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

Detroit Today: Sil­i­con Val­ley Tomor­row?

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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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