Return to Transcripts main page
Quest Means Business
Seven Killed, 21 Missing in Hungary Tour Boat Accident; Trump Lashes Out at Mueller and Russia Probe; Indian Prime Minister Modi Sworn in for a Second Term. Aired 3-4p ET
Aired May 30, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: Sixty minutes to go, the final hour of trade on Wall Street, now look, it started well
after yesterday's horrible session. Middling morning. The afternoon is down. And that's why we need to be very careful as we move into the final
hour because yesterday, it was in that last minute that you saw a really big drop.
Verizon is at the bottom on a downgrade. McDonald's at the top for new products. The market betwixt and between. Look, the movements are not
huge at the moment. But these are the reasons why.
Donald Trump is hitting back at China as Washington is accused of economic terrorism. Brazil is on the brink of another recession as growth goes
negative. Facebook shareholders have a request from Mark Zuckerberg, it's time to give up some of your power.
We are live in the world's financial capital, New York City. This really isn't a very pleasant day here. But it is Thursday, it is the 30th of May.
I am Richard Quest. And of course, I mean business.
Good evening, the war of words between China and the United States is escalating further, whilst the rest of the global economy is caught in the
crossfire. China is now accusing the Trump administration of economic terrorism, saying the White House has inflicted huge damage abroad and on
the U.S. itself.
The newspaper of the ruling Communist Party has a menacing message saying, "Don't say we didn't warn you." President Trump says it's China, not the
U.S. who is paying the price of the war.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: China would love to make a deal with us, we had a deal and they broke the deal. I think if they had
to do it again, they wouldn't have done what they did. We are taking in billions of dollars in tariffs. China is subsidizing products.
So the United States taxpayer is paying for very little of it and if you look at inflation, and if you look at pricing, it's gone up very little.
The tariffs are having a devastating effect on China. People are fleeing the country with their companies, these companies are leaving for Vietnam,
other parts of Asia and they're even coming to the United States, because then there's no tariff.
(END VIDEO CLIP)
QUEST: That's the President's arguments, and we've heard it before, which begs us the question, as we've discussed a quite a few times on this
program, who really pays in in this situation.
Now the trade data shows U.S. importers are indeed turning away from China. And the President is right. They are going to Taiwan, Vietnam, South Korea
all host of other places, yet Donald Trump is not correct by saying that only China is getting weakened.
For instance, higher tariffs. Now these higher tariffs will cost each U.S. household $831.00 a year according to a study by the Fed of New York.
These are the $831.00. You've got to factor that of course at $831.00 vis- a-vis the tax cuts, which of course was a year ago and is now sort of working its way through the economy.
Simon Freakley is chief executive of the management consultancy, AlixPartners. Good to see you.
SIMON FREAKLEY, CHIEF EXECUTIVE, ALIXPARTNERS: Good to see you again, Richard. Hi.
QUEST: Okay. Who is being hurt most at the moment? And please, I know everybody is being hurt.
FREAKLEY: Right.
QUEST: But who is being hurt most?
FREAKLEY: Well, I think everybody is being hurt. And what we're seeing I think is a very old fashioned negotiation here. The rhetoric is being
ramped up. Both positions are hardening their stance. I personally believe we will end up in some sort of a resolution, but things may get
harder before that happens.
QUEST: Right, but as between the U.S. -- I mean, the President's point, which he has just prosecuted today is that China is really hurting and will
be dragged towards a deal because of that. Do you believe that?
FREAKLEY: I think China is hurting. But I think the U.S. is hurting, too. I mean, as we just saw, it is going to cost the average household in 2020,
$831.00 a year. There's only so long that the retailers, for instance, can absorb the additional costs, either through the tariffs or through second
sourcing. So the U.S. consumer does hurt as well.
And so I think it hurts both sides, and I think because it hurts both sides, that is why there will be a resolution.
QUEST: It doesn't seem that way at the moment, though. The President -- the U.S. President certainly seems prepared to continue. He keeps talking
about the billions of dollars coming into the U.S. Treasury, which he said yesterday may increase.
FREAKLEY: Right. And I think he has to say that, doesn't he? And I think that he clearly has dug in for the long haul. But I think everybody wants
to get a resolution to this. Clearly, the pain is felt by both sides. The U.S. consumer ultimately will get tired of bearing increased costs as a
result of it whilst it is possible to source many items from different places, it takes time, it's more expensive. I'm hopeful there would be a
resolution sooner rather than later.
[15:05:19] FREAKLEY: But let's not forget, the real issue here, what sparked this off was the sense by the U.S. that the Chinese authorities
through Chinese corporates were stealing intellectual property.
QUEST: But there's no doubt, I don't believe. Nobody in the West seriously doubts that there was an --
(COMMERCIAL BREAK)
QUEST: Now, welcome back. As you are well aware, we are in our new home, in our new studios and the nature of the beast as when you move into a new
house anywhere. Sometimes the light bulb goes or you suddenly realize you haven't plugged something in. But we are working out.
We are back with Simon Freakley. Welcome back, good to see you, sir.
FREAKLEY: Great to see you, Richard.
QUEST: Where were we? What do you expect this resolution will look like because to have gone through the pain of these tariffs? One would at least
hope or expect a proper agreement. Not some nonsense that just will fall apart at the first whiff of grapeshot.
