SAO PAULO, BRAZIL -- Brazil, erecting a new barrier against computer imports, is refusing to allow the sale here of a standard computer operating program manufactured by Microsoft Corp., an American firm.
The protectionist action has alarmed and angered the Reagan administration, not so much because it has closed the door on a single U.S. software product but because it signals Brazil's intention to extend its restrictions on high-tech imports to advanced intellectual property.
Brazilian authorities have ruled that a local product -- the SISNE program developed by Scopus Tecnologia -- is similar enough to Microsoft's MS-DOS system to justify locking out the foreign competitor. DOS stands for disk operating system, a basic program that allows a computer to run other programs.
The decision is in line with Brazil's announced determination to protect its fledgling computer industry from foreign competition in the hope that it can develop its own technologies. But some room had been left in Brazilian law for the import of foreign systems for which no similar national product exists.
Critics of the Microsoft decision say it shows that the government's desire to keep national policy restrictive continues to overshadow technical considerations in defining what constitutes a similar system. U.S. officials regard the Brazilian move as a disturbing precedent for high-tech trade, for which international rules are unsettled.
Rare among the newly industrialized nations in its enormous size, Brazil has been counting on a giant domestic market to support the establishment of a domestic computer industry. But this effort has generated critical trade disputes between Washington and Brasilia. The Microsoft case has added to a reservoir of frustration and mistrust in both countries, reviving the possibility of retaliatory U.S. trade measures against Brazil.
Over the past several years, the Reagan administration has tried through private negotiations and public threats to get Brazil to open itself more to foreign computer products, with some results. International Business Machines Corp. and Unisys have been assigned a share of Brazil's mainframe computer market and have received permission to produce discs with large storage capacity here. IBM also has won government approval to form a joint venture for data processing services with a Brazilian company.
Last June, Washington suspended consideration of trade sanctions after a bill was introduced in the Brazilian Congress promising copyright protection for computer software. The bill, now before the Senate after passing the lower house, offers the hope of controlling widespread pirating of American computer programs. Such pirating has cost U.S. manufacturers an estimated $35 million in lost sales, according to the Washington-based Computer and Business Manufacturers Association.
But the proposed legislation also reserved the right of Brazilian authorities to deny the licensing of foreign software when a Brazilian firm can be shown to produce a "functional equivalent."
In July, the Brazilian Special Secretariat for Informatics (SEI) -- the committee responsible for regulating the computer industry -- determined that the SISNE program by Scopus was similar enough to Microsoft's MS-DOS to deny a license to four Brazilian firms to market the American product. The judgment confirmed U.S. fears that Brazilian regulators would interpret the "functional equivalent" concept in a broad, highly protectionist way.
Microsoft contends, and many experts agree, that its system -- the recognized world standard for 16-bit microcomputers -- is clearly superior to SISNE in functions and performance. Pirated versions of the MS-DOS program are already used widely in Brazil.
But Brazilian authorities say the Scopus system is more than adequate for companies here and generally is on a par with the Microsoft product. Moreover, to let Microsoft enter the market now would, officials here argue, negate the rules of the game under which SISNE was developed and thereby discourage other Brazilian firms from developing software.
"Our example does show at least that Brazilian firms are able to develop high-tech software on their own," said Edson Fregni, president of Scopus, a 12-year-old firm that has been a leader in Brazil's computer drive.
The integrity of Scopus itself, though, has been called into question by the discovery that a small part of the SISNE program was copied from Microsoft. Scopus has acknowledged that one of its junior engineers duplicated part of Microsoft's code in designing SISNE. But the Brazilian company said the amount lifted was small -- 0.15 percent of the total SISNE code. The copied segments were rewritten last July as soon as the plagiarism was publicized by Microsoft.
"It is perplexing that the Microsoft case has created the reaction it has in the United States," said a senior Brazilian official handling the dispute. "We worked hard to establish a framework of understanding in this area. What we had agreed with the United States was that if a difference of opinion should arise, it would be appealed in the courts or CONIN," a ministerial-level council.
U.S. officials, in turn, feel deceived, having understood that America's more advanced computer software would be allowed into Brazil. A recommendation to retaliate is before the Cabinet-level Economic Policy Council, which deferred a decision three weeks ago to avoid spoiling the climate for separate negotiations on a rescheduling of Brazil's foreign commercial debt.
U.S. options are complicated by at least two factors: There are no Brazilian computer products in the United States to target, so retaliation would have to be against other kinds of Brazilian imports; and many Brazilian exports to the United States are manufactured by U.S. multinationals based in Brazil or contain U.S.-made components, so sanctions could hurt U.S. interests.
Moreover, some Brazilian products have become major consumer items in the United States, giving U.S. officials further pause. Brazilian citrus growers, for instance, now supply about 40 percent of the U.S. orange juice market.
For Brazil, meantime, the question is not whether to abandon its protectionist policy -- there seems little chance of that -- but how to manage it in a way that makes the rules clearer, less arbitrary and more acceptable to the United States.
As a step in this direction, Brazilian associations of computer producers and users have joined forces with conservative senators to try to eliminate the "functional equivalent" concept from the pending software bill. They have suggested substituting tariffs on imported software as a less controversial means of protecting domestic manufacturers. But strong protectionist forces in the Ministry of Science and Technology, the military, labor unions and some science and engineering elements want to retain the concept.