Sept. 12 (Bloomberg) -- Brazil’s government is considering developing locally made network equipment that phone companies would be required to use as a defense against foreign spies, Communications Minister Paulo Bernardo said.
The measure would be designed to protect information privacy, in response to allegations that the U.S. National Security Agency used software to access communications between Brazil President Dilma Rousseff and staff members, Bernardo said yesterday in an interview in Brasilia.
“We could require the whole Brazilian market to use this equipment,” Bernardo said. “This would apply to businesses, communication networks and telecommunication companies that operate in Brazil.”
The plan would create a challenge to companies such as Cisco Systems Inc. that have identified Brazil as a market ripe for expansion. Brazil follows Germany in calling for a homegrown industry to avoid U.S. surveillance.
The spying allegations were made earlier this month on Brazil’s most-watched TV newsmagazine, Fantastico, by American journalist Glenn Greenwald.
Developing sophisticated network technology within five years is “feasible but not necessarily probable,” said John Butler, a senior telecommunications services and equipment analyst with Bloomberg Industries. Proprietary routers and switches would be very difficult for Brazil to design and manufacture, and many of the hardware-based functions in these systems are now slowly being replaced with software, Butler said.
“It would be hard to rip out all the routers and switches in the public telecom network and replace them with proprietary government gear,” he said. “It depends on how dedicated they are, but it could be done with the right talent and resources in place.”
Cisco, based in San Jose, California, declined to comment in an e-mailed statement. “We do not know the details of the project so we cannot assess what would be the implications for the industry,” the company said.
Telecommunications regulator Anatel said last week that it’s investigating contracts between Brazilian operators and foreign companies. The focus is on the “main companies with the largest client bases,” the agency said.
Brazil’s largest phone companies include Rio de Janeiro-based Oi SA and the local units of Madrid-based Telefonica SA, Mexico City-based America Movil SAB and Milan-based Telecom Italia SpA. Oi has said it acts strictly in accordance with Brazilian laws on privacy. A press official at the company declined to comment yesterday, as did one from Telefonica. America Movil and Telecom Italia had no immediate response.
Brazil’s national telecommunications union, known as SindiTelebrasil, said in a statement that Brazilian carriers follow the law and don’t share private information with foreigners.
Rousseff has asked for legislation to increase penalties for companies that worked with the security agency. This could include fines or even revoking licenses to operate in Brazil, Bernardo said yesterday.
“Espionage is illegal, regardless of who does it,” Bernardo said. “We’re discussing the possibility of penalizing companies that collaborate in this kind of spying scheme, which could be included in the legislation.”
Yesterday, Rousseff marked Internet privacy legislation currently in the lower house as urgent, to be voted on within 45 days.
Thomas Shannon, the U.S. ambassador to Brazil, had denied a report on spying allegations by newspaper O Globo in July, telling officials that the U.S. didn’t spy on Brazilian citizens and only collects records of phone calls or e-mail messages abroad to pursue suspected terrorists.
“It’s clear that the information we received from the Americans was false,” Bernardo said. “That conversation was all lies.”
After meeting with Barack Obama last week, Rousseff said the U.S. president took personal responsibility for the spying allegations. The two leaders met informally at the G-20 summit in St. Petersburg. Rousseff is still deciding whether to go through with a scheduled state visit to Washington in October.
“The truth is we see this as an affront to our constitution,” Bernardo said. “We have to make it clear how we will respond.”
U.S. National Security Adviser Susan Rice met yesterday in Washington with Brazil Foreign Minister Luiz Figueiredo to discuss “intelligence collection activities,” according to a White House statement.
“The United States understands that recent disclosures in the press –- some of which have distorted our activities and some of which raise legitimate questions for our friends and allies about how these capabilities are employed -- have created tensions,” the White House said in the statement. It pledged to work with Brazil to address the allegations.
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