FREAKLEY: Well, you know, as we said a minute ago, it is an old fashioned negotiation, but both sides are taking firm positions, the rhetoric is
going up, but it will get resolved. It has to get resolved by both sides.
QUEST: Okay. When China talks about the U.S. is using economic terrorism, the Chinese have a bit of terrorism of their own if they wish to, namely
the rare earths.
FREAKLEY: Yes.
QUEST: They can employ these rare earths which is in just about every device in the world, and they have the majority of them within their
borders.
[15:10:11] FREAKLEY: Yes, of course, China have been working for years to capture, really corner the rare earth element market. They've been
investing for multiple years to make sure that they have control of that, and we do need them.
So I think there are several forces that are driving a resolution to this 25 percent tariffs and $200 billion of good sounds a lot. But actually,
it's more in the context of what trade does go on between the two countries.
The big question, I think, and I speak to our clients all the time about this is, this is just another distraction, another disruption. You think
about the disruptions that many of our U.S. corporate and global corporate are dealing with, you know, whether it's changing consumer preferences,
whether it's the impact of artificial intelligence, whether its regulatory, or if you're in U.K., or have a U.K. operation, Brexit, this is just
another distraction, another disruption.
So I think corporates generally want to get this tied down so they can focus on driving their businesses forward.
QUEST: Let's just talk about Brexit, since you raised it briefly, if we may. The Tory party is now engaged -- I don't have the discussion points,
somebody said -- now they are just engaged in discussing which sort of cyanide to take. I mean, how bad is the situation as seen from business,
now that there is a leadership election on Brexit, and there's still a 31st stage in the future?
FREAKLEY: Well, the two time tables, of course, are adjacent. So there's the decision on the exit from the E.U. and the decision on a new leader for
the Conservative Party. Theresa May was in office, but not in power, she had to step down. She'll step down on June the 10th. What will then
follow quickly is an election of a new leader.
QUEST: But your clients are telling you what? That they're worried.
FREAKLEY: What my clients tell me all the time is that this is just another distraction, another disruption, so getting --
QUEST: Okay, sorry to interrupt you, forgive me. But why are these disruptions any worse than as Harold McMillan is reputed to have said, you
know, what you're worried about events, dear boy, events?
FREAKLEY: Events, dear boy. Well, of course, what we used to worry about was the economic cycles. We'd worry about when the cycle would turn. We'd
look at our quarterly data to say is a recession coming?
But of course, now, disruption cycles are not just much more regular than economic cycles. They're much more severe. If you have a disruption cycle
that coincides with the change in the economic cycle, then businesses have some real challenges.
And what my clients tell me all the time, Richard, is what they want to do is to make sure that some of these distractions are taken off the table so
they can focus on a strategy and are executed.
QUEST: Isn't that naive? In the sense that if you take one distraction off, and it will be something else. It's not so much the distractions,
surely that's significant here. It's the gravity and the seriousness here, it is existential?
FREAKLEY: Well, they are. So let's take the automotive industry for instance. What's happening with autonomous vehicles, what's happening with
electric vehicles is the investment required to position an enterprise to survive in that environment is very significant.
So you see, you know, the proposed mergers that are being discussed. That's really all about aggregate investments and focus to survive in a
rapidly changing world.
QUEST: Good to see you, sir.
FREAKLEY: Great to see you, Richard.
QUEST: Much appreciated. Thank you.
FREAKLEY: Thank you for having me.
QUEST: We were talking there about the cards that they might play and investors are worrying about the new card. The control of rare earth
minerals, a group of 17 elements, it's vital for high tech manufacturing. CNN's Matt Rivers with this dispatch from Beijing.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: I think the Chinese economy is dynamic.
MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT (voice over): "Don't say we didn't warn you." That's the new threat in Chinese state media as a new
front opens up in the U.S.-China trade war. This time, it's about rare earth minerals.
They are a group of important elements that are found in all kinds of high tech products -- smartphones, electric cars, wind turbines, superconductors
-- and China is the world's biggest supplier.
(BEGIN VIDEO CLIP)
WANG CHANGLIN, CHINESE NATIONAL DEVELOPMENT AND REFORM COMMISSION (through translator): China's rare earth is superior in quality, large and quantity
and has low cost. Therefore, a lot of countries especially developed countries depend heavily on Chinese rare earth imports.
(END VIDEO CLIP)
RIVERS (voice over): China mine's more than five times the amount of rare earth as the next largest producer. So it's no surprise that from 2014 to
2017, 80 percent of U.S. rare earth imports came from China, and in a trade war, Beijing could use that to his advantage.
It was just last week that Xi Jinping very publicly toured a rare earth's processing facility seen by some, as Xi offering a reminder that China
could cut off its rare earth exports and hurt U.S. industries.
On Wednesday, a commentary in state-run newspaper "The People's Daily" took it a step further, with an explicit threat about rare earth exports.
Quote, "At present, the United States completely overestimates its ability to control the global supply chain and is due to slap itself in the face
when it sobers up from its happy ignorant self-indulgence. Don't say we warn you."
To be sure China cutting off these exports would hurt certain U.S. industries, but it might not be the ace in the hand the paper claims. The
U.S. is already increasing domestic production and could import more materials from other countries.
