Published by Minyanville

British Deputy Prime Minister Nick Clegg led a 45-person delegation to São Paulo this week hoping to double exports to the Latin American giant by 2015. He admitted that the UK has failed to nurture ties with Brazil and hopes to boost bilateral trade which in 2010 sat at $8.3 billion. Exports that year from Brazil to the UK were at $3.35 billion.

UK exports to Brazil have risen 29% over the past year, Clegg said. “As Brazil is set to be the fifth largest economy in the world by 2016, UK companies … should seize on every opportunity to prosper in Brazil,” he said.

This is seen by many as a catch-up exercise. “Clegg and Co. will have to work hard to convince their hosts that Britain at long last takes Brazil seriously,” says Jonathan Wheatley writing in London’s Financial Times. Wheatley also points out that India and China (and later this year, Russia)—all of the other BRIC nations—received visits from British Prime Minister David Cameron.

“[Clegg’s] trip will look more like a plea for help than the overdue start of a long-term relationship,” the paper continues. “Britain lags way behind Germany, France and Italy in trade with Brazil. And European companies … are part of everyday life in Brazil in a way no British rival comes close to matching.”

Brazil has long been keen for a United Nations Security Council seat. This hope seemed to be ignored during a visit from US President Barack Obama earlier this year. The seat is not likely to materialize anytime soon but Brazil’s role as the leader of the continent’s economies is being recognized.

Clegg was forced to take diplomatic care as the UK had supported Brazil’s candidacy for the Security Council seat but then was forced to back down as Brazil voiced its support for Argentina’s claim of the Falkland Islands. The 1982 conflict between the UK and Argentina caused more than 1,000 deaths over 74 days. It is commonly put down to a distraction from then Prime Minister Margaret Thatcher’s domestic political problems. Adding to Clegg’s woes will be Brazil’s decision earlier this year to prevent Britain’s HMS Clyde warship to stop at Rio de Janeiro, delighting Argentina.

Former British Consul General in Brazil Martin Raven was more positive about the trip. “Although some large companies … have had a presence in Brazil for many years, several sectors have been ignored,” he told the BBC. “Defense sales have been poor, the retail sector has been absent, and telecoms have left the field to the competition.”

Clegg was joined by Culture Secretary Jeremy Hunt who impressed some sectors of the British press by flying economy rather than business class with his fellow ministers and delegates in order to save taxpayer money.

Brazil’s ongoing battle with inflation and ever-increasing interest rates were hit by low unemployment figures in May. The month saw the lowest figure of unemployment—6.4%—since the Brazilian Geographic and Statistics Institute began collecting figures in March 2002. This seeming paradox is down to companies being forced to pay higher salaries to attract and keep staff. This additional cost is passed onto consumer who themselves are earning more money, pushing them into the middle classes.

Average monthly salaries in May rose 1.1% to $988. Through mid-June, the annual inflation rate is at 6.55%, above the government’s 2011 target of 4.5%. There was some good news on inflation as the Consumer Price Index (CPI) rose at its slowest rate since August, thanks in part to a fall in gas prices. The figure rose 0.23% in the month through to mid-June, down from 0.70% the previous month.

Interest rates are still likely to rise though, Flavio Serrano, senior economist at Espirito Santo Investment Bank in São Paulo, told Bloomberg: “Inflation decelerated because of specific issues—food and fuels. Other items show inflation pressures are still spread. The central bank must remain vigilant and needs to continue to raise rates.”

Brazil has become the biggest buyer of US debt, having purchased $13.4 billion in April, almost double China’s figure, according to US Treasury data. While Brazil’s figure rises to a record $207 billion, both China and Russia have begun to reduce their holdings in 2011.

With the race between Mexico’s Agustin Carstens and France’s Christine Lagarde for the IMF leadership hotting up, Brazil looks close to siding with the underdog Carstens, according to Brazil’s IMF representative Paulo Nogueira Batista. This would be a large boost to the Mexican who, along with many emerging economies, has pushed for a non-European head for the organization.