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QUEST MEANS BUSINESS
The Human Cost; Tourist Attraction; Making the Money Happen; Spanish Credit Rating Downgrade Sets Off Warning Bells In Europe
Aired March 10, 2011 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: On borrowed time. A Spanish downgrade sets warning bells ringing in Europe.
The price of oil, debt crisis, and a blow from China, it is enough to send global stocks plummeting.
And going where the oil is; tonight, the chief exec of ENI on managing political risk and his hopes for Libya.
I'm Richard Quest. I mean business.
Tonight a new note of alarm sounds within the Euro Zone as Spain's credit rating takes a clobbering. It's all part of the crescendo of concern that is building up throughout the Euro region. Over the next 24 hours it is up the leaders of the Euro Zone currency bloc to try and come up with a plan. They have much on their agenda, whether it is Greece, Ireland, Spain, Portugal.
Jim Boulden is with me now to explain why this crisis is not going away.
And, Jim, we thought it was over at the end of last year. What's happened?
JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: We thought it was a respite at the end of last year. Nothing has changed, one word, "downgrade". Let's look at downgrades.
Spain was downgraded today by Moody's cutting the rating one notch, to AA1. Why? Well, because of the fears over bank refinancing. Who do you believe? Well, let's go through the numbers. The Spanish government says it will take $27.5 billion to keep its banks in business. Moody's disagrees. It says it is more like $55 to $69 billion. And the worst case, it could take as much as $165 billion.
Now Moody's issued this judgment before another report came out of the Bank of Spain. It has the lowest estimate of all, for just under $21 billion to help recapitalize 12 banks. What is the reaction to all this? Let's look at today. We saw Portugal debt, the yield to 7.5 percent, Portugal again, over 7 percent. For weeks now the treasury continues to say that is unsustainable. There are of course increasing pressures for a bailout there. We had a bailout in Greece last year, of course. Greek 10- year, you see at 12.8 percent. In that sense nothing has really changed; continues to be a fear of default and of restructuring, of course.
As Richard said, tomorrow the Euro Zone summit meeting in Brussels, they set a deadline for March 25, when there will be the big EU summit in a couple of weeks, to come up with a comprehensive package of measures to end this entire crisis. There is likely to be a discussion of a vague agreement on competitiveness, on tighter fiscal rules, on sanctions against debtor countries, even a possible better deal for Ireland.
But Reuters says today that Germany continues to block discussions of the increasing of the size of this bailout fund. And the European Central Bank continues to mount pressure onto the European Union. Their bulletin suggests that governments aren't doing enough to cut the budget deficit. And, of course, without concrete action markets could react very harshly.
QUEST: We look at these numbers that you have just shown us. Stay where you are, Jim, but I want to show a graph that shows the percentages of sovereign yield. This is an extremely complicated graph, but the gist of it is the 7 percent is the key number. And when-that is Ireland. That is Portugal, down here. Greece is up here at 12, 13 percent. But when you start to hit 7 percent that is when the pressure comes.
BOULDEN: The interestingly thing is that Portugal has been over 7 percent a lot long then we saw Ireland. And certainly Greece was much higher, but not for as long of a period. So Portugal has been over 7 percent for, many people say for far too long. But the markets just haven't been taking notice of it. And they just want to see the European Union make a very, very specific announcement.
QUEST: But hang on, Greece is 12.8 percent, as we can see from that graph over there.
QUEST: Now, look, why should they-I mean, what is going on there. Is it just simply because the fear of a default?
BOULDEN: Well, this of course, Greece already took the bailout. So in some ways, you know, Greece doesn't have to go to the market and take that kind of money. But Portugal has to actually obviously get the 10-year off, and if it is getting it off at that level, it is just unsustainable. Because there just isn't enough money in there to be able to pay that kind of yield.
QUEST: Jim Boulden, many thanks indeed.
