Published by Minyanville
British Foreign Secretary William Hague has spent two days in Brazil this week, in what he described in a speech in Rio de Janeiro as his country’s “most ambitious effort to strengthen ties with Latin America in 200 years, since the days of [George] Canning,” evoking his 18th century counterpart who pushed for British recognition of Latin American nations, bringing the New World into political existence.
Hague feels that Britain has neglected Latin America and so told readers of the London Telegraph, “Britain is coming back… We are turning around decades of British withdrawal in Latin America.”
The veteran politician pointed out that there have been 14 ministerial visits to Brazil since his government came to power in May 2010, compared to 10 in the previous three years. “So you can see the trebling, quadrupling of our effort that we are putting in to the relationship with Brazil.”
The New World, however, has matured into its political existence in Britain’s absence and so Hague’s trip was overshadowed by an escalation in rhetoric between Britain and Argentina over the Falkland Islands, or the Malvinas as they are known across Latin America.
As the 30th anniversary of Britain’s war with Argentina over the islands approaches, both British Prime Minister David Cameron and Argentine President Cristina Fernández de Kirchner have played to domestic audiences—much as the governments during the war itself—by claiming sovereignty.
Cameron accused Argentina of “colonialism,” this week before Argentine Foreign Minister Héctor Timerman hit back, essentially saying that this was rich coming from Britain—a “synonym for colonialism.” Kirchner described Britain last year as a “crass colonial power in decline.”
There are economic interests at stake, as well as political ones. British firms are becoming excited by oil finds around the islands and have begun carrying out deep-sea exploration.
The problem for Hague this week was that Brazil has backed the Argentine claim.
Regional trade bloc Mercosur, of which Brazil is a key figure, last month agreed to ban vessels carrying the flag of the Falklands from its members’ ports. Hague’s counterpart in Brazil, Antonio Patriota, said all Latin American nations “back Argentine sovereignty over the Malvinas and back the UN resolutions calling on the Argentine and British governments to hold talks on the issue.”
Hague said in Rio de Janeiro that the ships would be able to reflag with the British standard to overcome the ban, which, he claimed, would do nothing but “increase tension.” Both he and Cameron have said that they believe in the roughly 3,000 islanders’ right to self-determination. “That will continue,” said Hague.
Britain is Brazil’s fourth largest foreign investor and UK exports to the Latin American giant are growing. Bilateral trade between the two nations last year was $8.57 billion, up more than 10% from 2010. Exports to Britain increased 12.4% in the same period to reach $5.2 billion, according to data from UPI.
Another Interest Rate Cut
Brazil has cut its benchmark rate to 10.5%, for the fourth time running, in a much expected move which continues its easing cycle which began in August last year when the interest rate was at a high of 12.5%.
The shock decision to pull it down, and continue to pull it down, has since been ratified as the country’s economy cools. The third quarter of last year saw expansion at its slowest in two and a half years.
“The market is going to price in a greater concern about inflation,” Andre Perfeito, chief economist at Sao Paol’s Gradual Investimentos, told Bloomberg. “It’s obvious that they’re going to do another half-point cut and at least one more after that, which could be smaller.” Perfeito expects a further cut in March.
Authorities in Brazil will be keen to bring rates right down, in order to take pressure off the currency. Investors are attracted by the high rates which pushes up the value of the real against the dollar.
Inflation last year was at 6.5%, the upper limit of the Central Bank’s target. This year, the Bank is hoping for 4.5%, with the same upper and lower limits of two points either side. Analysts are expecting a figure of around 5.3% this year, according to the Wall Street Journal.