Brazil Said to Call Off State Visit in Response to Spying

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.

Rousseff signaled her concerns at the Group of 20 summit in St. Petersburg, Russia, saying the decision on whether to go forward with the trip hinged on “political conditions.” Obama had urged the visit to take place, saying that “just because there are tensions doesn’t override the incredibly wide-ranging interests we share.”

Opportunities that could stall include the opening of both countries’ beef markets, a bid by Chicago-based Boeing Co. (BA) to sell jet fighters, as well as technology cooperation, and nascent discussions to launch industry-specific trade negotiations, said Trebat, also a former executive director of the Brazil-U.S. Business Council.

‘Urgency’

Growing congressional cooperation to advance negotiations on a bilateral tax treaty probably would also stall. “The sense of urgency is going to be gone,” she said.

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.