News / Economy

Brazil's Anti-Spying Internet Push Could Backfire, Industry Says

Brazil’s President Dilma Rousseff
Brazil’s President Dilma Rousseff
Reuters
For tech companies in Brazil, the government's decision to target their operations in response to U.S. spying is about as smart as sending an angry email in the heat of an argument.
 
President Dilma Rousseff's plan to force Internet companies to store user data inside the country will not fix Brazil's security concerns and could instead send costs soaring and hurt future investments in a key emerging market for companies like Google, Facebook and Twitter, industry executives and analysts say.
 
“It could end up having the opposite effect to what is intended, and scare away companies that want to do business in Brazil,” said Ronaldo Lemos, a professor at Rio de Janeiro State University who has helped draft Internet legislation in Brazil.
 
Rousseff was outraged after documents leaked by former U.S. intelligence contractor Edward Snowden showed the National Security Agency spied on ordinary Brazilians, the country's biggest company Petrobras and even her own communications.
 
In response, the left-leaning president helped put together legislation that would require big Internet companies to house locally gathered data on servers inside Brazil. Otherwise, they will be barred from doing business in one of the world's fastest growing markets for technology and social media.
 
The bill has not yet been made public, and the number of companies in the government's sight is unclear.
 
However, Alessandro Molon, a congressman with Rousseff's Workers Party who is leading efforts to get the legislation approved in the lower house, recently said the number of companies affected could be counted “with two hands.”
 
In what was interpreted by the industry as another sign of hostility, communications minister Paulo Bernando recently suggested tech companies were not paying enough taxes.
 
An industry source, speaking on condition of anonymity due to the sensitivity of the subject, said many companies are still waiting to see the fine print of the legislation, and how it is implemented, before deciding whether to go ahead with investment plans, and some might even consider pulling the plug on Brazil.
 
“It's a terrible idea,” said the source. “And even if the government knows it, they feel they need to press ahead and send a strong political signal.”
 
Even if data were to be kept in Brazilian data centers, it would still be replicated in servers abroad, experts say. Having entire databases in one single country would make the information more vulnerable to cyber attacks.
 
Market size matters
 
But the government has so far refused to back off its plans, essentially betting that Brazil is too big a market for companies to ignore.
 
“I don't believe these companies will stop their profitable activities in Brazil,” said congressman Molon. He said building local centers would be a “small cost” for such large companies.
 
Virgilio Almeida, a senior official at the ministry of science and technology, which is also involved in the issue, cited Facebook as a company that should be required to have a greater physical presence in Brazil.
 
“Brazil is [Facebook's] second biggest market in terms of users and yet the company has zero infrastructure in the country. It would be natural, even from the business point of view, to have part of it here,” Almeida said.
 
A study commissioned by the telecommunications industry group Brasscom recently found that the operating costs of a data center in Brazil can be up to 100 percent higher than in the United States. That is mostly due to the high cost of electricity and heavy taxes on imported technology.
 
Installing a data center in Brazil would typically cost $61 million compared to $51 million in Chile and $43 million in the United States, the study showed. Brasscom estimates if Brazil were more competitive it could attract up to $22 billion in investments in data centers in the next five years.
 
“You first have to create the right market conditions for data hosting to be profitable,” says Marilia Maciel, a digital policy expert with the think tank Fundacao Getulio Vargas in Rio de Janeiro. “Even Brazilian companies prefer to host their data outside of Brazil.”
 
And that's why Almeida says the technology ministry is considering tax incentives for companies willing to manufacture servers in Brazil. Electricity subsidies, he said, could eventually be discussed with the finance ministry.
 
The idea of requiring local data hosting gained traction after Justice Minister Eduardo Cardozo tried to persuade U.S. authorities to run all further surveillance requests through Brazilian courts. He said his request was rejected during a recent trip to Washington.
 
Almeida suggested that the damage might not be as bad as some companies think.
 
“It is a view still under construction,” he said. “I think the industry is taking this debate about the data centers in a very extreme way.”
 
Fortaleza-Vladivostok
 
The fallout from the NSA scandal could give a boost to other government Internet initiatives as well.
 
One project would link Brazil and its peers in the BRICs group of emerging powers through a 34,000-km fiber-optic cable bypassing the United States. The cable would go from Fortaleza along Brazil's northeastern coast all the way to Vladivostok in Russia, also hooking up South Africa, India and China.
 
The Internet is heavily centralized in the United States,  meaning for instance that an email sent by Rousseff to her Russian colleague Vladimir Putin will be likely routed through a server in Miami.
 
“This is a fine opportunity to look at better connectivity options,” said Leslie Daigle, chief Internet technology officer at the Internet Society, a U.S.-based group advocating for an open Internet. “Where I think things go a little sidewise is the extent to which things are being decided out of reaction.”
 
Experts say awareness is more critical than mammoth fiber optic cables or home-grown email or encryption services in a country where officials in charge of crafting the Internet policy sometimes have a poor understanding of the subject and often exchange confidential information through gmail or whatsapp, an instant messaging service for smartphones.
 
“By introducing more technology you are actually introducing more problems instead of addressing the issues,” said William Beer, a cyber security analyst with the professional services firm of Alvarez & Marsal in Sao Paulo.
 
