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

Could Nemtsov Threaten Putin in Death as in Life?

Dynamic and debonair opposition leader had supported liberal economic reforms, criticized Russian president's aggression in Ukraine More

Oil Smuggling Highlights Challenges in Shutting Down IS Finances

Pentagon spokesman says Islamic State 'certainly continues to get revenue from the oil industry black market' but that airstrikes have made a dent More

India Focuses on Infrastructure, Investment to Propel Economy

Government expects economy to grow at 8 to 8.5 percent in next fiscal year More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US Supreme Court Hears Hijab Discrimination Casei
X
Katherine Gypson
February 25, 2015 11:30 PM
The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video US Supreme Court Hears Hijab Discrimination Case

The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video Falling Gas Prices Hurt Nascent Illinois Hydraulic Fracturing Industry

Falling oil prices are helping consumers purchase cheaper petroleum at the pump. But that’s made hydraulic fracturing or “fracking” less economically viable for the companies in the United States invested in the process. VOA’s Kane Farabaugh reports on one Midwestern town that was hoping to change its fortunes by cashing in on the next big U.S. oil boom.
Video

Video Fighting in Sudan's South Kordofan Fuels Mass Displacement

Heavy fighting in Sudan's South Kordofan state is causing hundreds of thousands to flee into uncertain conditions. Local aid organizations estimate as many as 400,000 civilians have been internally displaced since the conflict began more than three years ago, while another 250,000 have fled across the border to refugee camps in South Sudan. VOA's Adam Bailes reports.
Video

Video Lao Dam Project Runs Into Opposition

A Lao dam project on a section of the Mekong River is drawing opposition from local fishermen, international environmental groups and neighboring countries. VOA's Say Mony visited the region to investigate the concerns. Colin Lovett narrates.
Video

Video A Filmmaker Discovers Her Biracial Identity in "Little White Lie

Lacey Schwartz grew up in an upper middle-class Jewish family, in a town in upstate New York where almost everyone she knew was white. She assumed that she was, as well. Her recent documentary, Little White Lie, tells the story of how she uncovered the secret of her true racial background. VOA’s Carolyn Weaver has more on the film.
Video

Video Deep Under Antarctic Ice Sheet, Life!

With the end of summer in the Southern hemisphere, the Antarctic research season is over. Scientists from Northern Illinois University are back in their laboratory after a 3-month expedition on the Ross Ice Shelf, the world’s largest floating ice sheet. As VOA’s Rosanne Skirble reports, they hope to find clues to explain the dynamics of the rapidly melting ice and its impact on sea level rise.
Video

Video US-Cuba Normalization Talks Resume Friday

Negotiations aimed at normalizing diplomatic relations between the U.S. and Cuba resume Friday. On the table: lifting a half-century trade embargo and easing banking and travel restrictions. There's opposition in Congress, but some analysts say there may be sufficient political and economic incentives in both nations for a potential breakthrough this year. VOA's Mil Arcega reports.
Video

Video Pakistan's Deadline For SIM Registration Has Cellphone Users Scrambling

Pakistani cell phone users have until midnight Thursday to register their SIM cards, or their service will be cut off. While some privacy experts worry about government intrusion, many Pakistanis are just worried about keeping their phone lines open. VOA Deewa reporter Arshad Muhmand has more from Peshawar.
Video

Video Myanmar Warns Factory Workers to End Strikes

Outside Myanmar's main city Yangon, thousands of workers walked off their jobs earlier this month demanding a doubling of their wages, pay raises after a year and input from labor unions on industrial regulations. Since Friday, the standoff has grown more tense as police moved in to disrupt the sit-ins, resulting in clashes that injured people from both sides. VOA correspondent Steve Herman visited industrial zones which have become a focus of Myanmar's fledgling workers rights movement.
Video

Video Oscar Winners Do More Than Thank the Academy

The Academy Awards presentation is Hollywood’s night to reward the best movies from the previous year. It’s typically a lot of glitter, a lot of thank you’s, a lot of speeches. But many of this year’s speeches carried messages beyond the thank you's. VOA’s Carolyn Presutti takes a look.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

World Currencies

EUR
USD
0.8896
JPY
USD
119.26
GBP
USD
0.6475
CAD
USD
1.2451
INR
USD
61.816

Rates may not be current.