd by militia/narcos these days though.

> I assume it's something like the US where 10 illegals work under one social security number or a tax ID

No need for anything fancy like that. The poorest people are willing to work based on verbal agreements, as the alternative is either starving, or hoping the public social security network has your back. And in case your employer requires one, that's a non-issue because, except for rare circumstances, everyone has one.

Digital banking, install payments and general smartphone usage is widely popular, including favelas.