All of Canada's negotiations and new ventures with Brazil may be put on ice until there is a resolution to the question of what a Canadian spy agency was doing snooping on one of the South American country's ministries, says a leading Brazilian expert on relations with North America.
"If they take the same position with Canada as they took with the United States [after similar revelations of spying last month] then everything will be stopped, all the major things," said Rubens Barbosa, a former Brazilian ambassador to the United States. "The agreements, anything to do with government and the U.S., was put on hold and is still on hold and they may take the same view with Canada."
On Sunday, the Brazilian news program Fantastico made public documents from the trove acquired by Edward Snowden, a former contractor with the U.S. National Security Agency (NSA). They included a slide presentation that appears to show that Communications Security Establishment Canada (CSEC) was surveying the telecommunications of the Brazilian Ministry of Mines and Energy – a revelation that has sparked outrage here.
On Tuesday, the Canadian government shifted its tone on the allegations. Prime Minister Stephen Harper, whose government on Monday initially brushed off the charges, now says he's "very concerned" about reports that the country's electronic eavesdropping agency is conducting industrial espionage in Brazil.
Mr. Harper pledged that Ottawa would perform "appropriate follow-up" on the allegations.
Last month, the Rio-based journalist Glenn Greenwald, working in collaboration with Fantastico, used other archive documents from Mr. Snowden to show that the NSA was spying on Brazil's government and the national energy giant Petrobras. After that revelation, President Dilma Rousseff called off a planned state visit to the Washington – which was to be the first in 18 years by a Brazilian president – and said the relationship between the two nations could not advance until the spying was explained.
"I know that Canada was beginning to discuss with Mercosul – this is not going ahead, up and until the Brazilian government is satisfied with what Canada has to say," said Mr. Barbosa. Mercosul is the free trade zone of several South American nations, and when Foreign Minister John Baird was here in August, he and his Brazilian counterpart held talks about Canada joining the bloc.
Mr. Barbosa added that "the Brazilian government doesn't care" what the fallout may be of a tough stand – the question of sovereignty comes first.
He noted that when Ms. Rousseff spoke to the United Nations General Assembly two weeks ago, days after she had been supposed to be feted in Washington, she asked the international body to pursue new regulations for Internet security.
"Information and telecommunication technologies cannot be the new battleground between states," she said. "This is the time to create the conditions to prevent cyberspace being implemented as a weapon of war by means of espionage, of sabotage, of attacks against systems and infrastructures of other countries."
But Oliver Stuenkel, a professor of international relations at the Getulio Vargas Institute in Sao Paulo, said it is still too early to tell what the political fallout from these revelations will be. "It's not politically interesting to blast Canada in the Brazilian context – it's not going to get you any votes," he said. "Of course, there is a sense among policy makers that spying does exist, that countries do it: the element of surprise political leaders showed was partly theatre."
Because Canadian firms had no major deals on the table – like a pending Brazilian order for fighter jets for which the U.S. firm Boeing was angling hard, for example – the costs might be limited, he added.
On Monday, Ms. Rousseff used Twitter to denounce the alleged Canadian spying, calling it a violation of sovereignty and suggesting it was industrial espionage. That, said Mr. Barbosa, is the dominant view here. "Intrusion on a ministry that has to do with commercial interests, it's commercial espionage, it's serious," he said.
A report on the news program Jornal Nacional on the national network Globo also said: "The Brazilian government said to the Canadian government that, given the allegations, the interest of Canadian companies in the mining sector will be under suspicion."
There are more than 40 Canadian mining companies active in Brazil, with billions of dollars in assets here. The huge Brazilian mining company Vale also has vast holdings in Canada and would be a plausible target for snooping.
Brazil's booming energy sector is a key focus for Canadian industry: Later this month, Brazil is to auction rights to drill for oil in the "presalt" layer, an oil find estimated at billions of barrels that is 230 kilometres off the coast of Rio and 2,000 metres below sea level.
The president of Petrobras, Maria das Gracas Silva Foster, also weighed in on the allegations of Canadian spying, telling reporters in Brasilia: "Oil is energy. Energy is sovereignty. With or without espionage, the volume of the Brazilian reserves and its capability of producing [oil] is of international interest."
Comments from Brazilian officials suggest that there is a sense the upcoming auction on drilling rights may have been the target of spying. Altino Ventura, the official in charge of energy planning in the Ministry of Mining and Energy, told the news website UOL that Canada wouldn't have had access to anything privileged on the pre-salt layer.
"A great part of the information, particularly in the area of electric energy, gas and oil, and to a certain point, I would also say mining, is information that the ministry itself publicizes broadly," he said. "We want the investors to know the data." But he also said: "There is data that aren't made public because they are strategic, related to resources and technology."
Canada's ambassador to Brazil, Jamal Khokhar, was summoned to the Ministry of Foreign Affairs in Brasilia on Monday, where Brazil's Foreign Minister Luiz Alberto Figueiredo Machado expressed his government's "outrage" and reiterated the need for explanation of the reports, according to media reports.
With a report from Steven Chase in Ottawa