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Snowden’s Ride, Part 15: Economic Blitzkrieg against U.S. Electronics and Internet Business?

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COMMENT: In our continuing analysis of the adventures of Eddie the Friendly Spook (Snowden) we revisit an aspect of our complex analysis that concerns economic warfare against the United States.

(Our series on this is long, complex and multi-layered: Part IPart IIPart IIIPart IVPart VPart VIPart VII, Part VIIIPart IXPart X, Part XI, Part XIIPart XIIIPart XIVPart XVPart XVIPart XVIIPart XVIIIPart XIX, Part XXIt is impossible to do justice to this analysis within the scope of this post. Please digest the rest of the material, in order to come to terms with what we are presenting.)

For purposes of the analysis presented in this post, several previous entries dealing with the economic warfare aspects of this case bear examination. 

A recent editorial in The San Jose Mercury News (Tues. September 10, 2013, p. A9) opined: “Revelations that the National Security Agency has cracked the encryption technology that was supposed to protect Internet users’ privacy is a nightmare for Silicon Valley. . .”

The concerns expressed by the Mercury News and echoed by Silicon Valley CEO’s at a recent high tech conference go to the thrust of the main part of what we feel is the primary goal of this multi-layered psy-op: to do to the Silicon Valley and the U.S. electronic business what the German and Japanese automobile industry’s capture of much of the U.S. market did to the city of Detroit.

In this regard, a number of things come to mind: 

  • Leaking journalist Glenn Greenwald stated that Snowden’s goal in leaking this information was to alert people that the software they were using was being accessed by NSA without their knowledge–a consideration that is almost certain to damage U.S. internet companies. (See text excerpts below.)
  • Fear around the world about the NSA spying coverage is believed to be damaging U.S. internet companies. (See text excerpt below.)
  • A recent story in the German periodical Die Zeit claimed that the German government warned against using Windows 8 (and also Chromebook, a Google product) because the TPM chip had been equipped with a “back door” to permit the NSA to clandestinely access information. Although the German government denied that they had actually said that, it appears that damage may have already been done, perhaps deliberately. (See text excerpts below.)
  • As it happens, the leading maker of TPM chips is a German firm, Infineon, suggesting the distinct possibility that BND may be doing what the Die Zeit article accuses the NSA of doing. Note that BND has been doing exactly what the NSA has been doing for many, many years. (See text excerpts below.)
  • In an update 99/26/2013), we learn that Infineon is a spinoff of Siemens AG, one of the German core corporations, a key element of the Bormann capital network and inextricably linked with the BND! (See text excerpts below.)
  • An unnamed European chip maker has been placing kill switches in microprocessors, permitting the sabotage of high-tech weapons systems. Might that have been Infineon Technologies?
  • In numerous posts, we have discussed the fact that the GOP has been infiltrated by the Underground Reich to such an extent that it is little more than a Nazi/fascist front at this point. Note that the GOP is de-funding scientific and technological development to such an extent that it fundamentally threatens the American high-tech economy, the Silicon Valley in particular. (See text excerpts below.) Of particular interest in this regard is the fact that the leading budget cutters are the Paulistinian “libertarian” elements of the GOP. The possibility that this may be a deliberate act on the part of an Underground Fifth Column is one to be seriously considered.

“About the Reuters Article” by Glenn Greenwald; The Guardian; 7/13/2013.

EXCERPT: . . . .A: Snowden has enough information to cause more damage to the US government in a minute alone than anyone else has ever had in the history of the United States. But that’s not his goal. [His] objective is to expose software that people around the world use without knowing what they are exposing themselves without consciously agreeing to surrender their rights to privacy. [He] has a huge number of documents that would be very harmful to the US government if they were made public. . . .

“Zuckerberg Says U.S. ‘Blew it’ on NSA Spying” by Brandon Bailey; San Jose Mercury News; 9/11/2013.

EXCERPT: Facebook CEO Mark Zuckerberg lashed out at the U.S. government Wednesday, saying that authorities have hurt Silicon Valley companies by doing a poor job of explaining the online spying efforts of U.S. intelligence agencies.

“Frankly I think the government blew it,” Zuckerberg complained during an onstage interview at the tech industry conference known as Disrupt, a weeklong event where Yahoo (YHOO) CEO Marissa Mayer and other prominent tech executives also spoke out publicly and expressed frustration in person, for the first time, since a series of news leaks revealed the government’s controversial surveillance programs.

“It’s our government’s job to protect all of us and also protect our freedoms and protect the economy, and companies,” Zuckerberg told interviewer Michael Arrington, “and I think they did a bad job of balancing those things.”

He went on to say: “They blew it on communicating the balance of what they were going for.”

Facebook and other Internet companies have been under intense pressure in recent months after a series of news reports that suggest U.S. intelligence agencies have gained access to the online activities and communications involving users of Facebook and other popular services. Some of those reports have suggested that unnamed companies have cooperated with the U.S. efforts, although the details are unclear.

Analysts say those reports could hurt the companies financially, especially overseas, if if consumers and business customers believe their sensitive information isn’t safe from government prying. . . . .

“After Edward Snowden’s Rev­e­la­tions, Why Trust US Cloud Providers?: The NSA’s Activ­i­ties Are a Mas­sive Blow for US Com­puter Businesses” by John Naughton [The Observer]; The Guardian; 9/14/2013.

“It’s an ill bird,” runs the adage, “that fouls its own nest.” Cue the US National Secu­rity Agency (NSA), which, we now know, has been busily doing this for quite a while. As the Edward Snow­den rev­e­la­tions tum­bled out, the scale of the foul­ing slowly began to dawn on us.

Out­side of the United States, for exam­ple, peo­ple sud­denly began to have doubts about the wis­dom of entrust­ing their con­fi­den­tial data to cloud ser­vices oper­ated by Amer­i­can com­pa­nies on Amer­i­can soil. As Neelie Kroes, Euro­pean Com­mis­sion vice pres­i­dent respon­si­ble for dig­i­tal affairs, put it in a speech on 4 July: “If busi­nesses or gov­ern­ments think they might be spied on, they will have less rea­son to trust the cloud and it will be cloud providers who ulti­mately miss out. Why would you pay some­one else to hold your com­mer­cial or other secrets, if you sus­pect or know they are being shared against your wishes? Front or back door – it doesn’t mat­ter – any smart per­son doesn’t want the infor­ma­tion shared at all. Cus­tomers will act ratio­nally and providers will miss out on a great oppor­tu­nity.“

Which providers? Why, the big US inter­net com­pa­nies that have hith­erto dom­i­nated the mar­ket for cloud ser­vices – a mar­ket set to dou­ble in size to $200bn (£126bn) over the next three years. So the first own goal scored by the NSA was to under­mine an indus­try that many peo­ple had regarded as the next big thing in cor­po­rate com­put­ing.

“Microsoft Seeks Calm On Ger­man Secu­rity Panic Over Win­dows 8” by Tom Brewster; Techweek Europe; 8/23/2013.

EXCERPT: Claims that there is a back­door in Win­dows 8 giv­ing access to all ver­sions of the oper­at­ing sys­tem to US intel­li­gence have been gen­tly rebuffed by Microsoft.

A reporter in Zeit had sug­gested the back­door stemmed from the Trusted Plat­form Mod­ule, or TPM chip, which seeks to improve secu­rity by pow­er­ing the Secure Boot process that checks for and ignores mali­cious low-level code when a machine starts up. It does this through cryp­to­graphic keys that ensure code can­not be tam­pered with on load­ing and that the code is legitimate.

The Zeit writer had sug­gested the TPM could give the man­u­fac­turer of a device con­trol over it.

He said that in light of the leaks from Edward Snow­den, it would not be a sur­prise if TPM 2.0, the ver­sion used by Win­dows 8, was actu­ally a back­door the National Secu­rity Agency (NSA) could eas­ily exploit. As the chips pow­er­ing TPM are man­u­fac­tured in China, the Chi­nese could eas­ily access Win­dows 8 machines too, the report alleged.

The reporter attained doc­u­ments from the Ger­man gov­ern­ment that led him to reach his sup­po­si­tion. But the Ger­man gov­ern­ment has not said there is a back­door in the OS.

The Office for Infor­ma­tion Secu­rity (BSI) later clar­i­fied the government’s posi­tion, and did say the use of TPM 2.0 and Win­dows 8 (TPM is used in other non-Windows machines, includ­ing Chrome­books, mak­ing the claims even more ques­tion­able) meant the user had to deal with “a loss of con­trol over the oper­at­ing sys­tem and the hard­ware used”. This could lead to greater risk for the fed­eral gov­ern­ment and crit­i­cal infra­struc­ture, it said.

But the body said it had not warned the gen­eral pub­lic nor gov­ern­ment bod­ies against using Win­dows 8.

It said “the newly estab­lished mech­a­nisms can also be used for sab­o­tage by third par­ties”, but appeared only to be talk­ing gen­er­ally about vul­ner­a­bil­ity exploita­tion. There was no sug­ges­tion of a pur­pose­ful back­door, as Zeit had hypoth­e­sised, even if the BIS does have prob­lems with TPM.

Microsoft has responded to the ker­fuf­fle first by deny­ing it has ever pro­vided such access to users’ data and by talk­ing up the secu­rity ben­e­fits of TPM 2.0. It sug­gested gov­ern­ment depart­ments would be wise to use the secu­rity pro­tec­tions it pro­vides by default. But for those gov­ern­ments who want to gain back con­trol of their machines, they can go with OEMs who make Win­dows PCs with­out TPM. . . .

Can Hewlett-Packard Capitalize on Microsoft’s Missteps? by Joshua Bondy; The Motley Fool; 8/28/2013.

