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Quest Means Business
ECB's Quantitative Easing Starts Monday; China Cuts Growth Forecast to 7 Percent; ECB: New Plan, Old Problems; European Stocks Soar; Wall Street Awaits US Jobs Report; Etsy Files $100 Million IPO; Plane Skids Off Runway in New York; BRICS Central Banks Having Active Week; Brazil Hikes Rates to Rein in Inflation; South Africa to Keep Rates Unchanged; Standard Bank Posts Boost in Profits
Aired March 05, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
ISA SOARES, HOST: For all you "Harry Potter" fans, that's Jason Isaacs, who played Lucius Malfoy in "Harry Potter." Wall Street is covered
in snow, and the Dow has snapped its losing streak. It's Thursday the 5th of March.
Tonight, easy does it. The ECB sees better days ahead as it launches QE.
Seconds from disaster. A Delta plane slides off the runway at New York's LaGuardia.
And tackling the elephant in the room. The Greatest Show on Earth bids farewell to circus elephants.
I'm Isa Soares and this is QUEST MEANS BUSINESS.
Good evening. Europe is finally on the road to recovery. The European Central Bank has upgraded its forecast for 2015 and now predicts
the eurozone will grow at a rate of 1.5 percent, up from a paltry 0.9 percent last year. I'm sure many in Europe will be celebrating with
champagne or carver that may be.
In stark contrast, the world's growth powerhouse has done the opposite. China has cut its growth predictions for the year to 7 percent.
That is its lowest rate in years.
European Bank president Mario Draghi sparked bells and whistles in European stock markets on Thursday. We'll have more on that in just a
moment. He actually got the party started when he announced quantitative easing would being this coming Monday. The eurozone's central bank will
buy $66 billion in bonds each month until September 2016.
Draghi also declared that Greek banks are solvent, and he gave a thumbs up to a broad recovery predicted to becoming soon. Take a listen.
(BEGIN VIDEO CLIP)
MARIO DRAGHI, PRESIDENT, EUROPEAN CENTRAL BANK: The monetary policy decisions have worked, and it's with some certain degree of satisfaction
that the governing council has acknowledged this.
(END VIDEO CLIP)
SOARES: Well, for more on ECB's bond-buying program and the health of Europe's economy, I'm joined by Jim Rogers in Fort Lauderdale, Florida. He
is the chairman of Rogers Holdings and author of "Street Smarts: Adventures on the Road and in Markets." He was well-known here to QMB
viewers.
Jim, thank you very much for joining us. I want to start with Europe, if you don't mind. We've seen a bit of degree of optimism. QE confirmed
to begin on Monday. Growth forecasts also being raised. How much of a boost or impact do you think the QE will have on Europe?
JIM ROGERS, AUTHOR, "STREET SMARTS": Isa, I heard what he said, and it's embarrassing. I hope you don't get your investment advice from
central bankers. They're nearly always wrong. Especially in Europe -- well, America, Europe, everywhere else.
Yes, when all this money gets flooded out of the central bank, of course it's going to help the people who get it. Stocks are going to do
well, bonds are going to do well, some people are going to do very well. But it's not the way to revive the economy. Printing money has never been
a way to long-term success.
SOARES: It took a while for it to be felt in the US, so are we talking 18 months here? Longer even?
ROGERS: Well, yes, it's going to take a long time. There are many structural problems in Europe. And by -- if it's 18 months or two years,
whatever it's going to take, by then, the world economy in other parts of the world are probably going to be in decline.
So, Mr. Draghi's shooting himself in the foot. He's debasing the currency. The currency went down a lot more today, as you know. He's
increasing the debt. This is not good for Europe. It's not good for the world.
SOARES: And as you know, Jim, this comes five, six years after everybody else who's introduced QE. Would you think this will work, or you
do think -- maybe from your tone you can tell me this is largely sentimental.
ROGERS: It is largely sentimental. It will help the banking system, it will help the investment class, no question about it. You know, it's
going to help me. I own European stocks. I bought more because of all this.
But it's not good for the European economy. It is going to debase the currency, the currency is going to go down more. Exporters will do better,
that's part of what he's trying to do. But the cost of living in Europe is going to go through the roof because the currency's going down. If you're
an exporter, if you're a financial type, you're happy. Otherwise, you should be worried.
SOARES: Yes, it will definitely give a competitive boost on the currency front. But let me ask you this, Jim: how does the cash filter
through, and how do you measure this success? How you they measure if it's working or not?
ROGERS: They're going to say it's a success whether it is or not, Isa, just like in the US, just like in Japan. How do I measure the
success? They will measure the success because the stock markets are going to go higher and stocks are going to go higher. And they will say,
therefore, things are better in Europe.
The way you measure success is you ask the man in the street, is your life better or not? And most of them a year from now are going to be
complaining because the cost of living is going to go up a lot in Europe, and nobody likes inflation. Very few people like inflation.
SOARES: Because we've got another top story, and that's China slowing expansion, the growth forecast the lowest --
(AUDIO GAP)
SOARES: -- 2015 to 7 percent.
(AUDIO GAP)
SOARES: -- People's Congress, where policymakers seem wrapped up in reforms. They're looking to overhaul pensions, the tax system, and bring
blue skies back to Beijing. Jim, on China, we heard today more sobering report from China. It seems the leadership is not trying to hide it,
either, calling it the new normal. This growth forecast of 7 percent, Jim, was this to be expected?