Because rare earths have been deemed critical to national defense, the U.S. has already stockpiled some material and not shipping to the U.S. could
ultimately hurt China's rare earth industry overall by hurting bottom lines.
[15:15:19] RIVERS (voice over): Still, those losses could be something Beijing is willing to take in order to hurt the U.S.
RIVERS (on camera): To date, this is all just speculation. China hasn't taken any formal steps to restrict exports. But really it's just a
reminder that beyond just putting tariffs on U.S. imports here, China does have other ways to keep firing in this trade war in a battle that doesn't
look like it's going to end anytime soon. Matt Rivers, CNN, Beijing.
(END VIDEOTAPE)
QUEST: We are about to open the voting at cnn.com/join. It's a good opportunity to get out the phones or digital devices, I think my next
guests will prefer me to call them and get ready for the next story.
Right now in Palo Alto, Mark Zuckerberg is facing down a revolt of his own shareholders. There is a movement underway at Facebook's annual meeting to
wrest some control of the company from Zuckerberg.
Shareholders are angry, and they want a change in corporate governance. They voted on eight proposals that just -- the details don't really matter
of individuals. But the gist of them are almost the same, to put a check on Zuckerberg himself either as CEO, Chairman or to restrict his voting
after two years of scandals, fake news, elections, hacking, data collections.
Now, some have even gone as far as to say corporate dictatorship. Zuckerberg has unchecked pass and this calls to break up the company. He
will get the last laugh. He owns special stock. His vote is more powerful. All the proposals failed.
We want you to join the conversation. Get out your phones cnn.com/join. Does Mark Zuckerberg have too much power at Facebook? cnn.com/join,
cnn.com/join. Does he have too much power at Facebook?
Shelly Palmer is the CEO of the Palmer Group. Answer the question first?
SHELLY PALMER, CEO, PALMER GROUP: No. First of all --
QUEST: That's it.
PALMER: No, we're done. No, here's the thing. First of all, if you bought shares in Facebook, you understood the corporate structure because
you're a sophisticated investor. And those special shares that he has that give him voting rights, the super voting rights have always been in place.
So if you've bought shares in the company, you knew what you were buying. But there's a much more important reason, a much more important reason why
he doesn't have "too much power" in quotes. And that is he is allowed, like a private company CEO would be to think long term.
And if it was -- if there was a much harder quarterly EBITDA focus on that company, it would be actually a real problem for everyone. So I think
having one person who can thoughtfully look at the company long term, actually is a plus, because we're getting into an area that nobody has ever
been in, Richard.
And while it's easy to make knee jerk kind of claims or calls about what we should censor or not censor, whose worldview do you want to put in place of
his? In a committee, probably that's how we get camels and zebras.
QUEST: Absolutely. I'm familiar with the analogy. Now -- but the quid pro quo and I sort of agree in a way with you, which is perhaps --
PALMER: That's unusual.
QUEST: I know, it's disturbing to be blunt, and I sort of agree. Look, you bought into a Zuckerberg enterprise when you bought him. However, the
opposite side of that same coin, is that when Zuckerberg sold into the public market, he realized he would have to relinquish -- he would have to
be more amenable to sharing power. That's the other side of exactly the same coin.
PALMER: Yes, I guess it would be the other side.
QUEST: And at the end of the day, people did invest in his company.
PALMER: That's correct. By the way, Facebook is unprecedented in its size, and the problems that it is facing are unprecedented in history based
on its size. We've never collected this many human beings before. We've certainly never done it with data science. We've certainly never done it
with the intent of getting them to click on ads. And we didn't understand -- nobody understands the full social implications of the media addiction
that's happening. We just don't know.
QUEST: Nancy Pelosi might not understand it, but she is certainly angry for the portrayal of her, the fake portrayal of her that was widely
disseminated. Listen to what the Speaker of the House said.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI (D-CA): When a something like Facebook says, I know this is false, it's a lie, but we're showing it anyway. Well, to me, it says
two things. One, I was giving them the benefit of the doubt on Russia, but clearly, I thought it was unwitting, but clearly they wittingly were
accomplices and enablers of false information to go across Facebook.
(END VIDEO CLIP)
PALMER: I fully hear what she's saying. It's a much larger problem than Nancy Pelosi's video. There are so many doctored fake videos on Facebook.
We're not talking about a few. We're talking about millions and so who is going to make the call? What is satire? What is free speech?
[15:20:05] PALMER: You need to put a policy in place, you can't just say to Facebook, "Hey, you are the publisher." They're not. At the moment,
they're a platform and if you want to change that, then change the law, because right now they are legally a platform, which means they are only
responsible to take things down when they're told to take them down or if they're outside their policies.
QUEST: But even if they're a platform or a publisher, or whatever they make, because that platform versus publisher argument is the same one that
Uber has always used about, you know, we're just in the middle. It's the same one that Spotify -- we're just in the middle.
PALMER: Because it's the law. Change the law if you don't like it.
QUEST: Fine. But the reality is, though, don't we have the right to get things wrong? Don't we have the right to put up fake stuff?
PALMER: I think we do.
QUEST: Don't we have the right to be gratuitously offensive?
PALMER: Yes, well, look, in America we do, in other places we don't. And I think you can appreciate that if you've ever traveled outside the United
States. And so look, in practice, if they're -- which ones come down and whose worldview is the one that's going to be imposed? Because this is a
crazy idea. Is comedy then going to be in there? If you're -- are you collecting people who but make an honest mistake?