And I want you to keep an eye out on that graph. And remember those particular numbers because that 7 to 13 percent is what we need to talk about as we put it into perspective of the European market. Have a look and see how they traded. Shares fell to their lowest level so far this year as worries about sovereign debt intensified. They were down sharply in London's case. The Bank of England, well, the bank held rates steady at 0.5 percent, but now everyone believes the rate rise will happen, probably in May.
So, rate rises, credit defaults, higher interest rates for bonds; I spoke to Bob Parker, the senior advisor at Credit Suisse Asset Management. Clearly, when we took the scenario I asked him, are the wheels coming off the wagon in Europe?
BOB PARKER, SENIOR ADVISER, CREDIT SUISSE ASSET MANAGEMENT: I think that is partly unfair. You say the wheels are coming off the wagon. There is significant capital market pressure, again, on Greece. The cost for Greece to borrow relative to Germany is over 9 percent. There is a lot of pressure on Irish sovereign debt. There the cost is over 6 percent, relative to Germany. Portugal the market is discounting that Portugal will have to go the European bailout fund. There the relative cost is over 4 percent. So that is-it is those three countries where the pressure is.
QUEST: But will that-are you expecting that pressure to become overwhelming again?
PARKER: Well, when you say overwhelming, the markets-
QUEST: I suppose what I'm saying is, does Greece eventually have to reschedule, as does Ireland, and does Portugal have to go for a bailout?
PARKER: I think it is despite protestations from the Portuguese government I think we will inevitably see what is in European terms will be a mini bailout for Portugal. A mini bailout, probably they go to the bailout fund for $50 billion. In the case of Ireland, the market is correctly, in my view, discounting the senior bank debt. We'll have to have a write down for investors. For Greece, they have got to refinance 219 billion euros from 2013, onwards. I find it very difficult to understand how they are going to achieve that.
QUEST: And in that environment does Europe, with its current growth numbers, with its potential for a rise in interest rates, "strongly vigilant".
QUEST: As we shall see. Does it maintain its investment quality?
PARKER: I think if you look at Europe at the moment we've got very strong economic data coming out of Northern Europe. And Germany this year will grow at over 3 percent. One thing that is very encouraging is recently better growth numbers out of Ireland and Spain. And in the case of Spain despite its credit downgrade, they have taken very strong action in starting to repair the problems in their economy.
QUEST: I need to spin the globe around. We got this trade deficit number, a rare number, out of China. It is being written off as a blip because of the lunar new year in January and February.
QUEST: Do you buy into that? Or is it a trend, is it an exaggerated part of a trend?
PARKER: The trend, and the trend over the next one to two years I think is clearly that the Chinese trade surplus will slowly come down. That is inline with the boost to Chinese consumption. And we're seeing at the moment strong consumption, strong investment spending. There has been some moderation in the Chinese economy. It is moderating to probably a trend rate of growth of about 8 percent.
QUEST: I need to tap into your investment knowledge. What do you like the look of? Which part of the world are you moving your asset allocation to?
PARKER: Well, almost by default we like developed equity markets.
PARKER: Yes. And what we did over the last two to three months has been significantly reducing our equity exposure to emerging markets. The big decision for us, which I think will probably be in May or June, is when do we retake risk in emerging equity markets? While emerging markets central banks are raising interest rates that is still too early and emerging markets generally are still quite expensive relative to developed equity markets.
QUEST: And interesting strategy difference there, Bob Parker from Credit Suisse Asset Management, talking about equities versus emerging markets and developed.
Now as I discussed with Bob, China's trade balance has swung to a deficit. In February imports outweighed out exports by $3.7 billion. Now that perhaps, that would be a good month if it was the U.K., Germany, or relatively, the U.S. But as you can see from there it was the first monthly trade deficit for nearly a year and China's largest deficit in seven years. Exports rose just 2.5 points-percent.
Although most analysts, and this is the interesting thing, they put it down to the Chinese new year, when factories were closed for up to a month while imports surged in January to make up for that difference. So that is the way things are in China and the market was talking about in great detail. In New York at the moment, well, the market is extremely unhappy, the U.S. trade deficit also widened in January. Alison Kosik is with me from the New York Stock Exchange.