ROGERS: Of course. China cannot continue to grow at very rapid rates. It's a huge economy. And by the way, I don't know if it's 7
percent, and I doubt if they do either. They're just saying things are going to be slower, and they are.
There are some problems in China. They had a property bubble. Prices are coming down. They've had some inflation. They're trying to kill those
problems, and they are. They're solving those problems in a good way.
They're also trying to clean up China. China's filthy, as you know. And thank goodness, they're going to clean up the pollution problems.
Somebody, Isa, is going to make a lot of money cleaning up China. Find the companies and invest in them, and you'll make a lot of money, too.
SOARES: Thanks very much, Jim Rogers. Apologies for those of you that are hearing some bad sound on our mics. We'll try and fix that
problem. We'll be back after a short break.
(COMMERCIAL BREAK)
SOARES: Welcome back to QUEST MEANS BUSINESS. One of our top stories this hour, China. Crunches in Europe would probably do cartwheels over a 7
percent growth forecast like China. This is what they're forecasting.
But he ECB does have reason to be hopeful. Greece is off the radar for now, and borrowing costs are out of the danger zone. So, it really
begs the question: why do quantitative easing after all, and why now? "The Business View's" Nina Dos Santos takes a look.
(BEGIN VIDEOTAPE)
NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT (voice-over): After years of anticipation and months of hints, quantitative easing is finally
coming to the eurozone. Fighting falling prices and high unemployment, Mario Draghi hopes his 1.1 trillion euro plan will give the single currency
area the boost that it needs.
GILLES MOEC, BANK OF AMERICA MERRILL LYNCH: I don't expect a massively powerful impact from QE in Europe, because the channels of
transmission are probably less obvious than they were in America, for instance, because wealth effects are not as strong in Europe as they are in
the US. But all in all, I still think it's a positive to the European economy.
DOS SANTOS: The central bank's stimulus may not even have begun, but it's effects are already being felt, with stocks at record highs, the euro
at an 11-year low, and borrowing costs to some of the bloc's biggest nations at their cheapest in five years. A trend which even a near default
by Greece couldn't derail.
DOS SANTOS (on camera): So, how will the ECB's QE work? Well, the central bank will print 60 billion euros worth of new money per month to
buy bonds from banks, freeing up the cash so that those very banks can then lend to companies, in the hope that those companies will hire more staff.
In theory, that should mean more disposable income which, if spent, should push up prices, countering the eurozone's ongoing battle against
deflation. The scheme will last until at least September 2016 or longer if inflation doesn't reach the ECB's target of at or near 2 percent.
DOS SANTOS (voice-over): But will the cash really make it through to where it's most needed in the real economy? What's more, the plan puts the
ECB years out of sync with other central banks, like the Fed, now done with QE and poised to raise rates later this year.
MOEC: For the corporate sector in general, it's going to, I think, accompany or magnify the improving activity we've started to see in terms
of hiring, in terms of capex, so people may not see for themselves, may not see that if ultimately the consequence of QE. But odds are that they will
have a better chance of keeping their job.
DOS SANTOS: When Mario Draghi took the helm of the ECB, many said that he'd never get his colleagues to agree to QE. Though he may have won
them over, he'll now have to prove that the project won't be an expensive mistake.
Nina Dos Santos, CNN, London.
(END VIDEOTAPE)
SOARES: Now, the hard work begins. While the thick of European shares extended their rally after those encouraging comments from Mario
Draghi and the European Central Bank, stocks reached their highest levels in more than seven years in today's session, so the party really has
started. CAC 40 up almost 1 percent, and so is the Xetra DAX.
Well, Wall Street rose modestly higher as investors await Friday's big US jobs report. Alison Kosik joins us live from New York with more.
Alison, how was the day today? Because at the beginning of the week, it's been a bit up and down, hasn't it?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Yes, it looks like stocks were able to break from that two-day losing streak, if that's what you want
to call it. But we did see stocks trade in a very narrow range. We did see stocks get a pop early on, that's as we got more details from Mario
Draghi about that QE for the eurozone.
But we are seeing a lot of trepidation and caution head into the market, at least we did today. That's because of the jobs report coming
out tomorrow.
And the sort of precursor for that was jobless claims data. That came out disappointing, showing a rise of 7,000 to a level of 320,000. So,
that's giving some worry about what tomorrow may bring when the big US government jobs report comes out, Isa.
SOARES: Yes, and I think that Wall Street going a bit of DIY, or shall I say, the DIY industry is coming to Wall Street.
KOSIK: Yes. Etsy, not sure if you're heard of it, but this is a big deal for those who like to buy a lot of handmade goods, a lot of crafts and
housewares. Etsy filed with the SEC saying it's going to go public at some point next month. It could raise as much as $100 million with this IPO.
Now, it has brought in revenues generating almost $196 million of revenue just last year. That's up 56 percent from a year ago. But this is
a company that is small, and it's going through a lot of transition right now.
And it seems to be making less money on what it's selling to consumers and making more on selling services to its sellers, meaning it's making
money on ads and payment fees and shipping. That seems to be where the revenue is.
Now, the big question for investors is, are consumers still going to be interested in buying those handmade goods from Etsy once it becomes part
of a bigger corporation? We shall see, Isa.
SOARES: Thank you very much, Alison, there in New York for us.
KOSIK: Sure.