Like where's the line? And who gets to draw it? So it's very easy to say, "Well, I know when I see it." It's also really difficult to set a policy
that says this.
QUEST: Is it important?
PALMER: I think it's the most important thing ever. And I'll tell you why. Right now, Nancy Pelosi's video was doctored with traditional video
editing tools, they just slowed it down and they kind of goofed around with her.
In about 36 months or less, deep fakes are going to be created by AI that will be an indistinguishable Richard Quest from Richard Quest. It'll have
your voice, have your mannerisms look exactly like you and be on this set and it will be completely fabricated, and nobody outside will know even you
will not know whether it's you or fake.
And when that happens, we are really going to be in trouble. So the question now becomes, who gets to publish what and at what scale because at
a certain point, we're not going to know what's real and what's fake, and it is not science fiction. Go search deep fakes on the internet, it will
blow your mind. Go to a website called thispersondoesnotexist.com. Every time you refresh the page, you're going to see someone that doesn't exist
that looks like someone you know, created by AI. Different world.
QUEST: I'd be out of a job.
PALMER: Yes.
QUEST: Thank you. By the way, I can't read them, 70 percent say he's got too much power.
PALMER: They're probably right. But that's what they bought.
QUEST: You can't argue with that. I'll try to think of it. Good to see you as always. Welcome to our new studio.
Shares of Disney are holding slightly higher after paring some early gains. The stock had a stellar April, the entertainment giant announced Disney
Plus, its answer to Netflix. And sitting in the center of the company's new "Star Wars" land with our own, Christine Romans. The chief executive
Bob Iger has been weighing in on shifting consumer tastes and all the company's streaming services, from Disney Plus to Hulu to ESPN.
(BEGIN VIDEO CLIP)
BOB IGER, CEO, DISNEY: Well, we believe that all three will offer consumers different kinds of programming. Sports, obviously, ESPN.
Disney, which is Disney, Pixar, Marvel, National Geographic, and "Star Wars" will be more geared to family. And Hulu will stick to what it is
doing, which is essentially kind of an adult, like fair, more general audience. And they'll all be available individually.
And eventually we'll figure out ways particularly controlling the fact that we control Hulu, to package them for the consumer. So if a consumer wants
two or three, they'll be available at a discount and we'll make it seamless in terms of username, password, credit card, et cetera, billing.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Tell me where - what inning are we in, in this streaming evolution because I'm not sure
if this is the second inning or we're halfway through this ballgame. I mean, there's Netflix, Apple, Amazon Warner Media. I mean, there's so many
different players, is it going to continue to evolve?
IGER: Yes, I think we're in the early innings. Because I think that you're going to see a lot of change in media due to technological
disruption. And that will create change in consumer behavior.
And I think it's likely that direct to consumer over the top platforms that are focused more on program consumption versus channel consumption are
likely to grow significantly over time. And I think you're going to see consolidation on the linear channel front.
So I think you're in the -- when I say later innings, I don't want to suggest there's not going to be an extra inning game when it comes to the
channel business. But I think that's a mature business and consolidation is ahead and necessary as a consumer migrates to a different form of
television consumption.
(END VIDEO CLIP)
QUEST: Wall Street, we do need to check up on how it is doing. Yesterday was a very sharp fall towards the end. And U.S. GDP was revised slightly
lower 3.1 versus 3.2 on the projection. The corporate profits are falling somewhat. Guru La Monica. No, no.
PAUL LA MONICA, CNN BUSINESS REPORTER: I wasn't going to ring the bell, I was going to shake your hand.
QUEST: Well, that comes next.
LA MONICA: Yes, thank you sir.
QUEST: Good to see you. Do you think today is going to follow yesterday and suddenly have a sharp fall at the end?
[15:25:03] LA MONICA: I don't think we're heading to another big drop although you can't rule that out. We do seem to have this weird phenomenon
of that post 3:30 selloff as the market lay sets in.
But, you know, I think right now, the numbers that we got this morning, GDP numbers weren't all that shocking. We knew that profits in the first
quarter were weak, but consumer spending picked up a little bit from a year ago and I think that's a good time.
QUEST: It's still holding three percent.
LA MONICA: Yes.
QUEST: I mean, everybody says that for the year overall, it'll be one and a half to two percent.
LA MONICA: Yes, I think we are expecting deceleration of the economy's growth as the effect of stimulus fades, the tariffs and trade war starts to
potentially hurt consumer spending more, but as of right now, this is still a resilient if not robust economy, that you probably don't need the Fed to
step in just yet and be lowering interest rates.
QUEST: But look at Q1, I was reading your article. Exports are up 4 percent. Imports were down not surprisingly. The dollar value of course,
affected as well. So the tariffs are arguably having an effect and they're having an effect on the import side. But they don't seem to be harming the
exports.
LA MONICA: No, not as of yet, even though the dollar has continued to rally since the first quarter. So I'd imagine that the second quarter
number as this effect that we saw, will be even more pronounced.
But you know, right now, the U.S. economy is still a consumer led consumer driven economy, as long as consumers are still spending, that bodes well
for the U.S. economy, I think.
QUEST: Where are we on the inversion of the curve?
