By Esteban Israel and Anthony Boadle
SAO PAULO/BRASILIA (Reuters) - Brazil, seeking to shield its citizens from alleged U.S. spying, is pushing ahead with its plan to force global Internet companies to store data obtained from Brazilian users inside the country, according to a draft of the law seen by Reuters.
Despite opposition from multinational software, hardware and telecommunications companies, President Dilma Rousseff is pressing lawmakers to vote as early as this week on the law, sparked by disclosures of widespread U.S. spying on Brazilian telecommunications data.
If passed, the new law could impact the way Google, Facebook, Twitter and other Internet giants operate in Latin America's biggest country and one of the largest telecommunications markets in the world.
A draft of the law says "the government can oblige Internet service companies ... to install and use centers for the storage, management and dissemination of data within the national territory."
The government would evaluate the requirement for each company, the draft says, "taking into consideration their size, their revenues in Brazil and the breadth of services they offer the Brazilian public."
Rousseff's insistence follows disclosures of surveillance by the United States in Brazil that went as far as tracking the personal phone calls and emails of Rousseff herself.
It follows recent reports of similar U.S. spying on the leaders and citizens of Germany, France and dozens of other countries.
The disclosures, like the reports of surveillance by U.S. intelligence agencies on American citizens and businesses, come from documents leaked by Edward Snowden, the former contractor for the U.S. National Security Agency.
The spying has given Rousseff, a leftist who is expected to run for another four-year term in 2014, a cause celebre to pursue both at home and on the international stage, especially after Germany said it would back a Brazilian proposal at the United Nations that would seek to strengthen international rules for Internet governance and put limits on foreign surveillance.
Brazil will host a conference in Rio next April to discuss ways to guard Internet privacy from espionage. The meeting will be held by ICAAN, the body that manages web domain names and is considered neutral by many because it includes governments, civil society and industry.
First, though, comes the focus on Brazilian data.
Proponents of the law say in-country data centers would make companies answerable to local privacy rules and other Brazilian laws. They dismiss industry fears that the law would make online activities costly and inefficient and create unnecessary barriers in what is supposed to be a frontier-free Internet.
"We are not regulating the way information flows, just requiring that data on Brazilians be stored in Brazil so it is subject to the jurisdiction of Brazilian courts," Rousseff spokesman Thomas Traumann said. "This has nothing to do with global communications."
Given the outrage felt by many Brazilian lawmakers after the disclosures of American spying, Traumann added, the government is confident it has enough votes to pass the bill. Brazil's lower house of Congress is expected to vote on it as early as Wednesday.
Internet companies have been lobbying hard to try to stop what they see more as a political reaction to U.S. spying than an effective measure to ensure data protection.
Last week, a coalition of business groups representing dozens of Internet companies including Facebook, Google, Microsoft and eBay sent a letter to Brazilian lawmakers. "In-country data storage requirements would detrimentally impact all economic activity that depends on data flows," it read.
Industry sources say forcing companies to have in-country data centers will not address Brazil's privacy concerns, because the same information will be replicated in servers abroad.
Instead, they warn, it could scare companies away, depriving Brazilians of services and causing problems for industries, like finance and air travel, that rely heavily on data storage.
By some calculations, taxes and high costs of energy make data centers in Brazil up to 100 percent more expensive than in the United States, costing an estimated $200 million.
But the government argues the size of the market justifies having part of the infrastructure in the country, especially when companies like Google, which recently built a data center in Chile, are already setting it up nearby.
"The Brazilian market is huge," a senior official said. "There is a consensus within the government that if the market is here it makes sense to have the data centers here too."
Some in the industry believe big companies would eventually comply, if given no choice.
Others, however, say companies could skip Brazil or choose to operate remotely. That's especially true for companies that don't already have a physical presence in Brazil because the law, according to the draft, would apply to foreign companies with offices in the country.
(Editing by Paulo Prada and Sandra Maler)