SOARES: Now, a Delta airliner has skidded off an icy runway at LaGuardia Airport in New York. The plane slammed through an embankment and
snow. It came to a halt over the Flushing Bay's frigid waters. Twenty- four passengers have minor injuries, according to the New York Fire Department.
CNN's Will Ripley joins us now from LaGuardia Airport, which reopened about half an hour ago. And Will, what are we learning in terms of what
happened here?
WILL RIPLEY, CNN CORRESPONDENT: Well, Isa, we should point out, the airport really is only partially open. There is one runway that is
allowing flights to slowly take off from here, but all incoming flights are canceled.
This is affecting thousands of flights, not only domestically here in the United States, but internationally as well, because of the fact that
LaGuardia, located in the New York area, some of the busiest airspace in the United States, is having to reroute flights, which is why airports that
don't even have any weather problems right now have planes that are sitting at the gate unable to take off.
And if you look at the weather conditions behind me, you can see snow removal crews are working even in the parking lots around the airport to
keep up with all this snow, which created a very scary situation for passengers earlier today.
(BEGIN VIDEOTAPE)
RIPLEY (voice-over): A terrifying image for everyone who flies: a Delta passenger jet skidding off a slick and snowy runway at one of
America's busiest airports. The flight from Atlanta was coming in for a landing at LaGuardia, then lost control, ending up just feet from the
water.
JARED FAELLACI, PASSENGER (via telephone): As soon as we landed, we felt the wheels hit the runway, and we did not feel the wheels take
traction, and we started to skid. And we skid to the left side of the runway, and we continued to skid. We literally were a couple feet away
from heading into the water.
RIPLEY: Airport officials say the two planes that landed on the runway before the Delta flight reported good braking action.
TOWER: Delta 1086, Tower. Are you with me?
RIPLEY: One hundred twenty-seven passengers aboard the MD-88 were evacuated from the plane using emergency exits on the wings. Port
Authority officials say the emergency chutes did not deploy. Twenty-four people were injured, three taken to the hospital.
One of the passengers, New York Giants tight end Larry Donnell, who shot this video. Port Authority officials dealt with a fuel leak from the
plane. The airport remains partially closed, with flight cancellations continuing for hours.
CAR 100: He's leaking fuel on the left side of his aircraft heavily.
TOWER: He's leaking -- you said leaking fuel?
CAR 100: Affirm. His wing is ruptured.
RIPLEY: Moments after the plane lost control, tense communications from Air Traffic Control.
CAR 100: Tower, you have an aircraft off the runway. The airport is closed, the airport is closed. We've got a 3-4.
TOWER: Car 100, say again?
CAR 100: Tower, you have an aircraft off 3-1 on the north vehicle service road. Please advise, crash rescue. LaGuardia Airport is closed at
this time.
(END VIDEOTAPE)
RIPLEY: Such a frightening ordeal, that plane sliding 4,000 feet on a 7,000-foot runway. We saw passengers climbing out, having to walk away
without their coats, without their belongings. But they were able to walk away, Isa, and that is what is key here. Because had that plane slid just
a bit further into that icy water, it could have been a very different, much more dangerous scenario.
SOARES: Indeed. And will, and there are 127 passengers. How are they doing, any incidents of injury?
RIPLEY: We know that there were, again, about two dozen very minor injuries. Just three people transported to the hospital. So, as far as
injuries go, good news, people were not seriously hurt. People were cold, they were shaken up. And of course, the NTSB here at the airport also
investigating what happened.
Two pilots did report that the runway, that they had traction when they tried to land. And yet, when this plane hit the runway, it just slid.
So, it just goes to show you, when you're dealing with snowy conditions like this, Isa, how quickly and dangerously the conditions can change.
SOARES: Yes, absolutely. A very lucky escape. Will Ripley, there, for us. Thanks very much, Will.
Now, the BRICS nations are scraping and clawing their way to stable growth through progressive monetary policy. Brazil is the latest to make a
move. We'll have more when QUEST MEANS BUSINESS returns.
(COMMERCIAL BREAK)
SOARES: Welcome back to QUEST MEANS BUSINESS. Now, central bankers in the BRICS countries are sure keeping busy and keeping investors on their
toes. Brazil has become the latest to make a drastic monetary policy move.
First, let's take a look at some of those countries. Let's start with China. China cut its interest rate over the weekend, hoping to keep growth
coming and avoid a year that's shaping up to have the slowest GDP expansion in 25 years. As we said earlier, China has actually cut its GDP growth --
this is not working for us -- to 7 percent.
But let me move on, and let's focus there -- and there is China for you. Now, let's focus on India. India made a surprise rate cut on
Wednesday. It's the second of the year. The board is not playing with me. Let's show it -- there we go.
India, the government's ambitious target is banking on 8.5 percent growth, making one of the fastest-expanding economies in the world
Brazil, interestingly enough, is actually bucking the trend, aggressively tightening monetary policy in an effort to keep inflation at
bay, all while staring an economic downturn in the eye. The central bank hiked rates overnight on Thursday. And listen to this: highest level in
six years.
The move pushed the real down to its lowest level against the dollar to a record, over a decade, really. This is what we're looking at.
Well, for more on Brazil's economy, Shasta Darlington joins us now from CNN Center. Shasta, good to see you. We have seen, as you saw there,
several countries cut interest rates, including China and India yesterday. But Brazil, it seems, is going the other way by raising rates. This is
quite a battle to contain inflation, isn't it?