Look, you just heard me say, China had a trade deficit, the U.S. always has a monster deficit, but the market is off 190 odd points.
ALISON KOSIK, CNN FINANCIAL CORRESPONDENT: You said up? It's down.
QUEST: No, I said off.
KOSIK: Down just on that news because the U.S. trade-
QUEST: Sorry, forgive me. I said, the markets off 190 points.
KOSIK: You are absolutely right, I'm sorry. It is a loud day here on this floor of the New York Stock Exchange, Richard. And you are exactly right. You are right on. This is all about the U.S. trade gap. It is investors, yes, selling off because of the news that shows that in January we were buying more from overseas than we were selling.
And what's happening here is you are seeing the trickle down affect of this high level of oil prices. Everybody blaming it on these higher oil prices, even though we are kind of holding steady today; but it is these rising oil prices and imports from China that are driving the U.S. trade deficit. You know there are major barriers, Richard, to creating enough jobs to pull the unemployment rate down over the next several years.
I mean, what we're seeing here in the markets is manufacturing stocks are really being hit hard. Across the board stocks are being hit hard. The trade gap means that companies, they're not going to wan to produce more goods if we're not exporting them. And it creates this domino effect. If these companies aren't manufacturing, there is no need to hire anybody and that hurts GDP. And the big worry down here on the floor is that what is that revised GDP figure going to look like soon, Richard.
QUEST: Alison Kosik at the New York Stock Exchange. We agree the market is down, it is now down over 200 points, 12,000 is starting to look a little bit dodgy.
KOSIK: It is.
QUEST: Alison, many thanks indeed.
The worst-case scenario for Libya is that it goes down the same path as Somalia. That is according to the boss of Italy's biggest foreign oil producer. I am talking to ENI's chief executive when we come back.
QUEST: The battle for one of Libya's most crucial oil hubs continues in Ras Lanuf. Rebel forces have at times been overwhelmed by the fire power of the Libyan government forces. Witnesses say many are fleeing eastward in pickup trucks. Heavy artillery strikes continue to hit the port. International Energy Agency said the bombings were a worrying escalation and damage to infrastructure and that it was ready to act if disruption to supplies continued.
Brent has fallen slightly on Thursday's trade. It is just currently just over $114 an ounce. The Italian oil company ENI, E-N-I, says its operations have suffered heavy losses during the Libyan unrest. Production in Libya has been cut by 63 percent since the uprising began, from 270,000, a quarter of a million, to just 100,000 barrels a day. Now ENI is the country's largest foreign oil producer in Libya. It has been operating there since 1959, 10 years before Colonel Gadhafi came to power. The Libyan government brought a stake in the company in 2009.
So ENI's Chief Executive Paolo Scaroni today revealed the company's strategy for the next three to five years. And he says ENI's production won't be affected long-term if the situation in Libya improves. I spoke to him after he presented his plans to investors in London. And I asked him what affect he really expected to see?
PAOLO SCARONI, CHIEF EXECUTIVE OFFICER, ENI SPA: We think that this suspension will go on for example for 100 days, this will imply a reduction in our production on a yearly basis of 50,000 barrels. We don't know exactly when the production will resume at full speed.
QUEST: How-from what you are hearing, from your people there, how bad is the situation?
SCARONI: Well, it is a very confused conflict in which it is not really clear what is happening. What we do know is that the control of country is divided in two right now and we think that it is very difficult to imagine a solution in the short term.
QUEST: So, to that extent, no solution in the short term doesn't give much hope to your idea of a-of not having a long-term suspension of production.
SCARONI: Yes, well, it depends what it means for short term. I hope that in the next weeks maybe we will start to see a solution.
QUEST: But you can't have much more than that?
QUEST: What is the best outcome for your company, of this solution- of the crisis at the moment?