EXCERPT: With major industrial giants like Siemens, Germany is no small fry. As of 2012, it was the fourth-largest economy in the world. The German government’s recent announcement [that Windows 8 is unsafe due a backdoor called the Trusted Platform Module], is a dangerous omen for Microsoft (NASDAQ: MSFT ) .

AN ALTERNATIVE EXISTS

The growth of open-source computing is causing major headaches for Microsoft, and this situation is no different. Linux is open source, and generally has fewer security vulnerabilities than Windows. Government and corporate IT departments are starting to realize that they can make their operations more secure and cut costs by switching from Windows to Linux. Using open-source alternatives to Microsoft Office is yet another way to lower costs. The City of Munich recently moved 14,000 desktop PCs to Linux and plans to save $13 million by using LibreOffice.

MICROSOFT’S FUTURE

European Union austerity is making governments look for cost savings wherever possible. Microsoft is already feeling the pain in its bottom line. In 2013, operating income for the Windows division fell to $9.5 billion from $12.3 billion in 2011, and falling PC sales paint a grim future. . . .

“Don’t Let Para­noia over the NSA and TPM Weaken Your Security” by Ed Bott; ZDNet; 8/23/2013.

EXCERPT: The unin­tended by-product of Edward Snowden’s NSA doc­u­ment dump is a bull mar­ket in para­noid con­spir­acy theories.

The lat­est exam­ple is the breath­less report out of Ger­many that Microsoft and the NSA have con­spired to give Amer­i­can spies access to every copy of Win­dows 8, enforced by a mys­te­ri­ous chip called the Trusted Plat­form Mod­ule, or TPM. “It’s a back­door!” scream the con­spir­acy theorists.

Appar­ently, Microsoft is so pow­er­ful that it is able to influ­ence even its most bit­ter ene­mies.

. . . .The point is, a TPM is a platform-neutral device. It pro­vides a secure way to encrypt data so that it can’t be accessed by any­one except you, and it pro­tects your device from being tam­pered with. Both of those fea­tures are highly desir­able these days.

But who knows what’s going on in that chip? I mean, they say it’s just a secure place to store encrypted keys, but who knows what else it can do? Obvi­ously the Amer­i­can gov­ern­ment or maybe the Chi­nese have intim­i­dated the chip’s man­u­fac­turer, right?

Uh, maybe not. The most pop­u­lar maker of TPM tech­nol­ogy is Infi­neon Tech­nolo­gies AG , which is based in … Neu­biberg, Ger­many. Per­haps those intre­pid Ger­man jour­nal­ists could, you know, hop on a train and head down to Infi­neon to see for themselves.

“Infineon Technologies’; Wikipedia.

EXCERPT: Infineon Technologies AG is a German semiconductor manufacturer founded on 1 April 1999, when the semiconductor operations of the parent company Siemens AG were spun off to form a separate legal entity. As of 30 September 2010, Infineon has 25,149 employees worldwide. In fiscal year 2010, the company achieved sales of €3.295 billion. . . .

“The Hunt for the Kill Switch” by Sally Adee; IEEE Spec­trum; 5/1/2008.

Are chip mak­ers build­ing elec­tronic trap­doors in key mil­i­tary hard­ware? The Pen­ta­gon is mak­ing its biggest effort yet to find out . . . .

. . . . Accord­ing to a U.S. defense con­trac­tor who spoke on con­di­tion of anonymity, a ”Euro­pean chip maker” recently built into its micro­proces­sors a kill switch that could be accessed remotely. French defense con­trac­tors have used the chips in mil­i­tary equip­ment, the con­trac­tor told IEEE Spec­trum. If in the future the equip­ment fell into hos­tile hands, ”the French wanted a way to dis­able that cir­cuit,” he said. Spec­trum could not con­firm this account inde­pen­dently, but spir­ited dis­cus­sion about it among researchers and another defense con­trac­tor last sum­mer at a mil­i­tary research con­fer­ence reveals a lot about the fever dreams plagu­ing the U.S. Depart­ment of Defense (DOD). . . .

“The GOP Plan to Crush Sil­i­con Val­ley: What Will Become of Steve Jobs’s Angel?” by John B. Judis; The New Republic; 8/20/2013.

EXCERPT: When Con­gress returns from its sum­mer recess in early Sep­tem­ber, it will have exactly nine leg­isla­tive days to agree on a bud­get or the gov­ern­ment will shut down. House Repub­li­cans are seek­ing far greater cuts in non-defense spend­ing than Sen­ate Democ­rats, and some mem­bers of the GOP are threat­en­ing to hold up any bud­get agree­ment until the Obama admin­is­tra­tion aban­dons the Afford­able Care Act. It’s going to be a slog, with all sorts of unseemly com­pro­mises. But let me sug­gest an area where Democ­rats should allow exactly zero more dol­lars to be excised from the fed­eral bud­get: gov­ern­ment research for sci­ence and tech­nol­ogy. We’ve already seen a 13 per­cent drop in this area over the last two years, and it’s hard to over­state just how dam­ag­ing to the country’s future fur­ther reduc­tions would be.

Many peo­ple still cling to the idea that gov­ern­ment is, with­out excep­tion, a drag upon the pri­vate econ­omy. Con­ser­v­a­tives “know that when it comes to eco­nomic progress,” Arthur Brooks, the pres­i­dent of the Amer­i­can Enter­prise Insti­tute, wrote last year in National Review, “the best gov­ern­ment phi­los­o­phy is one that starts every day with the ques­tion, ‘What can we do today to get out of Amer­i­cans’ way?’ ” They imag­ine the United States as a land of plucky inventor-entrepreneurs (“We built it!” they cry) who work out of garages and depend solely on their wits. The prob­lem is that this vision of Amer­i­can inven­tive­ness is pure myth.

Steve Jobs, who has nearly been beat­i­fied in his role as inde­pen­dent busi­ness­man, excelled at design­ing prod­ucts based on government-funded inven­tions. Some of Apple’s most vaunted achievements—the mouse, a graph­i­cal user inter­face, the touch-screen, even Siri—were all devel­oped in part with fed­eral finances. Or take Google. Its search engine came out of a $4.5 mil­lion digital-libraries research grant from the National Sci­ence Foun­da­tion (NSF). You can also look at the phar­ma­ceu­ti­cal indus­try. Accord­ing to a Con­gres­sional Bud­get Office study, 16 of the 21 “most influ­en­tial drugs” intro­duced between 1965 and 1992 depended on fed­er­ally funded research.

The list goes on. Fed­eral money helped sup­port the inven­tion of lasers, tran­sis­tors, semi­con­duc­tors, microwave ovens, com­mu­ni­ca­tion satel­lites, cel­lu­lar tech­nol­ogy, and the Inter­net. Now, the feds are prime back­ers of the Human Genome Project (which could trans­form med­i­cine) and nan­otech­nol­ogy (which could trans­form man­u­fac­tur­ing). Sub­tract these kinds of inno­va­tions from America’s future, and you have an econ­omy depen­dent on tourism, the tot­ter­ing super­struc­ture of big finance, and the export of raw mate­ri­als and farm prod­ucts. More to the point, you have a weaker country—not just in com­par­i­son with its com­peti­tors, but also in its abil­ity to pro­vide its cit­i­zens with richer, longer, more imag­i­na­tive lives. . . .

Discussion

9 comments for “Snowden’s Ride, Part 15: Economic Blitzkrieg against U.S. Electronics and Internet Business?”

  1. http://www.theatlantic.com/international/archive/2013/09/pirates-in-germany-dodge-the-nsa-s-watchful-gaze/279516/

    The Atlantic
    ‘Pirates’ in Germany Dodge the NSA’s Watchful Gaze
    (Encryption pirates, not plundering pirates)
    GREG THOMAS SEP 10 2013, 10:59 AM ET

    BERLIN — On a warm August night, inside a meeting room at the Berlin House of Representatives, American digital privacy activist Jacob Appelbaum pulled a small electronic device from his backpack and issued a challenge to parliament: The member who agreed to run the device, a custom WiFi node, from an office in the building could have it for free.
    “If someone from the parliament here really believes in free speech, I’m happy to give this to them,” said Appelbaum. The node boosts the signal of a worldwide encryption network called TOR. Short for The Onion Router (think protective layers), TOR software provides a web browser that cloaks IP addresses, granting anonymity to Internet users. The National Security Agency’s controversial PRISM program is thought to be using Internet nodes in foreign countries for espionage. TOR nodes create a blanket that shields Web content — emails, instant messages, metadata and browser histories, for example — from the government’s gaze. Without anonymity and privacy, Appelbaum argues, freedom is a fallacy.

    “Fundamentally, it’s a very old idea that you should be free to read and free to speak and you should be free to do this without having to identify yourself,” Appelbaum told a packed room of concerned faces — about 60 in all. Appelbaum, a young man with thick-framed glasses and impeccably clear enunciation, acted as a de facto spokesman for WikiLeaks in 2010 after the group released intelligence cables handed over by Bradley Manning. With TOR, he explained, “instead of the 20th and 21st century surveillance state, you’re returning to a state where privacy is the norm.”

    Appelbaum’s audience, a mix of programmers, off-duty journalists, and concerned citizens, leaned forward in their chairs and listened closely. Promoting encryption is a key part of Appelbaum’s agenda. Only a small substrata of Internet users currently go to such lengths. But the more people encrypt, the greater grow the hurdles to the kind of widespread government surveillance brought to light by former intelligence contract Edward Snowden. And an effective way to recruit new members to the encryption movement is through public events like the one in Berlin — what have become known as “cryptoparties.”