SHASTA DARLINGTON, CNN INTERNATIONAL CORRESPONDENT: Exactly, Isa. They've definitely got two battles that they're fighting here. But one of
the major ones is inflation, so they hiked rates up to 12.75 percent -- quite high, as you mentioned, a six-year high -- to bring down inflation,
they hope.
And also to stem that slide in the currency. It's trading at three to the one, 3 reals to $1, something that was just unimaginable even a couple
of months ago.
The problem is, the higher they hike these rates, the less likely you're going to see people out spending money. They're not going to want
to borrow money at those rates. And it also means that government debt is getting more and more expensive.
So, we were in a recession in the first half of last year. Now, economists are predicting 2015, we're going to see another decline of about
0.58 percent in GDP.
So, the government really -- they are tackling inflation right now, but it is going to make it harder to tackle the question of economic growth
in the longer term, especially since they hope to introduce new austerity measures to really shore up investor confidence in coming weeks, Isa.
SOARES: Yes, and that's crucial. But Shasta, they've been raising rates for two years now, and that's done little to combat inflation. And
by raising rates, isn't there a fear they could put the country to near recession? That is the concern, isn't it?
DARLINGTON: Absolutely. What we're looking at, what economists are forecasting is that 0.58 percent decrease in GDP. But because inflation is
such an Achilles Heel in Brazil -- you can remember we've talked about this before -- the days of hyper inflation.
That is almost the first steps that all governments know they have to take to keep an economy in order. They can't let inflation get out of
line, so that is what they're doing. But they are facing the specter of a recession.
I think the real hope here is that the new economy minister, Joaquim Levy, will help really instill that investor confidence needed to keep
money in the country. And higher interest rates don't help, either. But again, this is going to be something we're going to see in the midterm.
Nobody expects 2015 to be an easy year. The hope is that 2016 we could begin to see some recovery, Isa.
SOARES: Yes, a much-needed recovery, as we know, from being there. Confidence really taking a hit. Shasta Darlington there for us. Thanks
very much, Shasta.
Well, let's stay with the BRICS economies, and if the board plays full with me, we're going to focus on South Africa, because South Africans are
calling on citizens to work with the government to stimulate growth and achieve its economic plan.
The country is suffering from a difficult mix of inflation and unemployment, similar to what Brazil. And the central bank indicated they
will be holding an interest rate cut at current levels.
Now, a survey from Bloomberg out this week says in 2014, South Africa will have the third-most miserable economy to live and work in. Well,
Standard Bank, the biggest bank in Africa, has reported strong results for 2014.
Sim Tshabalala is the co-chief executive of Standard Bank, and he joins me now from Johannesburg. Mr. Tshabalala, thank you very much for
joining us. Let's start off with your results. Reported a 12 percent jump in net profit last year. Are you pleased with those set of results?
SIM TSHABALALA, CO-CHIEF EXECUTIVE, STANDARD BANK: Good evening, Isa. Yes, we are very, very pleased. They are a strong set of results. As you
correctly point out, on a pro forma basis, 12 percent up on last year.
SOARES: Now, you seem -- I was looking at your results, and you seem to be in disposing of businesses outside of Africa, focusing your attention
on the continent. What's behind your strategy here?
TSHABALALA: Isa, a couple of years ago, we definitely had a strategy of growth outside the African continent. We had a medium-sized bank
domiciled in the United Kingdom. It had operations in several countries throughout the world, in South America, the Middle East, and the Far East,
and it was doing well.
Come the financial crisis, the infrastructure we had could no longer generate the revenues necessary to support that infrastructure, as well as
the capital allocated to that business. In consequence of those factors, we decided to focus on our core competencies and focus on the African
continent.
SOARES: Well, if you don't mind, let's talk bigger picture, because the South African economy, as you just heard us there, has been pretty
sluggish. Is this a risk to your business? What are you most worried about? What keeps you awake at night?
TSHABALALA: You are absolutely correct. The South African economy grew at 1.5 percent last year, and according to the minister of finance
during his budget speech a week or so ago, the economy is bold to grow at 2 percent. Now, that is really sluggish.
We think, however, that trend growth in the South African economy could easily be between 4 and 5 percent, but the cap on that growth is
infrastructure, particularly in the inadequate energy and logistics infrastructure.
The hope and the excitement, though, in our economy is that that infrastructure is being addressed, and as our country appropriately
addresses the rollout of that infrastructure, you can then see our growth go beyond 3 percent in due course.
SOARES: And Mr. Tshabalala, I've read a quote when you said that you lament a, quote, "a regulatory tsunami that is sweeping the continent."
What do you mean by that, this "regulatory tsunami"?
TSHABALALA: Isa, I think, first, let me preface my answer by saying that regulation is absolutely necessary, and the intervention of regulatory
authorities in business is necessary, particularly where there is market failure.
However, my proposition is that, given the nature of financial services on the African continent, the rate at which regulation is being
implemented far outstrips the ability of institutions to cope with the execution of that regulation.
And that regulation is often domestic, a lot of it is often international. And that was the point I was -- and in many instances, it
is often implemented at cross purposes in many jurisdictions.
SOARES: Mr. Sim Tshabalala, the co-chief executive of Standard Bank, joining us live from Johannesburg this hour. Thanks very much for joining
us, sir.