SCARONI: Let me tell you what is the worst outcome. The worst outcome would be to have Libya as a kind of Somalia, in which there is no government and the country would be in a mess for the long-term.
QUEST: Are you finding yourself in a difficult position of whether or not you tend towards the support for the Gadhafis or for the rebels, or are you really having to sit on the fence?
SCARONI: We are not really in a difficult position. Because what we do, really, do now is to produce gas for domestic consumption. The domestic consumption means electricity, and electricity is for everybody, on both sides of the country.
QUEST: Is this not a-I mean, as I look at your exploration plan. The countries where you are intending to increase are what? They are Venezuela, Iraq, Russia.
QUEST: Angola. None of them are particularly politically stable.
SCARONI: Well, as long as I don't find oil in Switzerland, I'll go where oil is.
QUEST: That's the truth of it, isn't it? The price of oil and the oil market is always going to be at the whim of these geopolitical measures?
SCARONI: Yes, and we are used to it. We have been working in those countries for the last 50 to 60 years. We always found the solution to go on with our activity.
QUEST: And as you look at the countries where you are hoping to expand your exploration which ones do you find particularly attractive?
SCARONI: Well, we have been having huge successes in Venezuela. But the real success story of last year has been Angola. Angola is a very promising country. We made a big discovery there.
QUEST: And as we come to the end here, what is your barometer, as the chief, for the level of political risk and instability that you are prepared to accept when deciding to commit ENI's resources?
SCARONI: Let's say the real choice is how much money do I want to invest in every country? Because the amount of money is the major of the political risk and, therefore, in countries which are particularly dangerous we want to progress slowly in our expansion.
QUEST: I would ask you about the price of a barrel of oil and where you think it is going to go, but something tells me you're not going to tell me that.
SCARONI: Well, what I can tell you is that I think that the North Africa situation is responsible for a $15 hike on the oil price. That is if the situation would be normal, oil price would be a little bit below $100 today.
QUEST: The chief executive of ENI.
Now, I do need to bring to your attention another deal that happened. The online grocery store FreshDirect sealed a $50 million investment from the U.K. supermarket, Morrison's, which takes a 10 percent stake in FreshDirect.
Why am I telling you about this? Because FreshDirect and its Chief Executive Richard Braddock are profiled on our series "The Boss". As a result of this deal Richard Braddock is leaving his job as chief exec. In a statement, the company said that, realizing its full potential required a full-time chief executive. There you see Richard Braddock from our reports. Now we reached out to him and to FreshDirect. We have got no comment on this development or indeed why he is leaving his current job. It proves the point, when you are the boss, the higher you go the harder the fall.
U.S. stocks are selling off. Oil prices, China trade deficit, and of course we'll talk more about oil in a moment-the weekly jobless numbers-
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And that is the number you see. Off 194, 12,000 just holding on by its fingertips. When we come back in just a moment, it is Q&A after the break. The growing turmoil across North Africa and parts of the Middle East, crude oil prices, Ali and I pit our wits against each other. Conflicts and the price oil. Q&A is next.
ALI VELSHI, CNN ANCHOR, CNN NEWSROOM: QUEST MEANS BUSINESS and so do I. We are here together in the CNN NEWSROOM and around the world.
QUEST: Ali, it is good of you to join us this Thursday. You and I, from around the world, talking business, travel, innovation. We like to say nothing is off limits and that is pretty much true. And so, with revolutions taking place in North Africa, as a backdrop, Ali, really have to get to grips with Texas gold, talking oil.
VELSHI: That's right. When the revolutions in Egypt started we saw oil hit levels that we hadn't seen in two years. Even though the world's oil, only about 2 percent of the world's oil goes through Egypt's Suez Canal. The fear was that if unrest were to spread throughout the region it would slow production and distribution of oil. And then, Richard, Libya happened, again, so little of the world's oil supply is actually affected.
So, today's question: How do conflicts affect the price of oil? Richard, take it away, you've got 60 seconds.
