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

Lion Cecil's Killing Sparks 'Canned Hunting' Debate in S. Africa

Conservationists believe incident, which triggered worldwide outrage, will reshape debate about practice in which hunters are allowed to target animals bred for hunting More

US Urges Taliban to Stay With Afghan Peace Talks

Top US Afghan diplomat also meets with Pakistani, Afghan officials following news of Mullah Omar's death More

Environmentalists Issue Warning on Mekong Biodiversity

Scientists say decades of economic development, hydropower-dam construction, lax law enforcement and trafficking have taken their toll More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Astronauts Train Underwater for Deep Space Missionsi
|| 0:00:00
...    
🔇
X
George Putic
July 30, 2015 8:59 PM
Manned deep space missions are still a long way off, but space agencies are already testing procedures, equipment and human stamina for operations in extreme environment conditions. Small groups of astronauts take turns in spending days in an underwater lab, off Florida’s southern coast, simulating future missions to some remote world. VOA’s George Putic reports.
Video

Video Astronauts Train Underwater for Deep Space Missions

Manned deep space missions are still a long way off, but space agencies are already testing procedures, equipment and human stamina for operations in extreme environment conditions. Small groups of astronauts take turns in spending days in an underwater lab, off Florida’s southern coast, simulating future missions to some remote world. VOA’s George Putic reports.
Video

Video Civil Rights Leaders Struggled to Achieve Voting Rights Act

Fifty years ago, lawmakers approved, and U.S. President Lyndon Johnson signed, the Voting Rights Act of 1965. The measure outlawed racial discrimination in voting, giving millions of blacks in many parts of the southern United States federal enforcement of the right to vote. Correspondent Chris Simkins introduces us to some civil rights leaders who were on the front lines in the struggle for voting rights.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Hometown of Boy Scouts of America Founder Reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.
Video

Video 'Metal Muscles' Flex a New Bionic Hand

Artificial limbs, including the most complex of them – the human hand – are getting more life-like and useful due to constant advances in tiny hydraulic, pneumatic and electric motors called actuators. But now, as VOA’s George Putic reports, scientists in Germany say the future of the prosthetic hand may lie not in motors but in wires that can ‘remember’ their shape.
Video

Video Russia Accused of Abusing Interpol to Pursue Opponents

A British pro-democracy group has accused Russia of abusing the global law enforcement agency Interpol by requesting the arrest and extradition of political opponents. A new report by the group notes such requests can mean the accused are unable to travel and are often unable to open bank accounts. VOA's Henry Ridgwell reports.
Video

Video 'Positive Atmosphere' Points Toward TPP Trade Deal in Hawaii

Talks on a major new trade agreement among 12 Pacific Rim nations are said to be nearing completion in Hawaii. Some trade experts say the "positive atmosphere" at the discussions could mean a deal is within reach, but there is still hard bargaining to be done over many issues and products, including U.S. drugs and Japanese rice. VOA's Jim Randle reports.
Video

Video Genome Initiative Urgently Moves to Freeze DNA Before Species Go Extinct

Earth is in the midst of its sixth mass extinction. The last such event was caused by an asteroid 66 million years ago. It killed off the dinosaurs and practically everything else. So scientists are in a race against time to classify the estimated 11 million species alive today. So far only 2 million are described by science, and researchers are worried many will disappear before they even have a name. VOA’s Rosanne Skirble reports.
Video

Video Scientists: One-Dose Malaria Cure is Possible

Scientists have long been trying to develop an effective protection and cure for malaria - one of the deadliest diseases that affects people in tropical areas, especially children. As the World Health Organization announces plans to begin clinical trials of a promising new vaccine, scientists in South Africa report that they too are at an important threshold. George Putic reports, they are testing a compound that could be a single-dose cure for malaria.
Video

Video 'New York' Magazine Features 35 Cosby Accusers

The latest issue of 'New York' magazine features 35 women who say they were drugged and raped by film and television celebrity Bill Cosby. The women are aged from 44 to 80 and come from different walks of life and races. The magazine interviewed each of them separately, but Zlatica Hoke reports their stories are similar.
Video

Video US Calls Fight Against Human Trafficking a Must Win

The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video Washington DC Underground Streetcar Station to Become Arts Venue

Abandoned more than 50 years ago, the underground streetcar station in Washington D.C.’s historic DuPont Circle district is about to be reborn. The plan calls for turning the spacious underground platforms - once meant to be a transportation hub, - into a unique space for art exhibitions, presentations, concerts and even a film set. Roman Mamonov has more from beneath the streets of the U.S. capital. Joy Wagner narrates his report.
Video

Video Europe’s Twin Crises Collide in Greece as Migrant Numbers Soar

Greece has replaced Italy as the main gateway for migrants into Europe, with more than 100,000 arrivals in the first six months of 2015. Many want to move further into Europe and escape Greece’s economic crisis, but they face widespread dangers on the journey overland through the Balkans. VOA's Henry Ridgwell reports.
Video

Video Stink Intensifies as Lebanon’s Trash Crisis Continues

After the closure of a major rubbish dump a week ago, the streets of Beirut are filling up with trash. Having failed to draw up a plan B, politicians are struggling to deal with the problem. John Owens has more for VOA from Beirut.
Video

Video Paris Rolls Out Blueprint to Fight Climate Change

A U.N. climate conference in December aims to produce an ambitious agreement to fight heat-trapping greenhouse gases. But many local governments are not waiting, and have drafted their own climate action plans. That’s the case with Paris — which is getting special attention, since it’s hosting the climate summit. Lisa Bryant takes a look for VOA at the transformation of the French capital into an eco-city.

VOA Blogs

World Currencies

EUR
USD
0.9118
JPY
USD
124.31
GBP
USD
0.6420
CAD
USD
1.3048
INR
USD
64.136

Rates may not be current.