Brazil Orders Cos. to Build Separate 5G for Government Use

Brazil’s federal government will require winners of an upcoming 5G spectrum auction to build a high security wireless network for its exclusive use, according to an order published late Friday.

The requirement is one of the new guidelines for the auction that the government is planning for 2021.

While the decision doesn’t mention Huawei Technologies Co., it erases the likelihood of banning any company from the auction, which had been a possibility for the Chinese tech giant, a person familiar with the communication ministry’s decision making said.

The move comes as Brazil needs to access large amounts of Chinese supplies for vaccines to combat Covid-19. Brazil has the world’s second-highest tally of fatalities, after the U.S.

President Jair Bolsonaro told reporters on Saturday that the 5G auction will not be used as a bargaining chip in global negotiations, O Globo newspaper reported. He said no decision has been made yet, adding that Communications Minister Fabio Faria will visit countries interested in the matter next week.

Companies that will build the network for the government’s exclusive use must have equipment suppliers with “transparency and compliance patterns in line with those required by Brazil’s stock market,” according to a statement on the Communications Ministry website.

The network for the government’s exclusive use will be managed by state-owned Telebras, the person said. The main purpose is ensuring government’s data confidentialy.

“We are talking about data that concern public security and the defense of our country. For this reason, our effort to enable the construction of this secure network will belong to the Union,” Communications Minister said in the statement.

President Lobbyist

The government’s decision includes other requirements for the auction winners, such as the installation of a mobile internet coverage on federal highways, and fiber optics in lightly-populated areas, primarily in the nation’s North and Northeast.

Huawei declined to comment on the new guidelines for the auction. Brazilian newspaper O Globo reported that the Chinese firm had hired former President Michel Temer this month to help its lobbying efforts.

The idea of ​​making a private network for the federal government is a preliminary step toward drafting broader rules on the 5G network in Brazil and appears to be good news for Huawei, a person close to Huawei’s thinking said. The company declined to comment.

The Trump administration urged Brazil and other allies to block Huawei components in their 5G networks, saying they facilitate intellectual property theft and spying by Beijing. But the government faced resistance from Brazil’s main wireless companies, which already use Huawei equipment. The carriers argue that a ban on the Chinese company would push their costs higher. Months ago, China said Brazil’s business reputation was at stake on the 5G auction decision.

Ties between Brazil and China were strained by Bolsonaro’s criticism of Beijing while on the campaign trail in 2018; he later warmed up to Chinese leader Xi Jinping during a trip to Asia. But tensions have flared again amid anti-China rhetoric adopted by Bolsonaro’s allies, including his son and Lower House Representative Eduardo Bolsonaro, and the Foreign minister Ernesto Araujo. This week, Brazilian Vice President Hamilton Mourao said Araujo may be replaced soon in a cabinet shake up.

China overtook the U.S. as Brazil’s top trading partner a decade ago as Beijing’s appetite for Brazilian commodity exports like soybeans soared.

©2021 Bloomberg L.P.

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