Companies brace for Brazil local data storage requirements

What started as a debate around privacy is now becoming a money matter

While Brazilian politicians try to agree on the country's first set of regulations around data and Internet governance, local storage requirements may go ahead.

Brazil's "Internet Constitution", the Marco Civil da Internet, was due to be voted last October by the House of Representatives. However, disagreement between politicians and ISPs - particularly around the point of providers being required to treat all data that goes through their network in the same way - meant that the Marco is yet to become law.

Despite all the to-ing and fro-ing between public representatives and companies around net neutrality, requirements that data collected about Brazilian internet users is to be stored locally are supported by president Dilma Rousseff and key miniters. The requirements were initially presented as a mechanism to protect citizen data - but the government is now becoming much more aware of the value of information.

During the Mobile World Congress last month, Brazilian communications minister Paulo Bernardo reinforced the point that local storage plans will go ahead and criticized the likes of Google and Facebook.

"Google told us that it could not hand data over to the Federal Police in Brazil because the information was stored in the United States, so the company has to comply with the laws of that country. Then they tells that they store the data in a random-access system - it is not possible to believe in everything they say," Bernardo told trade publication ConvergĂȘncia Digital.

"What is certain is that data is turning into money and we can't afford to be out of this business. Data will be the motor of the economy in the next few years. Datacenters of companies like Google and Facebook also have to be in Brazil," he added.

The requirement to force companies to store data locally has been criticized by businesspeople and activists alike, such as World Wide Web creator Sir Tim Berners-Lee, who said this is an "emotional reaction" to the NSA spying episode and will not have any practical impact in reducing espionage risk.

Brasscom, the Brazilian IT trade body, warned that the local data storage provisions will mean an increase in costs incurred by local IT companies and prompt these firms to move their operations elsewhere.

And small business owners who rely heavily on cloud services to operate their businesses are also not happy about the government's intentions. That is the case of Bidu, a insurance price comparison start-up, who stores all its data on systems operated by Amazon Web Services and Google.

"[If the government requires local storage], Brazil will take a massive backward step. It would be such a big setback for Brazil that small companies would be a lot less competitive," says Bidu's founder, Eldes Mattiuzzo.

The Marco Civil da Internet is now being processed as a matter of constitutional urgency and the fact it is still up in the air prevents various other proposals from being voted. Until an agreement is reached around net neutrality, voting cannot take place.