Rousseff has made the new Internet regulatory framework a top priority, meaning the lower chamber of Congress could vote on it as soon as the end of October. As for the data localization rule, congressman Molon sounds determined.
 
“Things cannot remain as they were,” he said. “We need a political answer against a political act that violated our sovereignty.”

You May Like

Video For West Ukraine City, Conflict Far Away Yet Near

Physically and culturally close to Western Europe, Lviv feels solidarity with compatriots in country’s east but says they need to decide own future More

West African Women Disproportionately Affected by Ebola

Women's roles in families and the community put them at greater risk for contracting the disease, officials say More

Video NASA's MAVEN Spacecraft Arrives at Mars

Mars Atmosphere and Volatile Evolution craft will measure rates at which gases escape Martian atmosphere into space More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
NASA’s MAVEN Probe Enters Mars Orbiti
X
September 22, 2014 9:20 PM
NASA’s newest Mars probe, called MAVEN, has successfully entered its designated orbit around the Red Planet. Scientists will use its sophisticated instruments to try to learn what happened to the atmosphere Mars had a few billion years ago. VOA’s George Putic has more.
Video

Video NASA’s MAVEN Probe Enters Mars Orbit

NASA’s newest Mars probe, called MAVEN, has successfully entered its designated orbit around the Red Planet. Scientists will use its sophisticated instruments to try to learn what happened to the atmosphere Mars had a few billion years ago. VOA’s George Putic has more.
Video

Video For West Ukraine City, Conflict Far Away Yet Near

The western Ukrainian city of Lviv prides itself on being both physically and culturally close to Western Europe. The Russian-backed separatists in the eastern part of the country are 1,200 kilometers away, and seemingly even farther away in their world view. Still, as VOA’s Al Pessin reports, the war is having an impact in Lviv.
Video

Video Saving Global Fish Stocks Starts in the Kitchen

With an estimated 90 percent of the world’s larger fish populations having already vanished, a growing number of people in the seafood industry are embracing the concept of sustainable fishing and farming practices. One American marine biologist turned restaurateur in Thailand is spreading the word among fellow chefs and customers. VOA Correspondent Steve Herman reports from Bangkok.
Video

Video Chinese Admiral Key in China’s Promotion of Sea Links

China’s President last week wrapped up landmark visits to India, Sri Lanka and Maldives, part of a broader campaign to promote a new “Maritime Silk Road” in Asia. The Chinese government’s promotion efforts rely heavily on the country’s best-known sailor, a 15th century eunuch named Zheng He. VOA's Bill Ide reports from the sailor’s hometown in Yunnan on the effort to promote China’s future by recalling its past.
Video

Video Experts Fear Ebola Outbreak ‘Beyond Our Capability to Contain’

Each day brings with it new warnings about the deadly Ebola outbreak already blamed for killing more than 2,600 people across West Africa. And while countries and international organizations like the United Nations are starting to come through on promises of help for those most affected, the unprecedented speed with which the virus has spread is raising questions about the international response. VOA's Jeff Seldin has more from Washington.
Video

Video Natural Gas Export Plan Divides Maryland Town

A U.S. power company that has been importing natural gas now wants to export it. If approved, its plant in Lusby, Maryland, would likely be the first terminal on the United States East Coast to export liquefied natural gas from American pipelines. While some residents welcome the move because it will create jobs, others oppose it, saying the expansion could be a safety and environmental hazard. VOA’s Deborah Block examines the controversy.
Video

Video Difficult Tactical Battle Ahead Against IS Militants in Syria

The U.S. president has ordered the military to intensify its fight against the Islamic State, including in Syria. But how does the military conduct air strikes in a country that is not a U.S. ally? VOA correspondent Carla Babb reports from the Pentagon.
Video

Video Iran, World Powers Seek Progress in Nuclear Talks

Iran and the five permanent members of the U.N. Security Council plus Germany, known as the P5 + 1, have started a new round of talks on Iran's nuclear program. VOA State Department correspondent Pam Dockins reports that as the negotiations take place in New York, a U.S. envoy is questioning Iran's commitment to peaceful nuclear activity.
Video

Video Migrants Caught in No-Man's Land Called Calais

The deaths of hundreds of migrants in the Mediterranean this week has only recast the spotlight on the perils of reaching Europe. And for those forunate enough to reach a place like Calais, France, only find that their problems aren't over. Lisa Bryant has the story.
Video

Video Westgate Siege Anniversary Brings Back Painful Memories

One year after it happened, the survivors of the terror attack on Nairobi's Westgate Shopping Mall still cannot shake the images of that tragic incident. For VOA, Mohammed Yusuf tells the story of victims still waiting for the answer to the question 'how could this happen?'
Video

Video Whaling Summit Votes to Uphold Ban on Japan Whale Hunt

The International Whaling Commission, meeting in Slovenia, has voted to uphold a court ruling banning Japan from hunting whales in the Antarctic Ocean. Conservationists hailed the ruling as a victory, but Tokyo says it will submit revised plans for a whale hunt in 2015. Henry Ridgwell reports from London.
Video

Video A Dinosaur Fit for Land and Water

Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid

World Currencies

EUR
USD
0.7768
JPY
USD
108.84
GBP
USD
0.6124
CAD
USD
1.0999
INR
USD
61.042

Rates may not be current.