Supporters are pushing the measure, which would impose restrictions on how Internet service providers use the personal data of Brazilians in response to the growing furor around the world over reports that the United States spied on foreign allies, including President Dilma Rousseff’s administration.

Brazil’s Chamber of Deputies is scheduled to consider the legislation this week, and an amendment is expected that would impose in-country data storage requirements on Internet service providers. The underlying measure would bar companies from storing email and voice communications and require they keep information on IP addresses and connection durations on file for one year. A Brazilian congressman’s aide said votes on the legislation could begin as early as Monday.

If the lower house and Federal Senate pass the bill, companies will have to build local data centers as a cost of doing business in Brazil, which industry groups oppose. In addition, some observers say the spying allegations have become a “dominant fixture” in the U.S.-Brazil bilateral relationship at a time when Washington is trying to formalize the trade and economic relationship with one of the world’s most dynamic emerging economies.

“President [Barack Obama] has been trying to bring the ball down the field; this has halted those efforts,” said Carl Meacham, director of the Americas Program at the Center for Strategic and International Studies.

Numerous industry groups have warned the local-data requirement would have several unintended consequences, including decreased data security, higher costs for services, lower technological innovation and competitiveness and limited consumer access to cloud services.

“These attempts to regulate commercial data flows as a way to respond to the surveillance; I think that’s the heart of the mistake,” said Mark MacCarthy, vice president of public policy for the Software & Information Industry Association.

Instead of a reactionary measure, “governments need to sit down and figure out a rule-of-law framework,” he said.

MacCarthy’s group and 46 others from the United States, Brazil, Europe and Japan sent a letter last week to the members of Brazil’s National Congress asking it to abandon the proposed in-country data requirements. The business organizations, which represent Google and other Internet firms, argue that the free flow of data is important for all sectors.

“Global data flows rely on data centers dispersed all over the world,” the letter says. “Thus, in-country data storage requirements would detrimentally impact all economic activity that depends on data flows.”

Supporters of the local-data amendment in Brazil say it isn’t related to the anti-spying goal of the broader bill so much as it is intended to protect the country’s national security. Requiring companies to keep the information in the country will allow the government to access it in the course of criminal investigations, said a spokeswoman for Alessandro Molon, a member of the lower house who is shepherding the broader Internet privacy legislation.

“It would make these companies obey Brazilian law,” the spokeswoman told POLITICO.

Lawmakers are also considering legislative language to help smaller companies handle the cost of building the centers, which could be tens of millions of dollars, the spokeswoman said. For big companies, “it shouldn’t be that big of a burden,” she said, adding that larger Internet companies could comply with the law using only a week’s worth of revenue.

She said lawmakers were still reviewing the provisions to determine the types of data that would be subject to the requirements, among other things.

Rousseff requested the National Congress pass the Internet privacy bill quickly in response to allegations that the National Security Agency monitored her phone calls and those of German Chancellor Angela Merkel, and she has taken other aggressive measures, as well.

Rousseff has proposed laying fiber-optic cable directly to Europe in order to bypass the United States and has teamed up with Germany to press for a United Nations resolution promoting the right to privacy on the Internet, Foreign Policy magazine reported.

The NSA is also accused of monitoring the emails of Mexican President Enrique Peña Nieto and his predecessor, Felipe Calderon, according reports to Brazilian television network TV Globo and Der Spiegel.

The Brazilian station based its reports, which include the Rousseff and Peña Nieto allegations as well as charges that the NSA spied on Brazil’s oil sector, on leaked documents Rio de Janeiro-based journalist Glenn Greenwald obtained from Edward Snowden, a former NSA contractor. Snowden has lived in Russia since being granted temporary asylum to live there this summer.

Meacham said the recent revelations from Germany and Brazil’s tenacious pushback aren’t making it any easier for the U.S. to advance its digital trade agenda. The U.S. has proposed binding rules that would prohibit barriers to data flow and the localization of data servers in talks on the deal with 12 countries in the Trans-Pacific Partnership.

But Rousseff may be using the spying scandal to buoy her own political career, Meacham said. She has faced strong headwinds over the amount of money the government is spending on infrastructure for next year’s World Cup tournament and the 2016 Summer Olympics compared with what it is investing in government services for its own people, Meacham said.

Rousseff may have been able to earn political points with her responses to the alleged U.S. surveillance activities, first by calling off a state visit to the United States last month after the allegations surfaced and then by pushing for the Internet privacy bill, he said.

“In the short term, that’s probably helpful to her political survival,” said Meacham. “In the mid and long term, she doesn’t want to damage her relationship with the United States either.”