In light of NSA spying, Brazil may take a step back from World Wide Web

The NSA has been accused on spying on countries around the world, from Russia to Germany to France. The country with the loudest reaction, however, has been Brazil. Since the revelations, Brazilian president Dilma Rousseff has cancelled a state dinner with President Obama, pushed for worldwide Internet governance through the United Nations, is overseeing the development of a state-run encrypted e-mail system, and suggested Brazil should build underwater cables that would route Internet traffic around the US.

Now the most pressing response is making its way through Brazil's Congress. New legislation would require Brazilian's personal data to be stored within the country, which would force tech giants such as Google and Facebook to build servers on South American soil. When paired with Brazil’s position as an emerging technology hub, this move has some big implications, potentially bolstering the country’s tech industry and shifting Internet dominance away from the US.

“Since there is not [an] international body regulating surveillance ... [Ms. Rousseff] said, 'look, at least I can try to find some way to try to protect Brazilians's communications,' " says Carolina Rossini, project director at the Latin American Resource Center, a wing of the New America Foundation in Washington.

A draft of this legislation was introduced in Brazil’s House of Representatives last week, and comes as part of the larger Marco Civil da Internet bill, dubbed the "Internet Constitution" that seeks to be the first set of Internet governance rules in Brazil. The Marco Civil has been in the works since 2009, but the spying revelations prompted the addition of data-storage provisions, and sent the bill on a legislative fast track.

Its passage could have reverberations worldwide. Rousseff spoke out strongly against US online surveillance at the UN General Assembly in September, and Brazil, along with Germany, proposed a resolution to the UN on Thursday that urged an international focus on citizens' right to online privacy.

Some worry about whether moving toward a more country-specific Internet would hurt the open-border philosophy that largely governs the Web. Speaking at a New America Foundation event in September, Google executive chairman Eric Schmidt said the move by Brazil would encourage a “balkanization” of the Web.

"The real danger [from] the publicity about all of this is that other countries will begin to put very serious encryption – we use the term 'balkanization' in general – to essentially split the Internet and that the Internet's going to be much more country specific," Mr. Schmidt said, according to The Guardian. "That would be a very bad thing, it would really break the way the Internet works, and I think that's what I worry about."

Does this mean country-specific Internets are on the rise? Ms. Rossini says physically hosting data in a country doesn't quite equate to Internet censorship seen in certain countries. "It is very different," she says. "What China does, they try to filter the whole Internet and provide alternatives for the citizens" whereas in Brazil this is only a move to physically move citizens' data away from servers in the US where Rousseff believes it would be more susceptible to prying eyes.

As many of the world's major tech, social media, and Internet companies are US-based, requiring the personal data of Brazilian citizens be hosted in Brazil could cost major tech companies millions of dollars. If they refuse to relocate the data, however, the tech companies face losing their stake in the 94 million Brazilian Internet users, who represent Facebook and Twitter's second largest markets, behind the US.

Though this could hurt US-based tech giants, it could be welcome news to local tech businesses. Brazil is a telecommunications hub in Latin America, and a report from Brazilian information communications and technology industry group Brasscom predicted the information-technology sector in Brazil would grow 7.3 percent this year. A push to use local networks and servers could provide a boost to Brazilian tech businesses such as telecommunication company Telebras, whose country-specific network has already started to bring more Internet access to remote areas.

The downside? Servers are expensive to build. Due to high taxes and the cost of electricity, data centers in Brazil cost about $61 million to build on average, compared to $43 million in the United States, according to a study by Brasscom.

"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, in a Reuters article. "Even Brazilian companies prefer to host their data outside of Brazil."

That detail isn't lost on Brazilian lawmakers. According to a draft of the legislation released last week, the bill allows for optional regulation of data centers for smaller companies, though would likely still affect large non-Brazilian companies. But legislation is still pending and could be edited before being voted on this week (though the vote may be postponed again due to debate). 

Some have speculated that this could be politically motivated. Rouseff’s approval rating has dropped in recent months, with protests rocking the country in June and July, and she is gearing up for a 2014 re-election campaign. But she isn’t without support: The spying revelations reminded many Brazilians of the authoritarian government that ruled the country from 1964 to 1985, when unwarranted surveillance was the norm.

However, Internet experts cast doubt on whether any of Rousseff’s solutions are viable: An AP story points out it would likely be expensive and ineffective to implement Rouseff's proposed plans. And Rossini points out despite squabbles over surveillance, ultimately the world wide aspect of the Web is still what binds countries together.

"We are all economically dependent on each other, Brazil is dependent on the US and the US is dependent on Brazil," she says. "So nobody is going to cut the Internet in pieces if we have those economic controls in place."