You are watching QUEST MEANS BUSINESS. And after the break, Ukraine's agriculture minister lays out the reforms he says are needed to keep his
war-torn country's economy afloat. That interview is just ahead.
(COMMERCIAL BREAK)
SOARES: Hello, I'm Isa Soares. Coming up in the next half hour on QUEST MEANS BUSINESS, Turkey's currency hits a record low as the prime
minister does battle with the central bank.
And why Google is being forced to censor a blockbuster documentary in India.
Before that, here are the top news headlines we're following for you this hour.
At least 68 people -- have been brutally murdered in a remote village in the northeast of Nigeria. Boys and girls, aged between 13 and 19 years
old, were singled out and killed alongside their parents. Those trying to flee were gunned down before the entire village was set alight. The
Islamist group Boko Haram is believed to have been behind the attack. The massacre took place early morning on Tuesday. We are only just getting
information from those who were able to escape.
The US ambassador to South Korea is recovering after being slashed in the face. Mark Lippert received 80 stitches to his face after being
attacked at a breakfast meeting. A man who said he was opposed to joint South Korean-US military drills was arrested over the incident.
A plane has skidded off the runway at LaGuardia Airport in New York. The Delta Airlines plane was arriving from Atlanta. It came off the runway
before hitting an embankment. New York fire officials say 24 people have been injured, with 3 taken to hospital.
US airline unions have waded into the row between US and Gulf carriers. Several union leaders say they are worried workers could lose
their jobs if domestic airlines are pushed out of key markets because of competition from the three Gulf airlines. They say that Qatar Airways,
Emirates, and Etihad have received billions of dollars in subsidies that give them unfair advantage. Those airlines deny that is the case.
The British prime minister has told "The Wall Street Journal" that he and other leaders are willing to take sanctions against Russians to a whole
new level. The interview has been printed as the British foreign minister is in Kiev. Philip Hammond says the U.K. can make a quote, "Important
contribution to Ukraine."
Seventy-five U.K. military personnel are being deported to train Ukrainian government troops who have been battling pro-Russia separatists
in Eastern Ukraine.
And while one British minister headed to Ukraine, Ukraine's minister for agriculture - he's here in London presenting the new government's plan
to reform the economy. Oleksiy Pavlenko joins me now. Thank you very much for taking the time to speak to us.
I want to, you know, of course developments out of Ukraine - ceasefire's holding somewhat, but let's talk about the economy. Because
the economic battle it seems is the one that's coming to the forefront now if only just beginning. How concerned are you that the economy is plunging
so dramatically, just looking - just if we focus on the numbers?
OLEKSIY PAVLENKO, UKRAINIAN AGRICULTURE MINISTER: Well one of the main issue now is the economy, stop such kind of fell down is to follow IMF
requirements and to receive IMF funding. The () put it quite significant steps to be done - in terms of reform, in terms of regulation with the
banks, in terms of fighting this corruption, and following it will cause it at the next two/three weeks will it received positive actually decision
from IMF and to receive (inaudible) which is federalized at this moment banking system --
SOARES: Yes.
PAVLENKO: -- and gives us opportunity to grow economic back.
SOARES: So that our viewers get a sense of what the economy is doing, I was doing a bit of research on this. Your currency has lost nearly 70
percent of its value against the dollar, the economy shrunk 7 percent last year, inflation is soaring, foreign investment and reserves fell for a
ninth consecutive month in February. It's a pretty bleak economic picture. Many are saying that, you know, you're going to struggle to avoid a
default. What do you have to say to that?
PAVLENKO: We also would like to say that the previous government of Yanukovych regime had stolen more than $60 billion U.S. dollars and then
now also together is the international community trying to find this money and resume it back to the Ukrainian economy and to the country, on the one
hand.
On the other hand, also we have our war situation and 5 percent of the GDP is current war expenses. We spend at this moment around 5 million U.S.
dollars daily expenses from war compilings of Eastern parts of Ukraine and also had to do several physical/fiscal (ph) steps for the budget cut to
follow IMF requirements.
In the worst years when we lost around 20 percent of our economy, I can give you an example for example - with agri-business - we lost one and
a half million tons of grain in Lugansk Condonias (ph) region in occupied Crimea. And even making the record figures, so 63.8 million tons of
production for food and for grain, it's still quite substantial now situation and the critical situation was the economy.
But I hope, I hope that following the IMF requirement that in receiving IMF financing, and together with the reforms that she done which
are pretty much are unpopular with the social taxes cut, with the social expenses cut - with the pension also reforms we will be able to in current
bonds/months (ph) the (inaudible) economy as well.
SOARES: I mean, that's the problem, isn't it? Because you're going to have the $17.5 billion from the IMF, but then you have to put the
reforms in already - they're quite painful and, you know, people are already screaming about this because you've seen a 15 percent cut in
pensions for retirees, we've seen price of household gas going up.
Do you feel that the Ukrainians on the street, they can sustain this economic pressure?
PAVLENKO: It's absolutely let's say a critical question now. But people understand because it's -- currently it's the right time for the
reforms.
And if they cannot follow them, we will not see (inaudible) because our target to be part of European Union and (inaudible) would save not only
for the shares of the European values but also to share European rules for doing the business in terms of taxation system and in terms of
transparency, in terms of also let's say it's some kind of general scheme for financing -- for social security.
