It makes it much easier to spy on your own citizens when you do that.
Well, yes and no. The main thing to worry about is typified by this comment:
Among Brazil's plans are a domestic encrypted email service
It's possible that what this means is that Brazil's domestic email service will do the encryption. This would be no security at all, since it would mean that the email service has everyone's keys and can decrypt everyone's email. And possibly sell it to interested customers, such as the US government.
If they're serious about local security, what they'll do is study various end-to-end email encryption packages, and recommend the best ones to their citizens. End-to-end encryption is the only way to get actual security in email. And they'll want a public education campaign to teach people about the "gotchas". For example, you don't ever store your keys in "the cloud".
There have been proposals in the US that email encryption be done by the low-level IP software. This was rejected back in the 1960s by the ARPAnet folks (the military predecessor to the Internet), on the grounds that low-level encryption is inherently secure, since it's typically installed in a way that the user can't control or even see into. It could easily be sending your keys and/or decrypted email to arbitrary third parties, and most users would have no way of knowing about it.
Anyway, it could be interesting to know what the Brazilian planners are planning. Are they really aiming for a domestic email service that "handles" the encryption (i.e., no security at all)? Or are they planning to actually do it right?
Here in the US, we know the answer to that question as applied to our own government (and telecom companies ;-). Is the Brazilian government any better?