LA MONICA: Yes, bond yields are relatively flat today at last check. They were down slightly on the 10-year. So we still have, you know, about a 10
to 15 basis point or so the inversion with the three-month and the 10-year and that has been a recessionary sign in the past. So I think people are
worried about it.
QUEST: But not too much. Not yet.
LA MONICA: Not yet, because I think again, a lot really rides on the U.S. and China inking some sort of long-term trade deal that can avert a global
slowdown.
QUEST: Good to see you.
LA MONICA: Thank you.
QUEST: Let me update you with the European markets. They closed -- well, look at them all and you'll see. The MIBTEL was down in Italy. There are
serious worries about the strength of the economy and of course the relationship with the E.U. over the budget and the Xetra Dax, the best of
the day interestingly. London and Paris were not too far behind. Italy was lower.
As we continue tonight, hopes for a Bolsonaro boom in Brazil have faded after the latest GDP numbers show the country sliding towards recession and
mounting pressure on the country's new President. We will understand what that's all about. This is QUEST MEANS BUSINESS. We are alive in New York.
(COMMERCIAL BREAK)
[15:30:00] RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest, there's a lot more QUEST MEANS BUSINESS in just a moment. As we
move forward, this is CNN and here on this network, the facts always come first.
Survivors from yesterday's deadly boat accident in Hungary. Searchers are still scouring the Danube River in Budapest. A tourist boat collided with
a cruise ship and sank. Seven people are confirmed dead, however, more than 20 people are missing.
Angry U.S. President Donald Trump has lashed out at the special counsel Robert Mueller and his investigations into Russia's election interference.
Before speaking at the Air Force Academy graduation, Donald Trump said Russia didn't help get him elected. He said talk about impeachment
proceedings is harassment.
And the U.S. president has admitted, he said he got nothing to do with moving a war ship called the USS John McCain out of sight during his state
visit to Japan. He did confirm it was done purposely by in his words, well meaning people. Mr. Trump often clashed with the ship's name sake of the
late Senator John McCain.
Narendra Modi has been sworn in for a second time as India's Prime Minister. His cabinet announcements are expected soon. Thousands of
people attended the ceremony at the Colonial Era Presidential Palace in New Delhi. Modi's party the Nationalist Hindu PJP won the world's largest
election and it did so in a landslide.
And England have won the first match of the Cricket World Cup, beating South Africa by 101 -- 104 runs at the oval. They were held by a
magnificent catch from Ben Stokes who had already batted for 89 earlier in the day. The tournament continues with Pakistan against the West Indies on
Friday.
Brazil has barely recovered from a record recession. Now, the country's economic fortunes are waning once again. Q1 GDP comes in at 0.2 tenths of
a percent. Now, look at that on the chart and you'll see it looks rather nasty, and it's a small number but it is a negative number, and it's the
first negative number in three years.
Economists believe that Brazil could soon be facing yet another recession, hopes of era of economic prosperity. And Jair Bolsonaro; the new
president's election manifesto included promises to turbo-charge growth, cut taxes, sign new trade deals, open up the Amazon rain forest. Six
months on and he is struggling to get those measures through Congress. I'm joined by Alberto Ramos; head of Latin American Research at Goldman Sachs.
Good to see you.
ALBERTO RAMOS, HEAD OF LATIN AMERICAN RESEARCH, GOLDMAN SACHS: Good to see you, Richard.
QUEST: Oh, I'm guessing that the negative two-tenths was not a surprise or that there about was not a surprise, but why? Why is the economy slowing
and sinking?
RAMOS: Absolutely, not a surprise. Minus 0.2, 00.2 positives about the same number. The broader picture is one of economic stagnation. This is
the sluggish, most anemic recovery on record, why? I mean, this is not new. Brazil has serious structural problems to deliver decent growth. You know,
Brazil has required that very weak growth, less than 1 percent over the last four years.
And then we had a very nasty recession in 2015, 2016. There was a tremendous decline of the capital stock of the economy because investment
spending just collapsed, the unemployment rate is above 12 percent. The public sector is highly indebted, they have to reduce spending, they cannot
boost investment.
And there's a bit of disappointment in the slow progress to deliver, you know, tangible signs that the structural reform agenda is moving. So the
annual entrepreneurial spirits of -- in Brazil are still quite depressed, and that explains why we have the sluggish recovery --
QUEST: But it's --
RAMOS: On record.
QUEST: But hang on, he's only been in office for six months.
RAMOS: That's right.
QUEST: Barely got time to discover where the toilets and the photocopiers are in terms of that. But let alone for policy to take place. Is there
not an encouragement as -- encouraging aspect of the -- that the deregulatory policies or the reform policies, structural policies are
slowly being put in place?
[15:35:00] RAMOS: Absolutely. I mean, you know, make no mistake about it, this is a very reformist administration. The minister of economy is a
very, you know, liberal thinking and there's a number of structural reforms that he wants to implement.
But the policy dialogue with Congress has been beset with a lot of friction. There has not been that much progress in delivering the tax
reform and Social Security reform measures to open Brazil, to try Brazil --
(CROSSTALK)
QUEST: But how much --
RAMOS: United close to trade.
QUEST: How much of this sluggish GDP number is as a result of that because this GDP number was baked a year ago.
RAMOS: That's right --
QUEST: Six months ago.