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QUEST: Starting now? I thought you had already started.
The global demand for oil is roughly 90 million barrels a day. But look at the countries that are involved in that. They are Iran, Iraq, Algeria, Angola, Nigeria, Libya, all countries where there is the potential for instability, disruption of supply.
In 1973, during the Yum Kippur War, prices rose by 400 percent. It was 7 percent was at risk. In the Iran Iraq war, 10 percent of the oil supply was at risk, and prices rose accordingly. There is roughly 1.8, 1.5 billion barrels in the strategic reserve. But that would only last 15 days, up full strength. The truth is on today's oil price roughly $10 to $15 is built in for this speculation, this worry. And the big problem, of course, Ali, if Saudi Arabia gets involved. Any instability there and prices head towards $140 a barrel.
VELSHI: There is very little I can add to that, Richard. You know so much about this. But what I can add to this is something that your viewers may not have seen on a nightly basis, and that is my trusty oil barrel. Let's start with that, I'm going to take one minute.
The answer of whether conflict affects the price of oil depends on where the conflict is. Take a look at Libya, which produces less than 2 percent of the world's total of oil. So any disruption to oil there shouldn't put more stress than already exits on global supply. But as you mention don't tell that to the investors, who speculate, that if these popular uprisings spread into the real oil producing Arab nations, as you said, Saudi Arabia, then we could be in for some trouble.
So, Richard, it is not the actual conflict driving oil prices. It is the fear of that conflict spreading. What I would worry about, however-you didn't say it-is Nigeria, America's fifth largest source of imported oil. It is a country that has long dogged by civil conflict in that Niger Delta region. In 2008 rebels made headlines. They hit the Royal Dutch Shell pipeline, they kidnapped oil workers, they disrupted out put, it hardly budged oil prices, which were already high for a host of other reasons. Investors just shrugged it off assuming Nigeria would get back to normal, so conflicts sometimes affect the price of oil, but not always.
And not everywhere. I hope you like my barrel, Richard.
QUEST: Well, it could to with a lick of pain, but I guess times are hard.
VELSHI: Yes, times are tough.
Let's separate the men from the boys, here, Richard. It is time to introduce The Voice, for the quiz.
THE VOICE: Hello, Gentlemen. Let's jump right into it.
Question number one, Russia, Saudi Arabia, and the United States are the top three oil producers in the world. Who is next on this list? Is it A., Canada; B., China; C., Iran; D., Venezuela?
THE VOICE: Ali?
VELSHI: What are you talking-people are always, you never give Canadians credit for anything.
THE VOICE: Don't take it personal. Richard?
QUEST: That's because you are wrong. Try Venezuela.
THE VOICE: You are wrong as well.
THE VOICE: Wrong again.
VELSHI: Well, then, Richard, you better get this one right.
QUEST: Iran, it's Iran, Iran, Iran.
THE VOICE: Well done, Richard.
Iran is the fourth biggest oil producer in the world, producing over 4.1 billions of barrels per day.
On to question two, which of the following countries consumes the most oil? Is it, A., Brazil; B., India; C., Russia; D., United Kingdom?
THE VOICE: Ali?
THE VOICE: Nice job.
India consumes the most oil. They consumer almost 3 million barrels of oil a day. The biggest consumer of oil is the United States, though, consuming over 18 million barrels of oil a day. Yes, I said, 18. Canada and Mexico-
QUEST: Could you-hang on, hang on, hang on. Hang on Voice.
Ali, did you know that or was it just a good guess?
THE VOICE: Gotcha, OK.
VELSHI: Look I claim all sort of heritage, right? I claim I'm Canadian. I claim I'm Indian, all that kind of stuff. Since my Canadian heritage got blown off, I figured let's try India as a lucky guess.
THE VOICE: OK, enough of the small talk. Question number three, Canada and Mexico are the biggest suppliers of oil to the U.S. Which country is the third biggest supplier? Is it A., Angola; B., Iraq; C., Saudi Arabia; or D., Venezuela?