    Many Germans have regarded ubiquitous web giants like Google and Facebook with a high degree of skepticism since well before Snowden’s intelligence leaks revealed that NSA surveillance relies on cooperation from some of the world’s most powerful telecommunications companies. A popular rationale for Germany’s collective apprehension cites the country’s history of extensive spying by both the Nazi secret police and then, in the 1980s, by Stasi state security forces. In July, German magazine Der Spiegel published an interview Appelbaum conducted with Snowden in which the former government contractor claimed that the NSA and German authorities are “in bed together.”

    As of August 27, Germany was second only to the U.S. in the number of active TOR users (with nearly 49,000 users to the U.S.’s 97,000). In August, global TOR connections spiked to 150,000 monthly users, up from about 50,000 users in June and July. Publicly, incensed Germans are staging street protests and urging lawmakers to intervene with mechanisms that protect their web activities from the prying eyes of government. Privately, they’re turning to hackers for lessons on how to do it themselves.

    Laptops open, dozens of people listening to Appelbaum prepared for an evening of privacy instruction. At cryptoparties, privacy activists and software specialists tutor people in the craft of data defense. Appelbaum led a workshop on TOR while two German instructors ran basic primers in encryption protocols called off-the-record messaging (OTR) and “pretty good privacy” (PGP). OTR prevents instant messaging conversations from being logged or viewed by outsiders. PGP is a program used to encrypt and decrypt messages and files, including emails. Communications between Snowden and Guardian reporter Glenn Greenwald and documentarian Laura Poitras were secured using PGP.

    A common analogy for explaining the importance of encryption supposes that an unencrypted message sent via, say, Gmail, exposes information to Google and an Internet service provider as if it had been written on a postcard and dropped in the mailbox. “You don’t see the postman but he’s certainly there,” said Anne Roth, a digital privacy activist in Berlin. Cryptoparty attendees are wary of the postman and his loyalties.

    As expressions of political activism, cryptoparties first took root in 2011 in Australia when lawmakers were considering hotly contested legislation intended to reign in cybercrime. The bill, which passed in 2012, allows government authorities to force Internet service providers and carriers to retain and relinquish customer data. Even foreign governments could demand the information. In a letter to the Australian government, civil liberties group Electronic Frontiers Australia cautioned that the bill “can potentially enable arbitrary interference with privacy and correspondence.”

    In the past two years, cryptoparties have sprung up in Oakland, Boston, Calgary, Cairo, Reykjavik, London, Brussels, Manila, and elsewhere. The event in Berlin was the latest in a series of post-PRISM cryptoparties on German soil – and perhaps the country’s largest to date. The gatherings are often ad hoc, hosted by IT experts, and typically draw between five and a dozen pupils of varying ages, technical experience, and professional backgrounds. One such party in Cologne in July drew, among others, a tango instructor, a healthcare worker, and a schoolteacher.

    The Berlin event was hosted by Alexander Morlang, a parliamentarian who belongs to Germany’s digitally vigilant Pirate party. He made a point of inviting roughly 180 government administrators. None showed.

    “It’s important to teach employees of the government in case they want to do some whistle-blowing at some point,” said Morlang, a sturdy, bespectacled man with a pony-tail. His t-shirt read, “Hell yeah it’s rocket science!”

    A professional systems administrator, Morlang won his seat in 2011 during Germany’s second wave of Pirate nominations and served as chairman of a parliamentary committee on Digital Management, Data Protection and Freedom of Information until April. The first wave of Pirates were elected in 2009 during heated debate over a data retention law that drew criticisms similar to those raised in Australia. (A year after the German law passed, the country’s high court suspended it, citing privacy concerns.) In the wake of the NSA surveillance leaks, the concerns around which the Pirates built their campaigns — fears that some opponents called paranoid — have gained cross-party resonance.

    “All democratically elected political parties have to take the topic of data protection on board,” said Jochim Selzer, a mathematician and cryptoparty coordinator, in an interview with German broadcaster Deutsche Welle in July. “The issue can’t be owned by a single party.”

    For their part, the Pirates count digital privacy as fundamental right, not a privilege subject to compromise in the name of national security. Cryptography is a means to that end. It offers a sense of control and relief to people concerned that their personal liberties are being siphoned through their smartphones and ethernet cables.

    “I’m worried that the government won’t grant me the privacy I think I deserve,” said Daniela Berger, a developer who attended the Berlin cryptoparty to learn about TOR. Like many Germans, she is both angry and disheartened by her country’s role in NSA surveillance operations. “I think my freedom should be of high value to my government and right now we’re steering in a direction where my privacy is an afterthought, if it’s a thought at all.”

    A common refrain from people who don’t encrypt is that they have nothing to hide, so why bother? Allowing the government to comb through personal data is no problem if it might help foil the next terrorist plot, the reasoning goes.

    Appelbaum and Roth would argue that encryption is a means of protecting freedom of expression of government overzealousness. Roth’s partner, Andrej Holm, a sociology professor at Humboldt University in Berlin, was arrested one summer morning in 2007 during a raid on the couple’s home. Authorities suspected him of leading a group of arsonists who had staged attacks in the city months earlier. Language he had used in academic essays about gentrification and urban policy bore similarities to rhetoric the arsonists used when claiming responsibility for the responsibility for the attacks, the government said. A pretrial detention document noted that authorities’ suspicions were triggered, in part, by Holm encrypting his emails.
    After he spent time in jail and solitary confinement, a federal court ruled that the suspicions were not justified and overturned the arrest warrant. Holm, who by then was out on bail, did not have to return to jail. “Many people think you must have something to hide if you’re encrypting your email,” Roth said. “It’s something we have to get past.”

    “Right now, as soon as someone is encrypting, he gets flagged” by government monitors, Morlang said. His theory is that so few Internet users go to such lengths to shield their data that the act alone is viewed as suspicious, even when the encrypted content is harmless. If the technique were to become the norm — if it reaches a critical mass of, say, 30 percent adoption, Morlang said — that might reduce the risk of getting flagged.

    Morlang likened such a proliferation to a denial-of-service (DDoS) attack — a common weapon of hackers around the world that has been used to bring down websites of governments, banks, and news organizations. “We need to show that this surveillance practice is an unsustainable use of government resources,” he said. But couldn’t more encryption make the government’s job of finding potential terrorists more difficult? Rolling a cigarette with his fingers, Morlang chose his words carefully.
    “Banning cryptography is not an option, and we will never get the government to stop monitoring,” he said. “But we can make it really expensive. If everyone is encrypting, then the government has to take more care with who it investigates.” Authorities would then have to resort to using more targeted and time-consuming tactics, like a targeted piece of malware. “Maybe they only use that 20 times a year, when they really have to,” Morlang said.

    In the meantime, Morlang is coming to terms with the idea that encryption might put its users even more squarely in the government’s sights. “This is the price we pay to win the crypto war.”

    Posted by TBD | September 16, 2013, 5:46 pm
  2. Cloud computing is another area of the US tech sector that’s getting a lot of scrutiny following the NSA leaks. Notice how the obvious question “and why on earth would anyone trust any other major governments with their cloud data, especially all the governments that feigned shock at the NSA leaks only to get caught doing the same thing?” stll rarely gets asked:

    After Edward Snowden’s revelations, why trust US cloud providers?

    The NSA’s activities are a massive blow for US computer businesses

    John Naughton
    The Observer, Saturday 14 September 2013

    “It’s an ill bird,” runs the adage, “that fouls its own nest.” Cue the US National Security Agency (NSA), which, we now know, has been busily doing this for quite a while. As the Edward Snowden revelations tumbled out, the scale of the fouling slowly began to dawn on us.

    Outside of the United States, for example, people suddenly began to have doubts about the wisdom of entrusting their confidential data to cloud services operated by American companies on American soil. As Neelie Kroes, European Commission vice president responsible for digital affairs, put it in a speech on 4 July: “If businesses or governments think they might be spied on, they will have less reason to trust the cloud and it will be cloud providers who ultimately miss out. Why would you pay someone else to hold your commercial or other secrets, if you suspect or know they are being shared against your wishes? Front or back door – it doesn’t matter – any smart person doesn’t want the information shared at all. Customers will act rationally and providers will miss out on a great opportunity.”

    Which providers? Why, the big US internet companies that have hitherto dominated the market for cloud services – a market set to double in size to $200bn (£126bn) over the next three years. So the first own goal scored by the NSA was to undermine an industry that many people had regarded as the next big thing in corporate computing.

    But, in a way, even more disturbing was the realisation that the NSA seems to have covertly suborned the process by which encryption standards are set by the supposedly independent US National Institute of Standards and Technology (NIST). In 2006, NIST published the standard (ie technical protocol) for encryption on the web that was subsequently adopted by the International Organisation for Standardisation (ISO), which has 163 countries as members. What nobody knew until Edward Snowden revealed it was that the 2006 standard was effectively written by the NSA and that it had inserted a secret back door into the encryption system for its own use. “The road to developing this standard was smooth once the journey began,” a NSA memo noted. “However, beginning the journey was a challenge in finesse.”

    I’ll bet it was. Technical standards are to networking as oxygen is to life. And, broadly speaking, the way they are shaped has always been co-operative and open. In the internet world, for example, it’s done by groups of engineers with specialist expertise in a particular area who gather to hammer out, by a process of open discussion, successive versions of a protocol until they converge on something that is agreed to be workable. “We believe,” one of the pioneers of the process wrote, “in rough consensus and running code.” But at the heart of the process is the assumption that everyone participating – whether from companies or academia – is working in the public interest rather than trying to advance the narrower interests of their organisation.

