The office of Brazilian President Rousseff released a statement on Tuesday announcing the cancellation of a highly-anticipated meeting with President Obama. The talks, which had been scheduled for next month, were expected to highlight the steadily improving relations between the two trade partners. However, revelations of spying by the US National Security Agency (NSA) in Brazil prompted Rousseff to call off the visit, in which she was to have been honored with a state dinner.

Reports from the Brazil daily Globo newspaper, citing documents provided by former NSA contractor Edward Snowden, have said that US agencies snoop on the phone calls and Internet communications of private citizens, and Rousseff's own communications with aides. The reports also allege the NSA hacked into the computer network of the state-run energy giant Petrobras.

Washington's refusal to answer Brasilia's questions about the allegations and a "commitment to cease such surveillance activities" had created a diplomatic rift between the two countries.

"The conditions are not in place for the visit to go ahead as previously scheduled," the statement read.

"The illegal interceptions of communications and data of citizens, companies and members of the Brazilian government represents a serious act which violates national sovereignty and is incompatible with democratic coexistence between friendly countries," it added.

Earlier this year, Snowden leaked information to the UK daily The Guardian about alleged US spying on domestic and international telephone and Internet activities.

Both 'looking forward' to rescheduling

The White House also commented on the cancelled meeting on Tuesday, contending that both presidents had reached a mutual decision to postpone talks until they could smooth diplomatic relations.

"They both look forward to that visit, which will celebrate our broad relationship," White House spokesperson Jay Carney said. "We're certainly acknowledging the concerns that these disclosures have generated in Brazil and other countries."

"[President Obama] has directed a broad review of U.S. intelligence posture, but the process will take several months to complete," Carney added.

Other world leaders, including Germany, have decried the alleged NSA spying, but Brazil's decision to halt talks comes as a first.

Amid public discontent with the Brazilian government's massive spending on upcoming international sporting events while millions languish in poverty, Rousseff stands to regain political points for standing her ground against the world power.

The negative consequences of halting trade included the possibility of the US losing a major defense contract worth roughly $5 billion (3.74 billion euros). Rousseff had expressed interest in signing a deal with US-based Boeing for the F-18 fighter jets. However, the disagreement could persuade the Brazilian leader to award the contract to contenders France or Sweden instead.

kms/jr (AP, AFP, Reuters)