Even for the gas prices - one of the very unpopular situations would be rising out of this in gas prices is the market value. And giving the
direct subsidies to people who need this. This will be one of the main issue, that's why people are unhappy.
SOARES: Yes, and now it's a real economic battle. Oleksiy Pavlenko, thank you very much for taking the time to speak to us today.
PAVLENKO: Thank you.
SOARES: Now, Turkey's currency fell to an all-time low on Thursday as the prime minister continues his battle with his economic team. Erdogan
has called for steeper interest rate cuts from the Central Bank. The demands have rattled investors. Turkish ministers have been meeting with
New York investors to try to reassure them that 20 percent of the Turkish stock market is helped by such investors.
Well I spoke with CNN's emerging markets editor John Defterios and asked him by the lira is impacted every time Erdogan criticizes the Central
Bank.
(BEGIN VIDEOCLIP)
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Well this is not the first time, Isa, that President Erdogan has squared off with his economic
team. But it's very obvious with the response to the lira and even the stock market in Istanbul that investors are getting fatigued by his
actions. He's been challenging the so-called Turkish Troika - the economic team that he has.
The deputy prime minister Mr. Babacan, the finance minister Simsek and the Central Bank governor Baty suggesting they have space now to lower
interest rates and we'll find out on the 17th whether they're listening to his political calls and cutting the interest rates by a quarter percentage
point.
But with the lira lower, this is fueling inflation right now and that's creeped up to 7 - above 7 percent with their target of 5 percent.
But we're not seeing the growth in Turkey right now. And this is the biggest concern that President Erdogan has. This is not growth of 6
percent right now.
They're going to struggle to get to 3 percent in 2015, and in fact the latest quarter was below 2 percent. And he has an election in June. So
there's a lot of pressure on him and pressure that he sees right now to accelerate growth by lowering interest rates, and it's getting very
political.
SOARES: And some would say, John on that note that he's just - it's just a strategy of talking the currency lower to help the exports. But
that's not cost-free, is it?
DEFTERIOS: It is not cost-free because it is fueling an inflation right now and every time he does speak, investors run for the exits. And I
think that the timing of this latest statement by President Erdogan is auspicious in the fact that his economic team is in New York meeting with
investors who have an estimated one-fifth holding in the Istanbul market. The overall economy of the companies in terms of market cap right now held
by New York investors.
So they don't like the intervention. In fact, this time last year, the credit rating agencies were suggesting they moved to negative because
of the concerns they had about the political intervention and the protests that we saw the year before in 2013 and whether Prime Minister Erdogan back
then could handle the transition to president and whether he'd like to tighten his grip on the economy.
Now the elections in June, President Erdogan needs a very large majority to try to make this transfer of power from the prime ministry to
the presidency the executive presidency is looking for. To get that, he wants faster growth, support of the industrialists and lower interest
rates.
(END VIDEOCLIP)
SOARES: Let's progress our attention on Venezuela. Good cheers (ph) are past since the country's President Hugo Chavez has died. He remains a
popular figure, especially now as the country's economy appears to be on the brink of collapse. Well Chavez's successor Nicolas Maduro has faced
opposition from the very start, and it seems the frustration is only growing. Maggie Lake has the details.
(BEGIN VIDEOCLIP)
MAGGIE LAKE, CNN ANCHOR/CORRESPONDENT: At New York's El Cocotero Restaurant, piping hot specialties are on the menu. Along with heated
debate over the crisis back home in Venezuela.
FERNANDO RENDON, VENEZUELAN LIVING IN NEW YORK: The state has no control over crime, the state has no control over the food supply. We are
approaching a breaking point.
LAKE: That breaking point could come soon. Violent protests are on the rise against the government of Nicolas Maduro as oil prices plunge and
the cost of living skyrockets.
CHRISTOPHER SABATINI, COLUMBIA UNIVERSITY: The inflation rate is about 68 percent. People think that unless this government trims back its
spending, there's a very severe risk that it could in this year hit hyperinflation that could reach up to 1,000 percent.
LAKE: The average monthly after-tax salary for residents is the equivalent of just $332 U.S. dollars. But a basket of cheese, chicken,
eggs, apples and potatoes now costs almost $50 U.S. dollars. And the price of high-end imports are out of reach to all but the ultra-wealthy.
A pair of Nike shoes can gobble up a whole paycheck. Even residents that have money can't find what they need.
RENDON: There is a scarcity of food and a scarcity especially of medicine. You see mile-long lines to purchase those basic items like
toilet paper.
LAKE: This Venezuelan woman visiting New York says even milk is exorbitant. In some instances, a $5 container of milk is priced to the
extreme.
Female: But you can find the flat (ph) in the black market for $50. The problem all comes back to oil. Venezuela sits on the world's largest
proven oil reserves, but profits were mismanaged. The economy failed to diversify. And now that oil has crashed, Venezuela is running out of money
for generous social programs and subsidies.
(NICOLAS MADURO SPEAKING TO AUDIENCE)
LAKE: The Maduro government blames Washington for trying to destabilize the country. But if action is not taken soon, Venezuela could
be forced to default.
SABATINI: They've got about $11 billion worth of debt that's due this year. Five billion of it will come due in October. The question is how
they're going to make it past October.
LAKE: At El Cocotero, Venezuelans say Hugo Chavez's socialist revolution is finished. What happens next is far from certain. But many
still have hope.