    That’s why the discovery that the NSA abused that kind of trust is so depressing. And, in a way, it represents the biggest own goal of all, because it fatally undermines one of the fundamental tenets of US foreign policy, namely that governance of the internet is best left in American hands. As the net became increasingly global, this was already looking like a threadbare proposition. The NSA has ensured that it is now untenable.

    Which brings us back to birds and their nests. I forgot to mention that of course the official seal of the US president is… an eagle.

    And here’s an article that actually addresses the realities that no cloud computing service is truly trustworthy (that would require encryption technology no one could ever break even with a court order). The article suggests that there won’t really be much of an impact on the US cloud services for a variety of reasons including that tech companies might already realize that their local governments are also quite capable of spying on their cloud service providers. It’s a nice reminder that we’re really entering more of a “choose your Big Brother of choice” model vs a “choose real privacy if you want it” model for online communication. Plus, as the article points out, it might even be helping the US encryption companies. At least that’s the theory. We still have to wait and see what the long-term impact will be. With the global cloud computing industry poised to grow massively over the next few years the industry could change in very unpredictable ways. But the article makes one thing clear: US cloud computing firms won’t be getting any referrals from Bertelsmann:

    Analysis: Despite fears, NSA revelations helping U.S. tech industry

    By Joseph Menn

    SAN FRANCISCO | Sun Sep 15, 2013 9:09am EDT

    (Reuters) – Edward Snowden’s unprecedented exposure of U.S. technology companies’ close collaboration with national intelligence agencies, widely expected to damage the industry’s financial performance abroad, may actually end up helping.

    Despite emphatic predictions of waning business prospects, some of the big Internet companies that the former National Security Agency contractor showed to be closely involved in gathering data on people overseas – such as Google Inc. and Facebook Inc. – say privately that they have felt little if any impact on their businesses.

    Insiders at companies that offer remote computing services known as cloud computing, including Amazon and Microsoft Corp, also say they are seeing no fallout.

    Meanwhile, smaller U.S. companies offering encryption and related security services are seeing a jump in business overseas, along with an uptick in sales domestically as individuals and companies work harder to protect secrets.

    “Our value proposition had been that it’s a wild world out there, while doing business internationally you need to protect yourself,” said Jon Callas, co-founder of phone and text encryption provider Silent Circle, where revenue quadrupled from May to June on a small base.

    “Now the message people are getting from the newspapers every day is that it’s a wild world even domestically.”

    LITTLE IMPACT

    Google employees told Reuters that the company has seen no significant impact on its business, and a person briefed on Microsoft’s business in Europe likewise said that company has had no issues. At Amazon, which was not named in Snowden’s documents but is seen as a likely victim because it is a top provider of cloud computing services, a spokeswoman said global demand “has never been greater.”

    In the more than three months since Snowden’s revelations began, no publicly traded U.S. company has cited him in a securities filing, where they are required to report events that are material to their business.

    One reason that the prophecies of business doom are getting such a wide airing is that both the U.S. industry and its overseas detractors have been saying the same thing – that customers will stop buying from U.S. cloud companies.

    Politicians in Europe and Brazil have cited the Snowden documents in pushing for new privacy laws and standards for cloud contracts and in urging local companies to steer clear of U.S. vendors.

    “If European cloud customers cannot trust the U.S. government, then maybe they won’t trust U.S. cloud providers either,” European Commission Vice President Neelie Kroes told The Guardian. “If I am right, there are multibillion-euro consequences for American companies.”

    There have indeed been some contract cancellations.

    Charles Mount, chief executive of business file-sharing service OneHub, told Reuters that an automated system that asks customers why they have dropped the OneHub service elicited this reply from an unspecified Bertelsmann unit in Austria:

    “Headquarters is banning storage of company data in the U.S. or with U.S. companies altogether because of the NSA data-mining and industrial espionage. You should watch out for that. Maybe you should think about hosting in Iceland, Sweden or some other place known for complying with their own privacy legislation.”

    Bertelsmann spokesman Christian Steinhof said the company couldn’t confirm that the exchange had occurred and therefore wouldn’t comment.

    FEW GOOD ALTERNATIVES

    There are multiple theories for why the business impact of the Snowden leaks has been so minimal.

    One is that cloud customers have few good alternatives, since U.S. companies have most of the market and switching costs money.

    Perhaps more convincing, Amazon, Microsoft and some others offer data centers in Europe with encryption that prevents significant hurdles to snooping by anyone including the service providers themselves and the U.S. agencies. Encryption, however, comes with drawbacks, making using the cloud more cumbersome.

    On Thursday, Brazil’s president called for laws that would require local data centers for the likes of Google and Facebook. But former senior Google engineer Bill Coughran, now a partner at Sequoia Capital, said that even in the worst-case scenario, those companies would simply spend extra to manage more Balkanized systems.

    Another possibility is that tech-buying companies elsewhere believe that their own governments have scanning procedures that are every bit as invasive as the American programs.

    Some think it’s just a matter of time, however, before U.S. industry suffers significantly.

    “Industry is still in denial,” said Caspar Bowden, once the chief privacy officer at Microsoft and now an independent researcher and privacy advocate in Europe. “It’s like Wile E. Coyote running over the cliff, his legs are still turning but he hasn’t started falling yet.”

    BOON FOR ENCRYPTION SECTOR

    As for the upside, so far only a minority of people and businesses are tackling encryption on their own or moving to privacy-protecting Web browsers, but encryption is expected to get easier with more new entrants. Snowden himself said that strong encryption, applied correctly, was still reliable, even though the NSA has cracked or circumvented most of the ordinary, built-in security around Web email and financial transactions.

    Richard Stiennon, a security industry analyst and author, predicted that security spending will rise sharply.

    A week ago, Google said it had intensified encryption of internal data flows after learning about NSA practices from Snowden’s files, and consultants are urging other big businesses to do the same.

    Stiennon said that after more companies encrypt, the NSA and other agencies will spend more to break through, accelerating a lucrative cycle.

    “They will start focusing on the encrypted data, because that’s where all the good stuff is,” Stiennon said.

    Already, in a fiscal 2013 federal budget request from the intelligence community published this month by the Washington Post, officials wrote that investing in “groundbreaking cryptanalytic capabilities” was a top priority.

    Posted by Pterrafractyl | September 16, 2013, 8:28 pm
  3. With outrage over the NSA spying still growing in Brazil President Rousseff just canceled her planned visit to the US next month. It was to be the first such visit from a Brazilian president to the US since 1995.

    Businessweek
    Brazil Said to Call Off State Visit in Response to Spying (1)
    By Raymond Colitt and Arnaldo Galvao September 17, 2013

    Brazilian President Dilma Rousseff will call off her state visit to Washington next month after President Barack Obama failed to smooth over relations shaken by allegations of espionage, two government officials said.

    The decision to cancel came less than a day after Obama personally called his Brazilian counterpart, the officials said, asking not to be named because Rousseff hasn’t publicly announced her decision. She said in a radio interview this morning the announcement would be made today.

    The decision is the latest fallout from revelations about U.S. interception of Internet and telephone traffic that was expanded after the Sept. 11 terrorist attacks. Brazil has more to lose than the U.S. by canceling the trip, Gabrielle Trebat, a director at strategic advisory firm McLarty Associates in Washington, said.

    “It throws a bucket of cold water on the bilateral trade relationship,” she said by phone this morning. “It jeopardizes numerous commercial interests, especially private sector investment in sensitive sectors that require good political cooperation.”

    Brazil’s trade deficit with the U.S. widened 161 percent in the first half of the year to $6 billion from a year earlier, compared with a surplus of $5.4 billion with China. Brazil also wants to attract U.S. investment for infrastructure and oil and gas projects.

    Full Explanation

    Rousseff is demanding a full explanation for allegations that the U.S. National Security Agency monitored her communications with top aides. The charges were disclosed by TV Globo on Sept. 1 and based on secret documents from former intelligence contractor Edward Snowden. On Sept. 8, TV Globo reported the NSA also spied on state oil company Petroleo Brasileiro SA.

    While calling off the trip, the first Brazil state visit to Washington since 1995, further sours bilateral ties, much of the damage had already been done by the breakdown of trust caused by the spying scandal, said Luiz Augusto de Castro Neves, head of Cebri, a Rio de Janeiro-based foreign relations research institute.

    “Without a doubt canceling the trip carries a cost,” Castro Neves said in a phone interview from Rio de Janeiro yesterday. “More assertive reassurances from the U.S. would have been in order.”

    The alleged spying on Petrobras and Rousseff had nothing to do with anti-terrorist intelligence and required a more accommodating stance by Washington, said Castro Neves.

    It will be interesting to see how this controversy around the Petrobas spying unfolds because the reports about spying on Petrobas have acted as a sort of confirmation in many people’s mind that the NSA is engaged in massive industrial espionage on foreign firms. That’s the official stance of Rousseff herself. James Clapper tried to offer an explanation along the lines of “this was just standard intelligence gathering every nations does regarding major international energy firms given their importance in the energy markets” but that obviously isn’t going to satisfy anyone. So it’s still sort of a mystery as to what the NSA was interested in regarding Petrobas.

    But it’s also a bit of a mystery as to why Rousseff, amongst all the leaders in the world, seems to be so interested in taking the faux-shock as far as possible by forcing the NSA to give a full explanation for why it was interested in Petrobas. After all, Rousseff, a former energy minister herself, is quite close to Petrobas’s leadership and Petrobas has a long and extensive history of corruption. So who knows, there may have been some rather unsavory details in those Petrobas emails that could be prompting real outrage and fear amongst Brazil’s leaders. But it’s a dicey strategy to continue fraying US/Brazil relations until a full explanation is given by the US because, given the reality of Petrobas, that explanation may not be pretty. Maybe it’s a PTSD-induced response:

    Brazil’s spy chiefs suspended in bugging scandal

    (AFP) – Sep 2, 2008

    BRASILIA (AFP) — The chiefs of Brazil’s spy agency have been suspended and a probe launched into allegations the agency eavesdropped on telephone conversations by senior judicial, legislative and government officials.

