Angered by revelations of National Security Agency surveillance, Brazilian officials have stepped up work on legislation to make Internet companies store data locally, so it is subject to Brazilian law.
The move underlines fears that revelations about NSA snooping on global communications are provoking an online trade war of sorts.
"These are exactly the types of repercussions that we feared would happen when the NSA leaks first came out," Daniel Castro, a senior analyst at the Information Technology & Innovation Foundation, told The Washington Times Friday.
Countries like Brazil are using the NSA leaks "to justify anti-competitive measures designed to boost domestic companies at the expense of foreign competitors," Mr. Castro said.
Brazilian President Dilma Rousseff believes the proposed law would help shield Brazilians from further U.S. prying, and she may urge other countries to take similar measures when she speaks at the United Nations General Assembly later this month, a senior Brazilian official told Reuters.
The legislation is being drafted by a lawmaker in Ms. Rousseff's left-wing Workers' Party and is slated to be finished next week. The law would compel foreign-based Internet and social media companies like Facebook and Google to maintain data centers inside Brazil that would subject to Brazilian privacy laws, officials told the news agency Thursday.
Mr. Castro said that, in the short-term, the move would likely "raise the cost of doing business in Brazil, especially for foreign companies."
In the long term, he said the impact might be more severe, if other nations "follow suit and erect their own barriers on the Internet," creating "a domino effect."
Analysts say many European nations are keen to promote domestic Internet providers at the expense of U.S.-based global giants like Microsoft, and India may ban e-mail services from Google and Yahoo, the Wall Street Journal reported.
Forrester Research, a business forecasting service, predicted last month that the backlash could cost U.S. companies as much as $180 billion by 2016 — "a 25 percent hit to overall IT service provider revenues."
Some in Brazil were already promoting such a law even before the June revelations from NSA leaker Edward J. Snowden, Mr. Castro said, but lacked traction and support from the president herself.
"The NSA spying revelations have basically fast-tracked every piece of anti-American legislation around the world," he concluded.
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