Local people say that São Paulo works so that the rest of Brazil can relax. Rio may have the carnival and the girls from Ipanema, but São Paulo has the largest stock exchange in Latin America, a GDP of $76 billion (£37 billion), a state budget of $10 billion and 15 per cent of the national economy.

The 20 million Paulistas who live there think of their state as the engine of a machine that has never functioned better. Brazil looks set to achieve investment-grade status next year. It is the biggest trader in South America. The real has appreciated more than 100 per cent against the dollar during President da Silva’s four-year administration and is set to strengthen further in 2008.

Brazil leads biofuel production. Record commodity prices make its natural resources, which include the world’s biggest iron ore mine, more valuable than ever. The country’s 26 states are conducting a “war of incentives” as they compete to offer foreign investors the best tax breaks.

This leaves one big question for São Paulo’s business community: with all this activity, why is Brazil still best known for cosmetic surgery and hyper-inflation? Nigel Morris, the executive director of the British Chamber of Commerce and Industry in Brazil, says that Brazilians are tired of being a novelty act. “Brazil is looked to for entertainment value,” he says. “Why are there no reports of the achievements here, just more stories about street children, carnival and the burning of the Amazon?”

Marcelo Viveiros de Moura, a partner at Pinheiro Neto Advogados, a leading Brazilian corporate law firm, acknowledges that the country has never excelled at selling itself, despite a wealth of privatisations ripe for the picking and growing opportunities for public-private partnerships. “There was a Frankfurt trade fair recently and the Brazilian stand was serving caipirinha [the national cocktail] among posters of naked women,” he says. “How was this appropriate?”

Privately, high-profile Brazilian business leaders worry about why the country has received less attention than India, China and Russia, its emerging-market rivals. One says: “There’s a concern in the Brazilian business community that Brazil doesn’t get a good press. And the authorities aren’t good at promoting Brazil, in part because it’s a hugely complicated country that’s difficult to get under the skin of.”

Britain has been particularly slow to recognise the opportunities in Brazil.

In the early 1900s the UK was a significant investor in Brazil, but its interest waned after the First World War and never recovered. Paulistas like to recount how, in the 1950s, the Brazilian Government, keen to expand its automotive industry, visited Britain to attract leading carmakers. The delegation was snubbed and, wondering where to turn next, made a last-minute decision to try some German manufacturers instead. Volkswagen went on to become Brazil’s leading carmaker. Even now, Britain lags behind other countries in investing in Brazil. Central bank figures show that Canada pumped $1.2 billion in foreign direct investment into the country in 2006, Spain $1.5 billion, Switzerland $1.6 billion and the United States $4.4 billion, compared with only $395 million from the UK.

The Brazilian and British governments are trying to improve the situation. The UK-Brazil Joint Economic and Trade Committee was set up after Mr da Silva’s visit to Britain in March last year. Since then, there have been visits by dignitaries on both sides, seminars for London business people on how to operate in Brazil and workshops to promote key Brazilian industries. The committee will meet again next March to discuss initiatives.

However, the programme elicits scepticism. Rubens Barbosa, a former Brazilian ambassador to Britain and to the United States who runs a São Paulo investment consultancy, says: “Every other year the Lord Mayor [of London] comes to Brazil with all the pageantry, but what comes out of it? Nothing. There’s not a single British company taking part in public-private partnerships here. I’ve been trying for years to get a British company interested in building jails in Brazil, but to no avail.”

The evidence is everywhere of Britain’s lack of interest in Brazil. The lobby of the Intercontinental, a favourite haunt in São Paulo for travelling business people, has newspapers to cater for everyone but Brits. Carrefour and Wal-Mart are popular super-markets in the city – not Britain’s high street stalwarts. The FTSE 100’s big names – Unilever, Reckitt Benckiser, AstraZeneca, Rio Tinto, Anglo American, BT and British Gas – have operations in Brazil, but these are largely historic investments rather than recent arrivals.

HSBC, the British company with the biggest Brazilian operation, has become a well-known name, with 935 branches and 300 consumer finance stores since entering the country ten years ago. Emilson Alonso, the chief executive of HSBC Bank Brasil, says that the secret to success is “tropicalising” the business. He says: “If you want to apply the strategies you have in the US or UK, it won’t work.”

HSBC has worked the circumstances in Brazil to its advantage.

Mr da Silva’s Family Fund of 95 reais (£26) a month has increased the percentage of the population receiving social security payments from 2 per cent to about 5 per cent. The payments mean that some of Brazil’s poorest people are able to buy products that they have not been able to afford in the past.

Soon after Mr da Silva’s election, HSBC bought Losango, a financing company aimed at low-income people, with about 17 million customers, from Lloyds TSB. The bank is widening Losango’s offering to serve the increasing financial needs of Brazil’s sub-prime customers.

There are other tricks to doing good business in Brazil, such as developing a liking for cafezinho, a small but strong coffee. Francisco Itzaina, the head of Rolls-Royce in Brazil, says: “If you sign a contract and something goes wrong, in some parts of the Western world the lawyers get to work. In Brazil, the businessmen get together and work out the most pragmatic solution. Here, banging the table just doesn’t work. A good conversation over coffee will get you much further.”

Paulistas are very aware of the remaining barriers to investing in Brazil. The judicial and legislative process is painfully slow. It takes about 180 days to set up a business in São Paulo and years to close one down. Taxation can be complex, with more than 50 business taxes in São Paulo alone. Far fewer people speak English than in, say, India. The city’s subway system is at least 100 kilometres short of requirements and a three-hour slog through security at Guarulhos airport is considered normal.

Yet Martin Raven, the British Consul-General in Brazil and director of trade and investment, is convinced that the effort is worth it. “Whatever its reputation, whatever the difficulties, this is a good place to do business,” he says. “It’s not an easy place to do business, but if you’re thinking of being global, you have to be in Brazil.”

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