    President Luiz Inacio Lula da Silva ordered the suspension of the directors of the Brazilian Intelligence Agency (Abin) late Monday, in response to a weekend media report alleging that the spy agency had wiretapped the head of the country’s supreme court.

    The decision was to “ensure transparency” while federal police investigated the scandal.

    But the head of the Institutional Security Cabinet, General Jorge Felix, on Tuesday denied that Abin illegally bugged the supreme court justice’s phone.

    “Certainly not,” he told a congressional committee looking into the allegations.

    “Abin, as an institution, has never done and does not do these things,” he said, adding that legislation does not give the agency wiretapping powers. The federal police, he said, was the agency that carried out telephone intercepts.

    The bugging allegation was raised by the weekly news magazine Veja, which gave its source as an anonymous intelligence officer.

    As proof, it published a July 15 telephone conversation between the supreme court president, Gilmar Mendes, and a senator, Demostenes Torres. Both of the men confirmed the conversation.

    A furious Mendes called the bugging “a lack of control over state apparatus,” while the head of the Brazilian Senate, Garibaldi Alves, called it “an attack on the rule of law.”

    Lula decided to remove Abin’s leaders — including agency chief Paulo Lacerda — from their functions after a day of discussions with several top officials, including Mendes and the defense and justice ministers.

    The allegations also suggest Abin might have illegally recorded a conversation with a government minister, Dilma Rousseff, Lula’s cabinet chief of staff.

    The Brazilian president told the head of the supreme court of his “concern and indignation over the possibility that there might have been an illegal wiretap,” his spokesman Marcelo Baumbach said.

    Before the announcement of the suspension, Abin had opened its own investigation into Veja’s report.

    In front of the special congressional committee, Felix — who was not among those suspended — speculated that the Mendes-Torres conversation “could have been recorded in the senate, in the supreme court, or even in the telephone carriers used in this call.”

    He said he was not rejecting any hypothesis, though, including that of intelligence agents intercepting the call and giving the information to the press. “Abin employees and human and make mistakes,” he said.

    A lawmaker, Marcelo Itagiba, said “the matter is so grave that only congress can conduct an impartial inquiry.”

    He added that illegal wiretaps have multiplied in Brazil, beyond the thousands that are authorized every year. Last year, for instance, 409,000 legal wiretaps were made, he said.

    “The revelation is serious because it involves the leader of one of the state’s powers, and because it revolves around wiretaps of the three powers,” an analyst at the political studies institute Santafe Ideias, Carlos Lopes, told AFP, referring to the powers of the judiciary, the legislature and the executive.

    “This demands drastic measures,” he said, suggesting that Lacerda could be fired.

    Another observer, political commentator Lucia Hipolito, told CBN radio that the scandal showed the government “has lost control of the security apparatus.”

    Posted by Pterrafractyl | September 17, 2013, 12:55 pm
  4. It begins:

    Brazil Looks To Break From U.S.-Centric Internet

    By BRADLEY BROOKS & FRANK BAJAK 5:11pm ET

    RIO DE JANEIRO (AP) — Brazil plans to divorce itself from the U.S.-centric Internet over Washington’s widespread online spying, a move that many experts fear will be a potentially dangerous first step toward fracturing a global network built with minimal interference by governments.

    President Dilma Rousseff ordered a series of measures aimed at greater Brazilian online independence and security following revelations that the U.S. National Security Agency intercepted her communications, hacked into the state-owned Petrobras oil company’s network and spied on Brazilians who entrusted their personal data to U.S. tech companies such as Facebook and Google.

    The leader is so angered by the espionage that on Tuesday she postponed next month’s scheduled trip to Washington, where she was to be honored with a state dinner.

    Internet security and policy experts say the Brazilian government’s reaction to information leaked by former NSA contractor Edward Snowden is understandable, but warn it could set the Internet on a course of Balkanization.

    “The global backlash is only beginning and will get far more severe in coming months,” said Sascha Meinrath, director of the Open Technology Institute at the Washington-based New America Foundation think tank. “This notion of national privacy sovereignty is going to be an increasingly salient issue around the globe.”

    While Brazil isn’t proposing to bar its citizens from U.S.-based Web services, it wants their data to be stored locally as the nation assumes greater control over Brazilians’ Internet use to protect them from NSA snooping.

    The danger of mandating that kind of geographic isolation, Meinrath said, is that it could render inoperable popular software applications and services and endanger the Internet’s open, interconnected structure.

    The effort by Latin America’s biggest economy to digitally isolate itself from U.S. spying not only could be costly and difficult, it could encourage repressive governments to seek greater technical control over the Internet to crush free expression at home, experts say.

    In December, countries advocating greater “cyber-sovereignty” pushed for such control at an International Telecommunications Union meeting in Dubai, with Western democracies led by the United States and the European Union in opposition.

    U.S. digital security expert Bruce Schneier says that while Brazil’s response is a rational reaction to NSA spying, it is likely to embolden “some of the worst countries out there to seek more control over their citizens’ Internet. That’s Russia, China, Iran and Syria.”

    Rousseff says she intends to push for international rules on privacy and security in hardware and software during the U.N. General Assembly meeting later this month. Among Snowden revelations: the NSA has created backdoors in software and Web-based services.

    Brazil is now pushing more aggressively than any other nation to end U.S. commercial hegemony on the Internet. More than 80 percent of online search, for example, is controlled by U.S.-based companies.

    Most of Brazil’s global Internet traffic passes through the United States, so Rousseff’s government plans to lay underwater fiber optic cable directly to Europe and also link to all South American nations to create what it hopes will be a network free of U.S. eavesdropping.

    More communications integrity protection is expected when Telebras, the state-run telecom company, works with partners to oversee the launch in 2016 of Brazil’s first communications satellite, for military and public Internet traffic. Brazil’s military currently relies on a satellite run by Embratel, which Mexican billionaire Carlos Slim controls.

    Rousseff is urging Brazil’s Congress to compel Facebook, Google and all companies to store data generated by Brazilians on servers physically located inside Brazil in order to shield it from the NSA.

    If that happens, and other nations follow suit, Silicon Valley’s bottom line could be hit by lost business and higher operating costs: Brazilians rank No. 3 on Facebook and No. 2 on Twitter and YouTube. An August study by a respected U.S. technology policy nonprofit estimated the fallout from the NSA spying scandal could cost the U.S. cloud computing industry, which stores data remotely to give users easy access from any device, as much as $35 billion by 2016 in lost business.

    Brazil also plans to build more Internet exchange points, places where vast amounts of data are relayed, in order to route Brazilians’ traffic away from potential interception.

    And its postal service plans by next year to create an encrypted email service that could serve as an alternative to Gmail and Yahoo!, which according to Snowden-leaked documents are among U.S. tech giants that have collaborated closely with the NSA.

    “Brazil intends to increase its independent Internet connections with other countries,” Rousseff’s office said in an emailed response to questions from The Associated Press on its plans.

    It cited a “common understanding” between Brazil and the European Union on data privacy, and said “negotiations are underway in South America for the deployment of land connections between all nations.” It said Brazil plans to boost investment in home-grown technology and buy only software and hardware that meet government data privacy specifications.

    While the plans’ technical details are pending, experts say they will be costly for Brazil and ultimately can be circumvented. Just as people in China and Iran defeat government censors with tools such as “proxy servers,” so could Brazilians bypass their government’s controls.

    International spies, not just from the United States, also will adjust, experts said. Laying cable to Europe won’t make Brazil safer, they say. The NSA has reportedly tapped into undersea telecoms cables for decades.

    Meinrath and others argue that what’s needed instead are strong international laws that hold nations accountable for guaranteeing online privacy.

    “There’s nothing viable that Brazil can really do to protect its citizenry without changing what the U.S. is doing,” he said.

    Posted by Pterrafractyl | September 18, 2013, 7:22 am
  5. And now it sounds like Brazil and Argentina are going to create a joint cyberdefense initiative that could grow to include other South American nations:

    Cyberdefense moves open Latin American opportunities

    Published: Sept. 16, 2013 at 6:24 PM

    BUENOS AIRES, Sept. 16 (UPI) — Brazil will help Argentina organize and coordinate cyberdefense development in the two countries’ military infrastructures, opening new opportunities for Brazilian business.

    New initiatives in regional cyberdefense began as a reaction to leaked reports alleging that Brazil, Argentina and other Latin American countries were subjected to spying by U.S. and other intelligence agencies.

    Latin American government services routinely spy on each other but revelations that the U.S. National Security Agency and other U.S. agencies have been monitoring government and diplomatic business in the area angered Brazilian President Dilma Rousseff and other regional leaders.

    Brazilian edge in defense and security technologies will give Brazil opportunities for new business expected to grow out of closer collaboration between the two countries. There were indications that other regional neighbors would be invited to join in cyberdefense planning and implementation.

    The United States, in particular, has faced frequent media criticism over the espionage controversy but analysts said there is no hint the spat has affected ongoing defense and security collaboration between Brazilian, Canadian and U.S. corporations.

    “We have decided that before the year ends we will hold a meeting in Brasilia to intensify cyberdefense complementary works,” Rossi said.

    He indicated the current controversy on cross-border espionage was not new and has “always existed.” However, he added, there is now need for coordinated work “to counteract vulnerable situations.”

    Amorim said Argentina and Brazil would explore each other’s capacity to deal with the challenge of external espionage and, where necessary, conduct research and development of new countermeasures and devices.