RAMOS: This is a legacy issue.
QUEST: This is not his number.
RAMOS: Absolutely, I mean, we had like this very nasty recession, 2015, 2016. Since then, you know, we have wasted already two-and-a-half years,
you know, some of the reforms have not been approved, and is still pending and still the fear out there for most domestic agents of medium-term fiscal
insolvency.
Until they address that issue, you know, I don't think investment-spending will pick up and you're not going to see a vigorous recovery.
QUEST: How can this be? This economy is -- has -- it is resource rich --
RAMOS: Absolutely --
QUEST: Like few others. It has phenomenal human capital. And yet, you're basically saying it's likely to be marred in mess for years.
RAMOS: Yes, I mean, look --
QUEST: They could muddle through.
RAMOS: Yes, they'll muddle through. I mean, they're called the software for growth and development is open source like that. We don't need to re-
invent the wheel here. You know, the perennial structure agenda in Brazil is the same from ten years ago. You know, compared with its peers,
in Brazil, you need to invest more, to save more, to open to trade and to educate more and to lower the tax burden.
QUEST: Is there any evidence that Bolsonaro's less than desirable social policies, his right-wing populist views, his homophobic diatribes. Is
there any evidence that they are having a negative effect on the investment climate? Companies are basically saying --
RAMOS: Sure --
QUEST: I'm not getting there.
RAMOS: Not necessarily on that, it's certainly like a divisive personality, and you know, and some of these issues are polarizing within
society, even that may affect any governability, the capacity of them to establish a fruitful dialogue with Congress to advance the reforms, whether
that is the issue that is handicapping investment, I'm not so sure. But it's certainly an issue that, you know, undermines governability.
QUEST: I'm going to go. I'm hearing your answers, but I cannot gauge whether you're optimistic or pessimistic. I'm feeling, you know, I'm
hearing on the one hand and on the other hand.
RAMOS: That's right, yes --
QUEST: But if you had to come down off the fence, where would you be?
RAMOS: I mean, sometimes they say that an optimist is a misinformed pessimist. You know, I am hopeful, I'm hopeful. You know, it's not pre-
determined or pre-ordained, but Brazil cannot grow. I mean, we have a legacy of 40 years of any mediocre growth, so we have to change the model.
The old engine of growth, now they never deliver decent growth.
So we need to change, we need to reform, we already lost too much time. What happened in Argentina should be a lesson that they need to learn.
QUEST: We'll talk about Argentina next, good to see you, sir --
RAMOS: Anyway --
QUEST: Thank you --
RAMOS: Thank you.
QUEST: Mike Pence is trying to speed up the new NAFTA with a visit to the Canadian Prime Minister. USMCA, the U.S. Vice President touching on the
Huawei controversy with Justin Trudeau. Canada arrested the tech giant's chief financial officer on -- which is also the daughter of the owner of
the founder on a U.S. warrant in December.
It's the first official visit by a senior member of the Trump administration to Canada's capital. Paula Newton is live for us in the
capital in Ottawa. How much of this visit is going to be Mike Pence being nice because Donald Trump has been rude to Justin Trudeau?
PAULA NEWTON, CNN CORRESPONDENT: I'd say pretty much a 100 percent at this point, and they need Canada, they need Canada to ratify this. There
was election here in the Fall, so they need to speed things up. So they thought, OK, a little cordial visit here from the Vice President, even
though really the president has no desire to come here, has not come here for a state visit.
They thought OK, this is going to work. But remember too, Richard, as you know, the United States also needs the USMCA, they needed to kind of clear
the desk so that they can take on China or continue to take on China. And to that end, Vice President Pence, you know, uttered in a press conference
just now that I attended, Richard, that Donald Trump is prepared to go further if he has to with those tariffs on China.
So the issue is here, we're going to reclaim our friends as far as the United States is concerned, Canada in particular. So we're going to move
on to see what we can get done on China.
QUEST: But the decision of course to lift or at least to install the process of lifting the steel tariffs which is absolutely what Justin
Trudeau almost demanded as a price for USMCA which he didn't get. But now, they are going to lift those tariffs.
NEWTON: Yes, they've been lifted in fact and it's over. That chapter in U.S., Canada and Mexico relations, I should say is now completely over.
And Canada had always driven a hard bargain. They knew that the United States needed this deal to go through, and they needed it to go through
before there was another election.
[15:40:00] And so for that reason, they were lifted. And it was a big thorn in the side. The Prime Minister was asked the question again and
Trudeau said look, there was very little chance or it would be proved difficult actually to ratify this trade deal unless those were lifted.
Richard, it shows that the Trump administration is learning lessons on trade. The Vice President was very clear in saying that Canada drove a
hard bargain on this trade deal, but so did the United States.
And I think Donald Trump believes it can be a win-win for both sides and perhaps show a pathway in some respects to what could happen with other
trade deals, certainly not China though --
QUEST: Right --
NEWTON: We're talking more about Japan and the European Union.
QUEST: Paula, in Ottawa, thank you. As we continue tonight, the CEO of Boeing is offering a personal apology to the victims of the two fatal
crashes and he says he would let his own family fly on the 737 Max.