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THE VOICE: Richard?
QUEST: I'm going to go with Saudi Arabia.
THE VOICE: Well, done. Saudi Arabia is the third biggest supplier of oil to the United States, supplying just under 1 million barrels of oil per day. And you know what, Richard, you are today's winner.
VELSHI: I'm going to check the sources on that stuff again. I was totally-you know why I didn't even ring in on that, because I thought you were going to say Venezuela and it was going to give me a chance to take the victory.
QUEST: Listen, listen, I just wonder how much more citizenship, ethnicity, or otherwise you are going to claim before this contest is over.
Always will do it.
VELSHI: Always my pleasure to see you, Richard.
QUEST: That will do it for this week. Remember, we are each of here, Thursday on QUEST MEANS BUSINESS, 1900 GMT.
VELSHI: And in the CNN NEWSROOM, 2:00 p.m. Eastern. Keep the topics coming on our blogs at CNN.com/QMB and CNN.com/Ali. Tell us each week what you want the two of us to battle about.
Richard, see you next week.
QUEST: Have a good one Ali.
Now let me tell you about what's happening later tonight, in just about half an hour here, on CNN.
Recovering Hollywood addicts have some harsh words for Charlie Sheen, as they weigh in on the actor's headline grabbing behavior.
And the case of a 12-year-old boy in the U.S. who's been charged in the death of his parents. That is on "PIERS MORGAN TONIGHT," 30 minutes from now, after QUEST MEANS BUSINESS.
QUEST: Hello. I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And on this network, the news always comes first.
So I need to tell you, NATO defense ministers are meeting in Brussels now, discussing how to intervene in Libya's civil war if they're pushed to do that. The secretary-general of NATO says the organization would need a solid UN mandate for military action.
Meanwhile, France is now recognizing Libya's opposition council as the only true Libyan authority.
Rebel fighters aiming to topple Moammar Gadhafi in Tripoli have been pushed back from the strategic oil town of Ras Lanuf after days of heavy bombardment. In a Reuters interview, Saif Gadhafi says government forces will intensify their offensive against the rebellion even further and they won't surrender even if Western powers intervene.
The Nobel Peace laureate, Mohamed ElBaradei, says he will run for the presidency of Egypt if true democratic reforms are implemented. There are media reports that quote him as saying if there's no real democratic system, he will remain an activist rather than be part of the decor (ph).
The Dalai Lama plans to step down as political head of the Tibetan exile movement. He says it's time for a new elected leader to take over his political role. Members of the exile movement have begged the Dalai Lama to stay on. The Chinese government issued a statement calling the Dalai Lama a religious crook.
Now this week, CNN continues with our launch of the Freedom Project. Our mission is really very simple -- it shines the spotlight on slavery in all its forms and joins the fight to end modern-day slavery.
As we know, there are plenty of examples where slavery is in the sex industry, but what about when slavery gets into the supply chain and what businesses can do to stop it?
QUEST (voice-over): Companies want the best profits. Consumers want the best prices. What no one wants is the human cost -- debt bondage, trafficking, child labor. Modern-day slavery exists and affects anywhere from 10 million to 30 million men, women and children.
BEATE ANDREES, INTERNATIONAL LABOUR ORGANIZATION: It's a huge number in terms of illegal profits that are generated by unscrupulous employers and intermediaries. And, therefore, the interests are high, but, also, the interests of legitimate business to fight forced labor is -- is important, given these illegal profits that can be made from forced labor.
QUEST: Business leaders are now learning to embrace corporate responsibility, and with it, transparency. Perhaps there's nothing like embarrassment to focus the mind.
GEORG KELL, EXECUTIVE DIRECTOR, U.N. GLOBAL COMPACT OFFICE: Clearly, the brand damaging issue is -- is the more sensitive one, because even if, in legal terms, you know, no complicity, can be shown, the brand damage is done so easily. And the more precious the brand, the more sensitive you are. And you just don't want to be associated with human trafficking. So I think it's the brand sensitivity which is a big driver, really.