    An Argentine security team will visit Brazil to explore the possibilities of collaboration in develop new cyberdefense software and joint defense industrial research, development and production.

    Brazil is keen to increase its role in a joint regional project for a training aircraft to be shared by the military organizations in the member countries of the Union of South American States.

    Brazil is developing a heavy duty freight aircraft it hopes to sell to neighboring countries and its union partners.

    Argentine officials say they are keen to share advanced technologies being developed by Brazilian armament firms in particular Embraer S.A.

    Analysts said Brazilian government and private sector emphasis on developing new cyberdefense programs could open new opportunities for commercial development. Brazilian defense firms are keen to capture a slice of defense and security market share currently under the sway of Canadian, European and U.S. companies.

    It’s also worth recalling that US diplomatic cables published by Wikileaks in 2010 contained quite a few very embarrassing revelations about both the Brazilian and Argentinian governments. So the current furor might, in part, be a delayed response to that previous leak-related diplomatic debacle:

    Posted on Thu, Dec. 02, 2010
    Red faces in Latin America as WikiLeaks reveals foibles
    Tim Johnson | McClatchy Newspapers

    last updated: June 19, 2013 11:01:38 AM

    MEXICO CITY — Does Haitian President Rene Preval drink too much? Did a former Argentine chief of staff come to blows with a former president? Is Venezuela’s government anti-Semitic?

    The U.S. diplomatic cables on Latin America raise a number of such questions, causing a stir across the region as politicians awkwardly agonize about their image, respond to embarrassing allegations or suddenly go quiet.

    The cables, released by the whistle-blowing WikiLeaks website, contain little that’s startling but many fly-on-the-wall observations, even down to a spouse trying to get her powerful husband to shut up during a meal with a U.S. ambassador to Argentina present.

    Several dozen cables have now come to light, and they show that U.S. diplomats, unconstrained by a requirement for proof, reported to Washington on the quirks, unconfirmed misdeeds and views toward the United States of those in governing circles in the Americas and the Caribbean.

    Nowhere in the hemisphere has the impact of the leaked U.S. cables been greater than Argentina, a nation that according to one September 2009 cable has a “rumor-plagued, conspiratorial society.” Such blunt characterizations have given rise to uneasy reflection in Buenos Aires.

    Marcelo Canton, an editor at Clarin, Argentina’s largest newspaper, said in a video Thursday on Clarin’s website that the cables offer little newsworthy but their assessments, coming from foreigners, create “an important commotion.”

    “We don’t like to see ourselves in a mirror,” Canton said, “and in this case, it is how we are seen abroad, how a foreign diplomat talks about the Argentina situation.”

    One cable described a Nov. 12, 2009, dinner, hosted by a businessman, with former presidential chief of staff Sergio Massa and his wife.

    At the dinner, the cable said, Massa “made light” of press reports that he and the late former President Nestor Kirchner once “came to blows,” but he went on to describe Kirchner as a “a psychopath,” “a monster,” and “a coward,” drawing expressions of concern from his own spouse.

    “Massa’s wife registered such alarm at these uninhibited comments that he asked her to ‘stop making faces at me,'” the cable said.

    Another cable, dated Sept. 9, 2009, reported that Kirchner’s Cabinet chief, Anibal Fernandez, was “dogged by corruption rumors, including ties to narco-trafficking, according to unsubstantiated press and intelligence reports.”

    It described Fernandez as “more political hack than diplomat” with a demeanor that “can sometimes be crass. On more than one occasion, he has taken obvious notice of an attractive translator during a meeting with visiting U.S. officials.”

    While such descriptions may reflect as much on the author as the subject, their public airing has stung Argentines, and given rise to charges that U.S. diplomats are prying snoops.

    “We are not spies,” U.S. Embassy spokeswoman Shannon Farrell told El Mundo Radio in Argentina. “We collect information just like a lawyer does or a journalist does. The fact that we do it in private doesn’t mean we are spies.”

    Venezuela’s loquacious populist leader, Hugo Chavez, Monday hailed WikiLeaks for its “courage and valor” in publicizing the cables and called on Secretary of State Hillary Clinton to step down.

    “She should resign. It’s the least she can do, resign along with that tangle of spies and criminals in the State Department,” Chavez said.

    A day later, another cable dated Nov. 13, 2009, noted that Brazilian Defense Minister Nelson Jobim came close to openly confirming to U.S. diplomats that Colombia’s leftist FARC guerrillas operate out of Venezuela, which Chavez has vehemently denied.

    With that leak, Chavez went uncharacteristically mum.

    Another cable, from November 2009, noted that Jewish leaders in Caracas had voiced growing concern to U.S. diplomats about Chavez’s ties to Iran to and fretted that the Venezuelan leader had “merged his anti-Zionist views with anti-Semitic ones,” another charge that Chavez has dismissed.

    Posted by Pterrafractyl | September 18, 2013, 11:49 am
  6. Well, this probably won’t do much to increase actual privacy Brazil’s networks unless they’re planning on making Brazil’s future telecommunication networks uncrackable even by the Brazilian government itself, but at least it should be interesting to see how success Brazil is at build its own externally-uncrackable IT sector, including hardware and software. That can’t be easy:

    Bloomberg
    NSA Spying Gives Advantage to Brazil’s Local Tech Firms
    By Anna Edgerton – Sep 19, 2013 11:53 AM CT

    Cisco Systems Inc. (CSCO) and Huawei Technologies Co. are losing clout in the world’s fifth-largest telecommunications market as Brazil’s government backs smaller local companies that pledge to block foreign spying.

    Officials have intensified conversations with communications hardware makers such as Padtec SA and Datacom, betting they can get greater protection against the possibility of so-called back-door security holes in foreign-made products. While discussions have focused on government-operated networks for now, they open the door for the companies to take a greater role in the networks of Brazil’s publicly traded phone carriers.

    Allegations that the U.S. was snooping on its South American ally led Brazilian President Dilma Rousseff this week to cancel a state visit to Washington. The rising tensions are creating opportunities for closely held Padtec and Datacom, which had already established government ties through contracts with state-owned Telecomunicacoes Brasileiras SA. (TELB3)

    “Since we use only technology we develop, we believe we can guarantee its security,” Datacom Chief Executive Officer Antonio Carlos Porto said in a phone interview. “If you don’t have control, you’re vulnerable.”

    The Brazilian government is strengthening the defenses of the nation’s telecommunications networks following allegations by American journalist Glenn Greenwald that the U.S. National Security Agency spied on Rousseff and on state-owned oil company Petroleo Brasileiro SA. The allegations, which the U.S. says it is reviewing, aired on Brazil’s most-watched TV news magazine, Fantastico.

    Buying Local

    Brazil is considering a plan to force all phone companies doing business within its borders to use locally made equipment, betting it will have the technology to make the project feasible within three to five years, Communications Minister Paulo Bernardo told Bloomberg News last week. Already, local companies are providing network parts to Brasilia-based Telecomunicacoes Brasileiras, or Telebras, which serves government agencies and private companies and is improving Internet access in remote areas.

    “We’re taking every precaution that the construction of the network that serves the government will be totally secure,” said Telebras President Caio Bonilha. “We are using routers and fiber-optic equipment that have all been developed here. This is equipment that was made in accordance with Brazilian law.”

    More Secure?

    Brazil’s major network equipment providers are San Jose, California-based Cisco; Sunnyvale, California-based Juniper Networks Inc. (JNPR); Shenzhen, China-based Huawei; and Paris-based Alcatel Lucent (ALU), said Joao Paulo Bruder, an analyst at research firm IDC. While Brazil probably won’t ask companies to replace equipment made by those foreign providers, it may require the government and state-run companies such as Petrobras to buy new equipment only produced in Brazil, he said.

    “Brazilian industry would certainly benefit, and on the question of security, theoretically it would be more secure,” Bruder said. “But all it would take to spy on the new system would be to break the new code.”

    Cisco disputed the idea that Brazil could protect its networks by using domestic manufacturers.

    “Networks in Brazil must be connected to networks in the rest of the world,” Felipe Lamus, a Cisco spokesman, said in an e-mail. “Using different standards and protocols would isolate Brazilian networks and reduce the scrutiny of global customers invested in finding and addressing security vulnerabilities.

    ‘‘Network equipment produced in a particular country would also lack economies of scale. It will cost more and may end up sacrificing innovation.’’

    Datacom, Padtec

    The Brazilian government first contacted Datacom six months ago to discuss tighter security measures, said Porto, the CEO. The conversations ‘‘intensified’’ after news of NSA spying, he said.

    Datacom, based in the southern state of Rio Grande do Sul, makes about 200 million reais ($91 million) in annual sales, compared with Cisco’s $49 billion in revenue last year. The Brazilian company has 850 employees, with 350 working on research.

    Datacom has 55 million reais worth of contracts with Telebras. The company is also working on two government-funded projects worth 10 million reais each, Porto said.

    BNDES Backing

    Padtec, based in Sao Paulo state, produces equipment for fiber-optic networks in Brazil and more than 40 other countries, CEO Jorge Salomao Pereira said in a phone interview. A third of the company’s employees are dedicated to research, Salomao said. He declined to discuss Padtec’s financial figures or the details of its Telebras contract.

    In a 2011 report, state-owned bank BNDES identified Padtec and Datacom as holding ‘‘leadership positions” in the industry. In January, BNDES joined IdeiasNet SA (IDNT3) and Padtec managers and employees in raising 167 million reais in capital for new products, acquisitions and international expansion. Rio de Janeiro-based IdeiasNet, which owns a 34 percent stake in Padtec, fell 1.5 percent to 1.35 reais at 1:43 p.m. in Sao Paulo.

