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

Dave Emory’s entire life­time of work is avail­able on a flash dri­ve that can be obtained here. (The flash dri­ve includes the anti-fas­cist books avail­able on this site.)

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 I, Part II, Part III, Part IV, Part V, Part VI, Part VII, Part VIII, Part IX, Part X, Part XI, Part XII, Part XIII, Part XIV, Part XV, Part XVI, Part XVII, Part XVIII, Part XIX, Part XX. It 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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