(COMMERCIAL BREAK)
QUEST: Many grief-stricken families have been waiting for a personal apology from chief executive of Boeing to the victims of the 737 Max
crashes. He was speaking to "CBS" when Dennis Muilenburg called the crisis a defining moment for his company, and says he still believes in the safety
of Boeing aircraft.
(BEGIN VIDEO CLIP)
DENNIS MUILENBURG, CHIEF EXECUTIVE OFFICER, BOEING: We clearly fell short and the implementation of this angle of attack disagree. Alert was a
mistake, right, we did not implement it properly. We're confident in the fundamental safety of the airplane.
UNIDENTIFIED FEMALE: You'd put your family on a 737 Max?
MUILENBURG: Without any hesitation, absolutely.
(END VIDEO CLIP)
QUEST: Clare Sebastian is with me. Listen, this angle of attack disagree is a -- is a minor technical point --
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Right --
QUEST: But does not go to the core of whether the MCAS should ever have been designed in the way it was, executed in the way it was, and ultimately
advised in the way it was.
SEBASTIAN: It's scratching the surface, Richard, this is you know, one sense and one communication with the MCAS system. The question of whether
the MCAS system wired exists in the first place really gets to the core of this. The way they type certify the plane, that they -- you know, all of
that certification issue is really is the software and the certification. They haven't come out and admitted yet that there was any, you know,
underlying problem with all of that. So this --
QUEST: Far from it.
SEBASTIAN: Apology --
QUEST: Far from it in his speech yesterday, Muilenburg specifically says there was integrity in the system.
[15:45:00] SEBASTIAN: Absolutely, and in the certification system, he said that's the reason why air travel is the safest way to travel in the
world. He said he's fully confident in that, but he has convened an internal board, Richard, to review the certification process and he's
working with the FAA who is doing the same.
(CROSSTALK)
QUEST: So what are you hearing from --
SEBASTIAN: Well, no, I wanted to know, basically because the apology is not the same as an admission of guilt, and this didn't seem to go all that
far. So, I wanted to know what they thought about whether or not he's trying to protect himself from further liability.
And the concerns is yes, this seemed to the people I've spoken to today, to the lawyers, to be a very schooled response, that he is really, you know,
leaving some wiggle room to perhaps continue to blame the pilots or other parties. And they are facing lawsuits on this, and that could get worse,
the longer the planes stay on the ground.
QUEST: How long -- what's the latest thinking on that?
SEBASTIAN: So I asked if it could be 10 to 12 weeks, they said this week, that takes us to August. The main U.S. carriers, United, Southwest and
American all have cancelled their Max flights through August. So certainly, August seems to be the earliest which the plane will get off the
ground.
Don't forget, Boeing hasn't actually submitted its fix to the FAA yet. They're still working through some dialogue with them, so some issues on
that. The FAA says that's normal. But there's still a lot of work to be done, and plus, there's the trust issue, Richard.
I want to pull up a tweet just in the last hour and a half from Senator Richard Blumenthal. He says "plane passengers deserve more than apologies
and promises from Boeing CEO about the update of 737 Max air worthiness. Any fix must be independently scrutinized. A new robust review of all
safety systems is paramount." What he actually means by that is unclear. But for some people, the FAA sign-off isn't going to be enough.
QUEST: This -- look, the fix will be put in place, the planes will be put back in the air. The issue will become whether or not passengers will balk
at flying on it.
SEBASTIAN: Absolutely, and I think there are some who still will. United CEO was speaking just today in an interview and said there's no guarantee
that everyone will get over this, and if they don't, United is going to have to put them on different planes.
QUEST: We'll talk about that in the future. In my view, well, people will fly it. Coming up, it's time to step inside the new "Star Wars" theme park
in Disneyland after the break.
(COMMERCIAL BREAK)
QUEST: "Star Wars" fans can now build their own droids, drink blue milk and even fly the Millennium Falcon. The much wanted anticipated "Star
Wars" Galaxy's Edge has opened in Disneyland, California. Just look at it, look at the size.
I mean, they're going to give the relative size of this whole thing -- the second one will open in Florida in August. Theme parks -- theme, I was
just looking at the numbers, theme parks are a big focus for Disney which reportedly spent a billion dollars on the expansion.
[15:50:00] They're also a source of revenue for the parks. Disney Parks, look at this, they earn more than 20 billion -- now this is Disney. Now,
major networks, that's "ABC", "ESPN", 24.5. And then the next biggest thing is parks and resorts, 20.3, I assume that includes the cruise ships
as well.
The studios, you would think they were bigger, but no, 10 billion, less than half of rev from parks. And then finally consumer products. In other
words, you make the movie, you send them to the park, you do a spinoff on the television program and then you sell them the goods.
Disney's Chief Executive Bob Iger says it was crucial to stay true to "Star Wars" when building Galaxy's Edge. Christine Romans asked him about the
pressure to please fans of the "Star Wars" franchise.
(BEGIN VIDEO CLIP)
BOB IGER, CHAIRMAN & CEO, THE WALT DISNEY COMPANY: They are particular. And I think we started by wanting to please them the most because we knew
that if we pleased them, then you know, we'd please everyone. And by pleasing them, what we meant by that is one, it has to be big and bold --
CHRISTINE ROMANS, CNN SENIOR BUSINESS CORRESPONDENT: Right --
IGER: Because that's what "Star Wars" is and it's what "Star Wars" was. It has to be artistic in nature, meaning there has to be a lot about it
that has elements of art in it --
ROMANS: Right --
IGER: And it also has to be technologically advanced. And of course, lastly ahead of me from a detailed perspective as "Star Wars" as it gets,
and what I mean by that is right down to, you know, the footprints and the --
ROMANS: Right --
IGER: You know, on the turf or on the floor.