    The Brazilian companies’ fortunes are rising just as Cisco is betting on its future in Brazil. The company opened an innovation center in Rio de Janeiro in August to boost sales and services to government and corporate clients, it said last month. Cisco will continue with its Brazil investment plans, Lamus said.

    “Cisco does not monitor communications of private citizens or government organizations anywhere in the world and Cisco does not customize equipment for specific customers to facilitate the surveillance of users,” he said.

    Technology Transfer

    Brazil’s focus on homegrown technology is also guiding its space program. Brazil’s first geostationary satellite, to be launched in 2016, will bring Internet to remote areas and provide secure military communications. Brazil currently uses a satellite operated by Mexico City-based America Movil SAB.

    Telebras selected French-Italian aerospace company Thales Alenia Space SAS to build the satellite, a decision Bonilha said was unrelated to spying allegations and partly based on a technology transfer agreement. The $650 million project is run by Visiona, a joint venture between Telebras and Embraer SA (EMBR3), the aircraft maker based in Sao Paulo state.

    Sharing technology will let Brazilian companies play a bigger role in building a second satellite planned to launch in 2022 and a third in 2026, according to Leonel Fernando Perondi, director of the Brazilian Space Agency.

    “This is a window of opportunity, and we don’t have many of them, so the idea is to not miss this one.” said Bonilha of Telebras. “This satellite will be part of a system of future satellites that will be mostly made in Brazil.”

    The claims that espionage/intelligence concerns had nothing to do with the decision to select a French aerospace firm for the development of satellite that will handle secure military communications might seem kind of absurd at first given the current spying hysteria that seems to be preoccupying the government. Then again….:

    France24
    France is top industrial espionage offender
    Latest update: 04/01/2011

    France is worse than China or Russia when it comes to stealing industrial secrets, the head of a German satellite company has been quoted as saying in a WikiLeaks cable made public Tuesday.
    By News Wires (text)

    AFP – France is the top offender when it comes to industrial espionage, and is even worse than China and Russia, the head of a German company was quoted as saying in a leaked US diplomatic cable made public Tuesday.

    “France is the evil empire (in) stealing technology, and Germany knows this,” Berry Smutny, the head of German satellite company OHB Technology, was quoted as saying in the diplomatic note obtained by WikiLeaks and released by the Norwegian daily Aftenposten.

    Germany, with its decentralised government, was however not willing to do much to counter French industrial espionage activities, he was paraphrased as saying.

    “Going on at length of his (disdain) of the French, Smutny said French IPR (intellectual property rights) espionage is so bad that the total damage done to the German economy is greater than that inflicted by China or Russia,” read the cable, dated November 20, 2009.

    Posted by Pterrafractyl | September 19, 2013, 12:53 pm
  7. Brazil says bye bye to Boeing:

    UPDATE 2-Saab wins Brazil jets deal after NSA spying sours Boeing bid

    Wed Dec 18, 2013 3:48pm EST

    By Alonso Soto and Brian Winter

    Dec 18 (Reuters) – Brazil on Wednesday awarded a $4.5 billion contract to Saab AB to replace its aging fleet of fighter jets, a surprise coup for the Swedish company after news of U.S. spying on Brazilians helped derail Boeing’s chances for the deal.

    The contract, negotiated over the course of three consecutive Brazilian presidencies, will supply Brazil’s air force with 36 new Gripen NG fighters through 2023. Aside from the cost of the jets themselves, the agreement is also expected to generate billions of additional dollars in future supply and service contracts.

    Saab did not immediately comment on the purchase. In addition to Chicago-based Boeing, France’s Dassault Aviation was a contender for the contract.

    The timing of the announcement, after a decade of off-and-on negotiations, appeared to catch even the companies involved by surprise.

    Brazilian officials said the purchase, one of the most coveted defense contracts anywhere for an emerging market, was sealed after Brazil decided that Saab provided the most affordable option for the new jets as well as the best conditions for technology transfer to local partners that would be necessary for upkeep and service on the jets.

    The choice, Defense Minister Celso Amorim said, “took into account performance, the effective transfer of technology and costs – not just of acquisition but of maintenance.”

    Until earlier this year, Boeing had been considered the frontrunner for the purchase. But revelations of spying by the U.S. National Security Agency in Brazil, including the personal telephone calls and emails of President Dilma Rousseff herself, led Brazil to believe that it could not trust a U.S. company.

    “The NSA problem ruined it for the Americans,” a Brazilian government source said on condition of anonymity.

    Boeing called the decision a “disappointment” in a statement, but added that it would continue to work with Brazil to meet its defense requirements. Dassault declined to comment.

    Brazil coexists peacefully with all of its South American neighbors and has no enemies elsewhere. The country, however, is eager to fortify its military as it considers the long-term defense of its vast borders and abundant natural resources, including the Amazon rainforest and massive new offshore oil discoveries.

    The decision unexpectedly wraps up a tortuous and prolonged decision-making process that in some defense circles had made the negotiations the object of ridicule.

    The deal meant serious business, though.

    French President François Hollande personally lobbied for Dassault last week during a state visit. Boeing, for its part, was so committed to winning the contract that it opened a big corporate office in Brazil and named Donna Hrinak, a former U.S. ambassador to the country, as its top executive there.

    The timing of the announcement surprised many analysts, who believed that the ongoing slowdown in Latin America’s biggest economy, coupled with Rousseff’s expected bid for re-election next year, would delay the purchase until 2015.

    Indeed, the decision coincides with pressure on Rousseff from economists, the private sector and political opponents to curb public spending. Having initially stoked government spending in efforts to spur growth, the president now faces growing criticism because of creeping inflation and a worsening outlook for the country’s budgetary targets.

    Still, the country’s current fleet of Mirage fighters, which the new jets will replace, is so old that the air force is in the process of grounding them.

    Saab’s Gripen NG jet edged out Dassault’s Rafale and Boeing’s F/A-18 Super Hornet.

    Posted by Pterrafractyl | December 18, 2013, 3:10 pm
  8. Here’s an emerging story that addresses an aspect of the internet that’s received surprisingly little attention in the last year considering the attention focused on the government and the internet: There’s a growing censorship fight in Germany over a secret list of forbidden websites that the German government agency in charges of censoring illegal content forces major search engines and router manufacturers to automatically block. The law is applied via the Federal Department for Media Harmful to Young Persons (BPjM) and the controversy is over whether or not the BPjM’s list of forbidden site should be made public now that someone decrypting the list after pulling it out of their router. There’s also a question raised in the article below about the validity of the list’s contents in general and the lack of public disclosure over how the list is generated in the first place. It’s a legitimately interesting debate.

    And now, with the German government threatening to ban companies that work with the NSA for government contracts, it’s also an topical story about government contracts with hardware manufacturers that compels certain changes in functionality along with regular software updates. Such agreements shouldn’t really be surprising. The more important a nation is to global internet connectivity, the more companies will play ball with national requests (with the US, UK, and Germany being particularly influential). And there’s no indication that the BPjM was doing anything other than develop the censor list to be distributed to router manufacturers. But given that international concern over the private sector cooperation is focused specifically on the NSA and GCHQ, this is one of those stories that’s a good reminder that secretive private sector cooperation with influential governments in critical IT sectors, like router manufacturers, is probably pretty routine:

    Vice Motherboard
    Germany Is Threatening the New Geocities over a Secret Censorship List
    July 17, 2014 // 09:25 PM CET

    Since 2005, the German government has been keeping a secret list of websites that it requires be censored from search engines and blocked by router manufacturers. The agency tasked with producing the quarterly list, BPjM (Bundesprüfstelle für jugendgefährdende Medien, or Federal Department for Media Harmful to Young Persons), is run by unelected officials, and largely free from public scrutiny.

    In response to BPjM’s secretive powers, an anti-censorship activist, security researcher, and self-described “concerned citizen” decrypted the agency’s secret list and published it on Neocities, a 21st century reincarnation of the free web hosting platform site Geocities. Now the German government is threatening to, yes, censor Neocities if it doesn’t keep the list off its web hosting service.

    After consulting with the activist (who wishes to remain anonymous), Neocities creator Kyle Drake decided to temporarily remove the list of nearly 3,000 URLs while exploring his legal options. But already, as so often happens with censored content, the list multiplied across the internet.

    Drake notified the Neocities community of his move on The Neocities blog.

    “The censorship list is published quarterly in the magazine ‘BPjM-aktuell’ which can be read in any major library in Germany,” wrote Drake. “Though hashed, this list is essentially public information, because it’s published by the German government in a way that is trivially easy to brute force to reveal the web sites.”

    As Drake explained it, anyone with a basic understanding of cryptography and a few spare hours could have easily cracked the censorship list, which is distributed to search engines and router manufacturers in and outside of Germany. As the leaker told Drake, they were able to take one of the routers, and simply “suck the list out by logging into the machine and copying the file.”

    In addition to blocking search engines like Google, Yahoo, and Bing, the BPjM-Modul can censor internet content at the router level. As Drake told me, whenever a user accesses a web site, the router intercepts the domain, uses MD5 or SHA1 to compute the hash of the site, and then blocks the content if the site matches the hash on BPjM censorship list.

    It’s also kind of noteworthy that, had the German government been using unbreakable encryption, the secret censorship list could have never been decrypted and the current debate over the past lack of public debate over how that list gets generated wouldn’t be taking place.