RENDON: I would always want to back. I'm definitely going back to fight for what we deserve which is freedom and a respectable standard of
living.
LAKE: Two years after the death of Chavez, the fight for Venezuela's future rages on. Maggie Lake, CNN New York.
(END VIDEOCLIP)
SOARES: Well you are watching "Quest Means Business." Still to come, controversy and transparency. Google India removes sensitive clips form
YouTube. We'll have more from Samuel Burke just ahead.
(COMMERCIAL BREAK)
SOARES: Now Indian authorities have won an online battle in their war against the BBC rape documentary. Google India will comply with a court
ban by removing excerpts from the film from YouTube which it owns. The uproar centers around an interview with death row convict Mukesh Singh who
took part in a 2012 gang rape and murder of a medical student.
He blames the victim for her death. The maker of the documentary told CNN's Hala Gorani the police were afraid of the potential public reaction.
Take a listen.
(BEGIN VIDEOCLIP)
Female: I think the reason the police have imposed or asked the court to impose this stay of execution - of film - is that they are a-feared that
this will lead to public disorder. I presume they mean protests.
(END VIDEOCLIP)
SOARES: Well Samuel Burke is - Samuel Burke is here with me to discuss this. And, Samuel, YouTube is an American company. Why does
YouTube need to comply?
SAMUEL BURKE, BUSINESS CORRESPONDENT: Because they have to, simply put. A court order was issued, delivered to Google and their company that
does business there, so they want to maintain their business. But aside from that, they have to comply with these local laws - not only in India
but all around the world.
SOARES: OK, so what about other social media companies? Do they have to comply as well?
BURKE: Absolutely. So, you have all these social media companies who want to go after what's right and freedom of speech, but at the end of the
day, these are companies that if they don't comply with these rules, will be shut down. So we've seen Facebook, Twitter, YouTube - all these
companies - in very similar situations.
SOARES: So is the Indian government then proactively scanning the website, scanning YouTube? How do they know that it's in there?
BURKE: I would imagine to some extent - and there are of course many websites like this - but probably what they do is just issue this, and then
that's it. And then --
SOARES: But you and I know that if people want to watch it, they'll find a way of watching it. There are was around it, correct? So is -- in
long-term, is this actually having the opposite effect?
BURKE: Google and YouTube are the biggest website out there - especially in term of video. So, yes, you're correct that people can find
this on many other video sites, on illegal downloading websites for example, but once you've gotten it off of YouTube, then you've really
accomplished a lot.
But what's interesting is that, yes, YouTube isn't showing it in India, but when YouTube takes content down, it's only in that country.
They don't actually take the content down - it's still up there,, so people here in the U.K., back in the United States can watch it. They just use
something called country lens where it's just not visible to that one country, but it's still up on YouTube servers.
SOARES: So via these VPN servers, they still can - traffic still can see pieces from that country?
BURKE: VPN - Virtual Private Network - is something that many people use free software, free apps so you can make it look as though you're in
the United States or in a different country so that you can see this content whether you're in the United States or whether you're in India.
SOARES: Samuel Burke, thanks very much for making sense of all this for us. Now, an American man is facing charges in the United Arab Emirates
for comments he posted on Facebook is speaking out. Ryan Pate posted a comment about his employer which included a racial slur. Now he faces up
to five years in jail. Becky Anderson has more.
(BEGIN VIDEOCLIP)
BECKY ANDERSON, CNN HOST OF "CONNECT THE WORLD WITH BECKY ANDERSON": The Emirates of Abu Dhabi is home to some 2 million expatriates, many of
whom arrived here in search of better livelihoods, most of whom avoid falling foul of local laws that can from the outside seem unduly tough.
American helicopter mechanic Ryan Pate was himself on the outside when he took to Facebook to make disparaging remarks about his Abu Dhabi-based
employer. Pate was on leave in Florida and intending to leave his post at Global Aerospace Logistics when he referred to his bosses as
"backstabbers." He says they had a disagreement about pay.
RYAN PATE, ARRESTED FOR CYBER SLANDER: I'd been at ends with the company for a few months at the time and that was kind of the thing that
sent me over the edge, made me very angry. I was already on Facebook at the time, so I used that to express my anger towards the company. I did
slam them verbally.
ANDERSON: Two weeks after Pate returned to the UAE, he was arrested by Abu Dhabi police on charges of cyber slander. He was jailed for several
days and forced to surrender his passport before he was released on bail last week. The charges stem from a 2012 law that makes it an offense to
mock individuals or organizations on the internet.
Twenty-nine-year-old American Shezanne Cassim posted a parody on young lifestyles on the UAE on YouTube and subsequently spent a year in a high-
security prison. Pate's trial begins on March the 17th. He faces up to five years in prison.
PATE: The prosecutor told me there was definitely going to be a fine. I'm not sure what the total fine is going to be - that's entirely up to the
judge. But there's a fine, possible prison time and possible deportation. But it really all rests upon what the judge wants to do with the situation.
ANDERSON: On Wednesday, the U.S. State Department confirmed it had offered consular advice. But not that it had called Pate's case into
question.
Female: Have there been any concerns expressed to the UAE government about this case?
MARIE HARF, DEPUTY SPOKESPERSON, U.S. STATE DEPARTMENT: Not to my knowledge. I think we're providing assistance and if there is more to say
as this moves forward, we will.