QUEST: In 2007, allegations that young children in India were being used by contractors to Gap Inc. Threatened its ethical image. Gap fired the contractor and promised to tighten standards.
DAN HENKLE, SVP OF GLOBAL RESPONSIBILITY, GAP INC.: In the mid-'90s, there were very few businesses that had codes of conduct for their supply chain. You think about today, now, there are over 10,000 codes of conduct that have been developed. And it's really become sort of a -- a thing that you -- you really need to do if you're a big global company.
QUEST: The biggest problem companies face has sprung from rapid globalization. Supply chains stretch far and wide.
ROBERT FISHER, BOARD DIRECTOR, GAP INC.: And we do business, I think, Dan, you told me the other day, in 1,500 factories. We don't own any of those factories. They're con -- with contract with the factory owners. And those factory owners are -- are interested in making a high quality product at a -- at a fair price. But they're also interested in making profit. And so we -- we try to deal with factories who we can trust. When they tell us they're making all the garments in that plant, we can -- we hope to be able to trust them, but we still have to verify.
And so I think in terms of perfection, while we all might aspire to perfection, it's a very difficult thing to achieve.
QUEST: Companies are waking up to their responsibility. But as consumers, we need to accept our share, too. It's all very tempting to say the slavery issue is far away and affects other people. From everything we buy to the places we visit, we all have a say.
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QUEST: You can access more stories and videos on modern-day slavery. It is at CNN.com/freedom, which, of course, you will find information about how you, too, can join in this campaign and -- well, and make a difference.
In a moment, we'll smooth out the crinkles in the tourism spreadsheets. European countries are changing their strategies because they need to cash in on emerging tourist markets.
QUEST: So there you have it, red ink on the markets in Europe, reflecting the red alert over European debt woes. And if the worst off nations want to avoid going cap in hand to the EU, it's probably time to get the E.U. to come to them, not as bailout merchants, but as tourists. The tourist trade is growing more competitive all the time. And as we now report from the ITB Conference and big exhibition in Berlin. It will take more than deck chairs and donkey rides to keep today's visitors happy, as Ayesha Durgahee reports from Berlin.
AYESHA DURGAHEE, CNN CORRESPONDENT (voice-over): It's a buffering and balancing act -- staving off the worst effects of the sovereign debt crisis while smoothing out the crinkles of tourism spreadsheets. Whilst Asia and the Middle East saw an increase last year of 13 and 14 percent responsively, in Europe, due to volcanic ash as well as economic uncertainty, recovery was slower, with only 3 percent more arrivals.
TALEB RIFAI, SECRETARY-GENERAL, UNWTO: Although Europe has been gradually losing market share, not because of -- of what Europe is doing or not doing, not because of the rise in importance of the emerging destinations, but in spite of all of that, today, more than half of the world's tourism in -- inbound and outbound -- is coming into and out of Europe.
So the health of Europe, the performance of Europe is important for -- for world tourism.
DURGAHEE: So at this year's ITB, the push is bigger and more crucial than ever before. Spain may be down, but it's not out, as it dominates the European exhibition halls. On the brink of a bailout, Portugal is preparing for the worst.
NUNO PINA, POUSADES DE PORTUGAL TOUR OPERATOR: The half of our sales and our business comes from the national market. We are obviously worried with the -- with the economy -- economic situation in Portugal. Also we have and we are trying to compensate with the international markets, especially from here, Germany, United Kingdom, Holland and Brazil.
DURGAHEE: Tourism accounts for 12 percent of total revenue in Portugal. A third comes from domestic travel and is expected to increase at Portuguese stay at home to save money. The country is relying on emerging markets to even out the numbers.