    Posted by Pterrafractyl | July 25, 2014, 5:48 pm
  9. More details are available about Brazil’s planned Brazil-to-Portugal undersea cable and the firms that will be used to complete the project. As expected, while international firms like Huawei, Alcatel-Lucent, and Ericsson are expected to make bids on the project, US companies need not apply:

    Bloomberg News
    Brazil-to-Portugal Cable Shapes Up as Anti-NSA Case Study
    By Anna Edgerton and Jordan Robertson Oct 30, 2014 4:30 AM CT

    Brazil is planning a $185 million project to lay fiber-optic cable across the Atlantic Ocean, which could entail buying gear from multiple vendors. What it won’t need: U.S.-made technology.

    The cable is being overseen by state-owned telecommunications company Telecomunicacoes Brasileiras SA (TELB4), known as Telebras. Even though Telebras’s suppliers include U.S. companies such as Cisco Systems Inc. (CSCO), Telebras President Francisco Ziober Filho said in an interview that the cable project can be built without any U.S. companies.

    The potential to exclude U.S. vendors illustrates the fallout that is starting to unfold from revelations last year that the U.S. National Security Agency spied on international leaders like Brazil’s Dilma Rousseff and Germany’s Angela Merkel to gather intelligence on terror suspects worldwide.

    “The issue of data integrity and vulnerability is always a concern for any telecom company,” Ziober said. The NSA leaks last year from contractor Edward Snowden prompted Telebras to step up audits of all foreign-made equipment to check for security vulnerabilities and accelerated the country’s move toward technological self-reliance, he said.

    Nigel Glennie, a spokesman for San Jose, California-based Cisco, declined to comment. Last November, Cisco Chief Executive Officer John Chambers said uncertainties related to NSA spying were causing international customers to “hesitate” in buying U.S. technologies.

    Vanee Vines, a spokeswoman for the NSA, didn’t return a call for comment.

    Damage Control

    The Telebras-planned cable, which will run 3,500 miles from the Brazilian city of Fortaleza to Portugal, shows how losses to U.S. technology companies from the NSA disclosures are now crystallizing. While much of the handwringing over damage to U.S. firms has focused on existing technology contracts, the pain may come more from projects that are just getting off the ground. In many cases, it’s too costly and complex to remove existing computing infrastructure, no matter the rhetoric coming from government leaders.

    New projects are a different matter. With modern data networks being built worldwide — especially in emerging markets where information-technology spending is estimated to rise 9 percent this year to more than $670 billion, according to market researcher IDC — that’s where there’s opportunity to look increasingly to non-U.S. technology providers.

    $35 Billion

    U.S. companies could forgo as much as $35 billion in revenue through 2016 because of doubts about the security of their systems, according to the Washington-based Information Technology & Innovation Foundation, a policy research group.

    Brazil’s new cable is the “perfect project to go non-U.S.,” said Bill Choi, an analyst at Janney Montgomery Scott, given that laying cables is a labor-intensive process dominated by non-U.S. companies such as French firm Alcatel-Lucent and Swiss-based TE Connectivity Ltd. (TEL)

    Some of the anti-U.S. technology company talk may just be negotiating ploys to gain lower product prices. While Microsoft Corp. (MSFT) and Verizon Communications Inc. (VZ) have lost some contracts in Brazil and Germany, and Cisco has reported declining orders from emerging markets, the finances of most U.S. technology companies have held up so far. Gross margins for the companies in the Standard & Poor’s 500 Information Technology Sector Index are at their highest levels since 1990, according to data compiled by Bloomberg.

    Yet there’s more risk for U.S. companies of being excluded from new projects, said Lee Doyle of consultancy Doyle Research. In Brazil, Russia, India and China, “the anti-NSA sentiment is real and significant,” he said.

    Doyle added that only a minority of IT projects can realistically be implemented without any U.S. technology, yet “that doesn’t make it any less painful for U.S. tech companies looking to grow.”

    Brazil’s Actions

    Brazil is a key geography where the pain for U.S. technology firms is rising. The world’s seventh-biggest economy has long prioritized buying from its own companies. A 1991 law gave preference for state-sponsored projects to use locally made technology, and importers face steep tariffs.

    Once news of Snowden’s leaks broke last year, Brazil began terminating its contracts with Redmond, Washington-based Microsoft for Outlook e-mail services. Brazil President Rousseff tweeted at the time that the change will help “prevent possible espionage.”

    Controlling Expresso

    Brazil is focusing instead on an e-mail system called Expresso, developed by state-owned Servico Federal de Processamento de Dados, known as Serpro. Expresso is currently used by 13 of the country’s 39 ministries.

    “Expresso is 100 percent under our control,” said Marcos Melo, Serpro’s corporate solutions coordinator.

    Last November, Rousseff also signed a decree requiring government ministries and agencies to use only technology services provided by public or partially state-owned companies, without competing for contracts in auctions.

    The transition “for the preservation of national security” should be monitored by the ministries of defense, communications and planning and budget, the decree said.

    Fortaleza Cable

    The Fortaleza-to-Portugal cable, proposed in 2012 before the spying allegations, would further the country’s efforts to encourage local companies. The cable will bypass Brazil’s existing Internet traffic routes to Europe, which currently go through the U.S.

    International submarine cables are prime targets for espionage, Rousseff said at a press conference in Sao Paulo on Oct. 20 as she campaigned for re-election. She said after the cables to Europe, Brazil will study building direct connections to Africa and Asia.

    “It’s a very important strategy for the country, this question of submarine cables, because it’s good to remember that submarine cables are among the main mechanisms of spying today,” she said. Rousseff was re-elected on Oct. 26, in a result that had the tightest margin of victory since at least 1945.

    Winning Vendors

    So far, Telebras has said it will only partner with European, Asian and local vendors. In January, Ziober said at a press conference that Telebras will work with Madrid-based Islalink Submarine Cables SL and an as-yet-undetermined Brazilian associate to construct the technology pipe.

    Ziober added that a project this complex could have multiple vendors, to be chosen from proposals presented after the third associate is finalized. Construction is slated to start in the first half of 2015, with the cable to be operational 18 months later, he said at an Oct. 15 event.

    Among the beneficiaries is likely to be Padtec SA, a 400-person network-equipment maker based in Sao Paulo state. Padtec CEO Jorge Salomao Pereira said his company will submit an offer when the bidding process is opened to build and operate all of the submarine cable.

    Closely held Padtec has 262.4 million reais of contracts with Telebras in Brazil’s national broadband network, including a 98 million-real agreement for maintaining fiber optic cables. State-owned development bank BNDES identified Padtec as a leader in the networking industry and last year helped the company raise 167 million reais for new products, acquisitions and international expansion.

    The anti-NSA sentiment provides “a window of opportunity for other smaller companies to enter the market with this technology and become global players,” Salomao said.

    Cisco’s Experience

    Telebras’s Ziober said in the interview that the competition for the cable project is also likely to include Asian and European suppliers Huawei Technologies Co., Alcatel-Lucent and Ericsson AB.

    Huawei spokesman Bill Plummer declined to comment. Ericsson isn’t part of the cable project, said spokeswoman Elisabeth Manzi. Alcatel-Lucent representatives didn’t return messages for comment.

    The Brazilian chill is already being felt by Cisco. The country, once one of Cisco’s most promising markets, is now among its poorest performing ones. Orders in Brazil fell 13 percent in the latest quarter ended July 26, continuing a series of double-digit declines there. Cisco doesn’t disclose underlying sales numbers for the country.

    That’s a far cry from what Cisco had been working toward in Brazil. In 2012, the company said it would invest $1 billion in the country over four years. It opened an innovation center in Rio de Janeiro last year, eight days before Brazil’s most-viewed news magazine, Fantastico, revealed the NSA spying and disclosed that Brazilian leaders had been monitored.

    In related news, Petrobras, the state-owned oil giant that became a symbol for NSA spying on Brazil last year, has a corruption scandal swirling around it after its former CEO alleged that dozens of policians were in a multi-billion dollar kickback scheme. A probe of the charges is ongoing, but if President Rousseff’s initial comments are what we should expect to result from the investigation the Petrobras scandal may change Brazil forever:

    Petrobras scandal may change Brazil forever, Rousseff says

    Sun Nov 16, 2014 10:19am EST

    (Reuters) – A widening corruption scandal at state-run oil company Petroleo Brasileiro SA may change the country forever, Brazilian President Dilma Rousseff said on Sunday in her first public remarks since a sweeping police operation last week.

    Police on Friday arrested top executives of some of the country’s largest construction and engineering firms as part of a probe into money-laundering and bribery allegations at Petrobras, as the oil company is commonly known.

    A former senior Petrobras executive responsible for some of the company’s biggest contracts was also arrested.

    “This may change the country forever,” she told reporters in Brisbane, Australia during a summit of the G20 Group of Nations. “How? By ending impunity.”

    The scandal puts new pressure on the recently-re-elected Rousseff as weak growth and high inflation pose serious challenges to her effort to boost the economy.

    She may also have difficulty distancing herself from the problems at Petrobras. She was chairwoman of the board of directors, the company’s highest official, from 2003 to 2010.

    Several thousand Rousseff opponents gathered in Sao Paulo, Brasilia and Rio de Janeiro on Saturday to protest her management of the company, according to state police.

    One of the world’s 10 largest companies in 2008, its market value has dropped by more than $200 billion since, as investors discounted its once shining promise. Despite the discovery of giant offshore reserves and hundreds of billions of dollars of investments, production has disappointed.

    Lawmakers of the largest ruling parties, including Rousseff’s Workers’ Party, are under investigation, according to Brazilian media. The construction firms involved were among the largest donors to Rousseff’s and other campaigns, including that of her challenger, Aecio Neves.

    Rousseff said the scandal was symbolic because it was the first large corruption case being thoroughly investigated.

    “This will change forever the relationship between … Brazilian society, the Brazilian state and private companies.”

    Posted by Pterrafractyl | November 18, 2014, 8:50 am

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