Brazil's Rousseff calls off state visit to U.S. over spying

BRASILIA (Reuters) - Brazilian President Dilma Rousseff has called off plans for a state visit to Washington in October because of revelations that the United States spied on her personal communications and those of other Brazilians.

Rousseff’s decision, which came despite a 20-minute telephone call from President Barack Obama on Monday night in an attempt to salvage the trip, is a big blow to relations between the two biggest economies in the Americas.

Both the White House and Rousseff’s office billed the decision as a mutually agreed postponement, and said a state visit could take place at an unspecified later date. However, two officials with knowledge of Rousseff’s decision told Reuters that such a visit was unlikely to happen anytime soon.

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White House spokesman Jay Carney said the presidents agreed on the phone the disclosures of alleged U.S. intelligence activities could overshadow their meeting so they decided it would be best to postpone. But U.S. moves to address the surveillance complaints may take months.

“As the President previously stated, he has directed a broad review of U.S. intelligence posture, but the process will take several months to complete,” Carney said.

Ties between Brazil and the United States had been improving steadily since Rousseff took office in 2011 and before the revelations that the U.S. National Security Agency had snooped on emails, text messages and calls between the president and her aides. The spying revelations came from documents leaked by former NSA contractor Edward Snowden.

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“Illegal surveillance practices intercepting the communication and data of citizens, companies and members of the Brazilian government constitute a serious affront to national sovereignty and individual rights, and are incompatible with democratic cooperation between friendly nations,” the Brazilian government said in a statement.

In the absence of explanations and a “commitment to cease such surveillance activities, the conditions are not in place for the visit to go ahead as previously scheduled,” it said.

U.S. officials said the NSA surveillance was aimed at tracking suspected terrorist activity and did not pry into personal communications, but Rousseff was not convinced.

The trip was expected to be a platform for deals on oil exploration and biofuels technology, and Brazil’s potential purchase of fighter jets from Chicago-based Boeing Co (BA.N).

A defense contract worth more than $4 billion that Boeing is seeking for the sale of 36 F-18 fighter jets to the Brazilian Air Force could be the main victim of the spying affair. Brazilian officials have said Brazil cannot buy such strategic aircraft from a country it cannot trust.

POLITICAL FIRESTORM

The spying revelations sparked a political uproar in Brazil that Rousseff could not ignore. A senior government official told Reuters that Rousseff’s top advisers, including her mentor and predecessor as president, Luiz Inacio Lula da Silva, encouraged her to scrap the state visit.

The issue is not likely to go away soon in a country that has long harbored suspicions that the United States wants to control its rich mineral resources in the Amazon basin and off its Atlantic coast, where Brazil has made the world’s largest oil deep-water discoveries in decades.

Brazil’s Congress has opened an investigation and on Tuesday questioned oil industry regulator Magda Chambriard on whether NSA spying could have given U.S. companies the edge in bidding for offshore production rights to be auctioned next month.

The committee also wants to send members to Moscow to interview Snowden, who has been granted temporary asylum by Russia.

The decision to cancel the visit to Washington will add tensions to the U.S.-Brazilian relations and increase risks for U.S. companies operating in sensitive sectors in Brazil, the Eurasia consultancy in Washington said in a note to clients.

This mainly affects the defense, telecom and energy sectors, and Boeing’s chances of securing the jet fighter contract will be “significantly reduced,” Eurasia’s analysts said.

“In the energy sector, there will certainly be a political firestorm if an American company wins the (subsalt) bid round in October,” Eurasia said, referring to the deep sea oil deposits that sit beneath a thick layer of salt under the ocean floor. (Additional reporting by Brian Winter in Sao Paulo and Roberta Rampton in Washington; Editing by Kieran Murray and David Brunnstrom)