Brazilian President Dilma Rousseff
Brazilian President Dilma Rousseff cancels US visit scheduled for 23 October (Reuters)

Brazil's bilateral trade agreement with the US has hit a roadblock after the President Dilma Rousseff cancelled her official visit to North America over allegations that the US National Security Agency tapped into her email and telephone calls.

The allegations were based on documents leaked by Edward Snowden, a former technical contractor for the NSA, which also revealed that the agency intercepted the communications of Rousseff's aides and semi-state-owned oil company Petrobras. 

They were first published by Rio de Janeiro-based journalist Glenn Greenwald in July, when he accused the NSA of spying on Rousseff's online activity.

Greenwald said on Globo Television that the NSA had committed industrial espionage by accessing data from Petrobras. The company is due to hold an important auction for exploration rights of an oil field off the Rio de Janeiro state coast in October.

Stalled Trade Opportunities

Rousseff's visit, scheduled for 23 October, was widely expected to improve relations between the countries, in line with Brazil's emergence as an economic power in the South American continent over the past decade.

"It throws a bucket of cold water on the bilateral trade relationship," said Gabrielle Trebat, a director at strategic advisory firm McLarty Associates in Washington.

"It jeopardises numerous commercial interests, especially private sector investment in sensitive sectors that require good political cooperation."

The opening of both countries' beef markets, a contract for Boeing to sell jet fighters, and an agreement for technology cooperation between the countries could be delayed due to the development.

Brazil has more to lose from the stalled meeting, taking into account the emerging economy's present situation, say many analysts.

Brazil's trade deficit with the US widened 161% in the first half of the year to $6bn (€4.5bn, £3.8bn) compared to the previous year. Meanwhile, its Asian rival China recorded a trade surplus over the same period. Brazil, which is due to hold the FIFA World Cup in 2014, is also in need of more US investment for infrastructure and oil and gas projects.

While the economy remains shaky, some Brazilian business leaders are expected to question the relevance of rejecting an important business connection with the world's largest economy.

Damaging Relations

The scheduled visit would have been the first by a Brazilian president since 1995.

The cancellation of the meeting comes less than a day after US President Barack Obama invited Rousseff to Washington to strengthen political and trade ties between the two biggest economies in the Americas.

Obama also held an unscheduled meeting with the Brazilian president during the Group of 20 meeting in St Petersburg earlier in September.

Rousseff had said on 6 September that she was outraged by the espionage allegations. Her government said in a statement that the meeting could not be held "in the absence of a timely investigation of the incident, with corresponding explanations and the commitment to cease the interception activities".

Brazil expects the visit would take place "as soon as possible", once the issue is resolved.

The White House said in a statement: "The president has said that he understands and regrets the concerns [that] disclosures of alleged US intelligence activities have generated in Brazil and made clear that he is committed to working together with President Rousseff and her government in diplomatic channels to move beyond this issue as a source of tension in our bilateral relationship."