ROMANS: Do you have a favorite element?
IGER: Well, for me, it's the fact that you can step into this place and actually feel like you are in "Star Wars". You know, this is one of the
planets Batuu, if you didn't know, Batuu, you know that on the outer Edge of the Galaxy. And I love -- there's a plaque when you walk into
Disneyland that says, "here, you leave today, and enter the world of yesterday, tomorrow."
So it was Walt's way of saying --
ROMANS: Right --
IGER: Leave everything behind, you're coming into a new place, whether it's yesterday or tomorrow, it's not where you're from. That's what this
is in many respects. Is you're leaving your reality and entering the reality of "Star Wars".
ROMANS: Peel back the curtain for me, what was -- what was the toughest part of the challenge of creating this land, especially when you're, you
know, under the eyes of "Star Wars" fans who really love this story.
IGER: There was never too much detail. And we did sweat all of the details, you know, right down to their finest points. And I think the
biggest challenge was at some point we had to stop and actually open the place --
ROMANS: Right --
IGER: You know, although Walt said, you know, Disneyland will never be finished, and as long as there's imagination in the world, I think our
imaginers are never going to stop tinkering with this --
ROMANS: Yes --
IGER: From a detailed perspective. But I think, you know, the biggest challenge here was just making sure that this place and every aspect of it
is true to what "Star Wars" --
ROMANS: Yes --
IGER: Is.
(END VIDEO CLIP)
QUEST: Now, the chief executive, that's his view on what's happening. What about for you and me or for those who are visiting? CNN's Frank
Pallotta, nice work if you can get it, think about it. He gets to go to Anaheim, California, he gets to go and get a preview of the park, and he
gets paid for it.
FRANK PALLOTTA, CNN MEDIA REPORTER: Hey, Richard, welcome to "Star Wars" Galaxy's Edge. We are on the Planet of Batuu, otherwise known as Anaheim
in California. And there are plenty of things going on all around me. But one of the most important things is what's right behind me, which is the
Millennium Falcon.
Yes, that is Han Solo's iconic ship. But it's not just a place where you can come and take photographs, it is something that you can experience
yourself because it is a part of -- it is a part of the smuggler's run which is the new attraction here at "Star Wars" Galaxy's Edge".
You can go over there and actually sit down in the cockpit of the Millennium Falcon, a "Star Wars" fans dream come true and piloted it
through the galaxy. You can press different buttons, you can control the flight pattern. It is all very state of the art technology that really
brings the "Star Wars" story to you.
Because remember, it's not Han Solo flying the ship, it's not Chewbacca flying the ship, it's you flying the ship. And that is incredibly
important to what Disney is trying to do with their theme parks, which has been on the rise for the last couple of years. And 2015, it's media
networks kind of took, you know, kind of peeked out, and since then have declined around 15 percent.
But in the same time frame, the park's unit has gone up nearly 50 percent. So this is a huge investment in one of the most important units of Disney's
corporate universe. And what they really want to do here is bring you here and really have you live out your story, not just ride rides, but live out
the "Star Wars" adventure via Disney. Back to you, Richard.
[15:55:00] QUEST: All right. Now, we need to wrap the markets up. McDonald's is at the top on -- it's opening a new times -- massive Times
Square store, it has had some new products. Verizon is at the bottom, and that's interesting that Verizon, but that's specifically because of a
downgrade by a series of analysts.
As for the rests, absolutely it would be interesting to know, Boeing is just up a quarter if you look at what happened. The GDP number has weighed
on the market to some extent. The market will close in the green, which of itself is fascinating. Come over here and I'll show you the last bit here.
We have a good strong open, middling at the end of day by -- and right at the end, the buyers come back. And now admittedly, these numbers are
small. So we have to take it with a pinch of salt. But the discrepancy between the various points of the day shows how this market is so fickle.
We will have Uber's numbers of course. Uber will deliver its first results as a public company. Look for a massive loss, look for increased revenues,
we'll have that of course later on. I'll have a profitable moment for you after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, the shareholders who attempted to oust or at least limit Mark Zuckerberg's powers at Facebook are understandable
of those efforts, but they are misguided. When they invested in Facebook, they knew they were investing in a Zuckerberg enterprise. His B-
class shares, 10-1 shares over everybody else.
The issue really becomes because of these other events, does that change anything? Shelly Palmer said tonight, no, really it doesn't. If
Zuckerberg's powers are to be limited, it has to now be done by regulators, by law and by suing and by anybody else, but not the shareholders.
They bought shares knowing what Zuckerberg was like and what the company was like. And it's not surprising that today, Zuckerberg recognizes that
and he defeats all the actions to get rid of him as chairman, to limit his powers as chief executive. It was the same with Rupert Murdoch at News
Corp.
When you buy into a special arrangement of shares, you know what you're getting into, and it doesn't behoove you to complain thereafter. And
that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it is profitable, the bell
is ringing, the Dow is up, the day is done!
(BELL RINGING)
END
