Alleged US spying on the communications of Brazil's president have brought negotiations on buying US warplanes to a halt, a Brazilian government source said Tuesday.
The talks have been going on for years, and got a nudge with a visit from Vice President Joe Biden in May.
"The negotiations were going very well, and then they stopped" with the recent press reports that the National Security Agency had spied on the online and other communications of President Dilma Rousseff. Mexican President Enrique Pena Nieto was also alleged to have been targeted by the NSA.
The US government was eager to close the aircraft deal in time for a planned October visit to Washington by Rousseff, the source said.
Brazil has been in talks to buy 36 fighter jets for years, at a cost of $5 billion.
The candidates are the Boeing F/A-18 Super Hornet, the Rafale from France's Dassault the Gripen NG by Saab of Sweden.
Rousseff said last week she will decide whether to go ahead with the Washington trip depending on the explanation she gets from Obama about the alleged espionage. Obama has promised an answer this week, Rousseff said.
"They have to win back our trust," the source said.
Brazilian broadcaster TV Globo has reported over the past two weeks that the NSA spied on the online communications of Rousseff, her aides and Brazilian oil giant Petrobras.
The allegations stem from documents leaked by fugitive former intelligence contractor Edward Snowden.
But the alleged US espionage targeting Petrobras will not in fact delay an oil field auction scheduled for next month, a government official was quoted as saying Tuesday.
The finding of the enormous so-called Libra field marked the largest oil discovery in Brazilian history. It is believed to hold between eight and 12 billion barrels of recoverable oil, and covers an area of 1,500 square kilometers in ultra deep oil fields detected in 2007.