The US National Security Agency’s cyber spying on foreign heads of state from Angela Merkel to Dilma Rousseff is poised to produce its first high-profile corporate casualty: Google Inc.’s operations in Brazil.
Brazilian lawmakers are under orders from President Rousseff to pause all other legislative proceedings until they hash out a proposal that would require Google and other providers of online services to keep local-user information in data centers within the country.
The measure is at the forefront of a growing backlash against American Internet companies, with allegations emerging last month and as recently as last week that the NSA gained access to e-mails between world leaders and their staffs, raising questions about the data held by US Internet companies. European lawmakers are considering their own penalties for companies that share unauthorized information.
Google says the data-center requirement would hinder expansion in Brazil, the world’s sixth-largest market for Internet users, because the infrastructure would be complicated to develop. Violating the rule would cost Google 10% of its annual sales in Brazil, where it is the most-visited website, according to research firm ComScore Inc.
While Google doesn’t disclose its Brazilian revenue, the country is the third-largest market for the company’s Android smart-phone software and the nation with the fifth-most YouTube users. Every month 92% of Brazilian Internet users visit Google sites, according to ComScore.
“Brazilian users would ultimately be harmed because they couldn’t access new tools, new services,” said Marcel Leonardi, public policy director for Google in Brazil told Bloomberg. “Companies would choose to implement those services at a much later stage, if at all.”
Rousseff’s support for the measure underscores the tendency toward protectionism in Brazil, which has raised taxes on foreign investment and car imports under her administration. It also provides a way for her to show she’s fighting on behalf of Brazilians amid nationwide protests against political corruption and the government’s spending priorities.
Yet she’s far from alone in calling for greater scrutiny of the NSA’s practices. German Chancellor Merkel and French President Francois Hollande called last week for closer cooperation on espionage after documents gathered by former NSA contractor Edward Snowden revealed US authorities hacked Merkel’s mobile phone in 2010. Mexico is probing allegations of US eavesdropping on former President Felipe Calderon.
The 28-nation European Union is debating a complete overhaul of its data protection rules dating back to 1995. A proposal put forward last year by the European Commission, the EU’s regulator, would also hold US companies such as Google, Facebook Inc. and Apple Inc. liable for violations such as unauthorized transfers of data on EU citizens to non-EU countries. Fines could be as high as 100 million Euros according to draft rules backed last week by a European Parliament committee. The EU plans need the support of lawmakers and national governments before they can become law.
Brazil’s data-center requirement would be tacked onto a bill called Marco Civil that establishes legal guidelines for Internet providers, such as neutrality in the services consumers can access on their networks. Rousseff marked the bill as urgent on Sept. 11, less than two weeks after documents leaked by Snowden revealed the agency monitored her communication with her staff. The urgent designation means lawmakers must set aside all other business to consider the measure, which would get similar priority in the Senate if it’s approved in the lower house. The lower house won’t vote on the bill today, its news agency said on its website.
In an interview last week with Radio Itatiaia of Belo Horizonte, Brazil, Rousseff said Marco Civil “clearly shows Brazil’s position” that data should be stored within the country, not “in the United States as it is today.”
Internet trade associations and the International Chamber of Commerce said in an open letter to the Brazilian congress that the data-center proposal would hurt the country’s competitiveness, increase the cost of doing business, lead to slower growth and make Brazilian Internet users more vulnerable to hacking.
Google has clashed with governments before, leading the company to make choices to adapt to local laws while still pursuing its mission to make information universally accessible. In China, where officials can block websites that don’t comply with media regulations, Google decided in 2010 to stop altering its search results, redirecting users to a Hong Kong site, limiting its ability to expand in China.
In Latin America, Google is building a 150 million dollars data center in Chile, on the outskirts of Santiago. The facility will be operating by the end of this year. Chile was chosen for Google’s first data center in the region because of “an ideal combination of reliable infrastructure, a skilled workforce and a commitment to transparent and business friendly regulations,” according to a company statement.