ANDERSON: A Florida congressman is now appealing to U.S. Secretary of State John Kerry for intervention. Well, CNN has reached out to the UAE
attorney general who issued no comment. Global Aerospace Logistics is likewise to yet to comment on the situation. But Pate says he wishes his
former employer no ill.
PATE: What I said was very wrong, it was derogatory and I regret it. And it's something I'm going to have to live with for the rest of my life.
ANDERSON: Becky Anderson, CNN Abu Dhabi.
(END VIDEOCLIP)
SOARES: We have some news coming in to CNN this hour. The United States Federal Reserves says all 31 of the country's largest banks have
passed their latest phase of stress tests. It means that they bear enough money to withstand an economic shock. The capital checks were instituted
in the wake of the 2008 financial crisis, if you remember. The Fed will publish the full results of this round of tests next week.
And the Fed (inaudible) since 2009 and more - as we soon will have more "Quests Means Business" after a very short break.
(COMMERCIAL BREAK)
SOARES: The Australian prime minister has admitted the current search for missing Malaysia Airlines flight MH370 cannot go on forever. Speaking
to Parliament today, Tony Abbott said Australia would still do everything it could to find the plane.
(COMMERCIAL BREAK)
TONY ABBOTT, AUSTRALIAN PRIME MINISTER: With sadness, Madam Speaker, I have to admit to the House that so far we have not found any trace of
MH370. But I do reassure the families of our hope and expectation that the ongoing search will succeed.
I can't promise that the search will go on at this intensity forever. But we will continue our very best efforts to resolve this mystery and
provide some answers.
(BEGIN VIDEOCLIP)
SOARES: Meanwhile, the grief goes on for the loved ones of the 239 people who were onboard. The plane vanished exactly one year ago this
Sunday en route from Kuala Lumpur to Beijing. Angus Houston, the man Australia called on to lead the search recently received a knighthood.
Anna Coren spoke to him about what it was like to be in charge of one of the biggest transportation mysteries of all time.
(BEGIN VIDEOCLIP)
Female: I'm (Inaudible) from CNN Center and we continue to bring you the latest on that missing airline that -
ANNA COREN, CNN INTERNATIONAL CORRESPONDENT: As news broke on March 8th last year that a Malaysian Airlines passenger plane had gone missing
over the South China Sea, many feared the worst.
ANGUS HOUSTON, FORMER CHIEF COORDINATOR FOR MH370: I thought, well, the aircraft is lost. It'll just be a few days and it'll be found.
COREN: But days rolled into weeks as the search for the now-infamous MH370 moves from the Malacca Straits to the Southern Indian Ocean, then
falling under the jurisdiction of the Australian government. For the man now in charge of finding the missing plane, this would be the toughest
challenge of his career.
HOUSTON: My initially thoughts were that the - it was like looking for a very small needle in a very large haystack.
COREN: Brought out of retirement to lead the search, former Australian defense chief Angus Houston would restore credibility to the
mission. The decorated pilot with 40 years military service knew the chances of locating MH370 were slim. But with time running out on the
battery life of the black boxes, there was suddenly hope when four pings were detected.
HOUSTON: That increased the level of optimism in not just me but everybody because we thought finally we've got a lead.
COREN: Sadly, it was a false lead and yet another emotional rollercoaster to the families and the search team.
HOUSTON: That was a great disappointment, it really was.
COREN: Based on satellite data and analysis, the search is now focused on a 67,000 square kilometer priority area located on what's known
as the Seventh Arc at a depth of more than 4,000 meters. One-third of it has already been covered with plans to complete the area by May.
Angus, do you believe that the plane will be found in the Southern Indian Ocean?
HOUSTON: I'm absolutely convinced that that seventh arc - it will be found on or near to that seventh arc.
COREN: Sir Angus knows how much the families are struggling but says patience is paramount.
HOUSTON: And I just hope for the sake of the families and that little bit of luck and the professionalism of the people who are out there doing
their job, eventually we will find the aircraft.
COREN: A hope desperately shared by everyone involved. Anna Coren, CNN Canberra.
(END VIDEOCLIP)
SOARES: Still to come right here on "Quest Means Business," the final curtain call is coming for elephants at the Ringling Brothers Circus.
We'll have that story after this break.
(COMMERCIAL BREAK)
SOARES: Welcome back. The Ringling Brothers' plans to remove some of its most iconic performers - elephants. The animals have taken center
stage for years in the 'Great Show on Earth' and have been featured prominently in the company's advertisements.
In the ring they're known for performing synchronized dance routines for the crowds. You know this - you've probably watched some of them.
Ringling Brothers has come under scrutiny and been sued by animal rights groups. The circus was fined $270,000 in 2011 for violating the
Animal Welfare Act. Well Ringling Brothers chairman had defended the treatment of its elephants, but said that the decision to retire the
animals is best for the company, the elephants and customers. They will be phased out of shows by 2018.
And before we go, let me bring you up to date with how Wall Street fared on Thursday. U.S. shares closed slightly high as you can see as
investors await Friday's big U.S. jobs reports out on Friday. The Dow finished up by around a 5th of 1 percent, and if you have been with us the
whole hour, the news coming in that we had reported this hour, the United States Federal Reserves says all 31 of the country's largest banks have
passed a capital check.
And that's does it for us at this hour. Thanks very much for watching. I'm Isa Soares. Do stay with CNN, the world's news leader.
END