LUIS MANUEL PATRAO, PRESIDENT, TURISMO DE PORTUGAL: We do not have the direct flights to China or India at the moment, but we have more than 70 weekly connections between Brazil and Europe. And so we are emphasizing in Brazilian tourism, in Portugal more than 50 percent this last year. The idea is also to concentrate on more than 300 million people that live at -- at the maximum of three hours flight from Portugal.
DURGAHEE: The BRIC nations continue to drive growth in terms of expenditure abroad, with the Chinese spending 17 percent more, Russians 26 percent and the Brazilians a whopping 52. Cashing in on new money is also Greece's plan.
(on camera): Greece's economy may be leaning on the tourism sector a little bit more so...
GEORGE NIKITIADES, DEPUTY TOURISM MINISTER, GREECE: It's this leaning and this is very essential of what you're saying. It is the first time that we're leaning more -- more and strongly in the tourist sector. We have made a great reduction on the VIT (ph) for tourism. We are planning measures with our airports, with airlines that have to come in our country, with over doing whatever we can in order to attract more people.
DURGAHEE (voice-over): Being the first to introduce austerity measures and experience the effects of a bailout, Greece believes an integrated approach is the only solution to the Eurozone crisis.
NIKITIADES: Sit down with our partners everywhere. We sit down with the prime minister of Portugal, who is a friend of the prime minister of Greece. We discuss together the problems. And we unite our forces in order to prove that Europe is the one which, united, has to face the problem.
DURGAHEE: Ayesha Durgahee, CNN, Berlin.
(END VIDEO TAPE)
QUEST: So we need to go from the tourists, because if they are in that part of the world, well, certainly they won't be very pleased that the storms continue to roar through Turkey and now into the Middle East.
Pedram is at the World Weather Center.
When you say storms, how bad are they?
PEDRAM JAVAHERI, CNN METEOROLOGIST: Well, it's been pretty severe here. We've had reports of a tornado in portions of Southern Turkey in the past 24 to 36 hours. And also, how about this?
Around the town of Antalya, a gorgeous community there in the southern area of Turkey, right along the Mediterranean. Folks out there, they woke up to some snow covering their lemon trees, their orange trees out there in the Mediterranean community. Some of them had never seen a snowfall before. And, again, this storm system responsible for it, in even portions of Western Turkey from Izmir, they got their first snowfall since 1968 for the month of March.
How about the heaviest snowfall in Istanbul in about 10 years?
And, again, this storm system bringing in cold air and also a lot of moisture with it, especially right along the Eastern Mediterranean, where Beirut has wind gusts of almost 100 kilometers per hour. And the snow level down in Beirut about 800 or so meters. So we're talking low elevations, snow showers, very cool temperatures and the continuous rainfall that has been occurring in this region since Tuesday.
Fortunately, this storm going to begin to shift on to the east. But take a look at the photographs coming out of Ankara, where, again, they've had schools closed. Officials in a city just northwest of this region, in Istanbul, a city of 12 million people, officials had sent out some 3,000 folks to try to help clean up the streets. A mess out there associated with the heaviest snow that they've seen in about a decade or so. And, again, that storm is going to begin moving on toward the east.
The center of circulation is still parked in place, but some of the outside waves, some of the energy associated with it, a portion in toward, say Riyadh, into Kuwait, toward Esfahan, Abadan in Iran getting very strong winds and also dusty conditions out there.
And you take a look at this. The orange numbers, those are the wind speeds in the past six hours or so. And work your way a little bit toward -- to the red and that's the green numbers there. That indicates the visibility, up to about 10 or so kilometers, in some areas down to three kilometers coming out of San Mosul (ph) in Iraq, where we have a dust storm being reported as we speak out there. And, again, that's the storm all responsible for the snow showers across parts of Turkey. And that is rainfall associated with it, I think, around Esfahan here, we're going to see some rain showers as the system begins to move on out of the region. And very cold temperatures, also, over the next couple of days for much of the Middle East.
But take a look at this. Speaking of cold temperatures, northeast out there, toward Northern U.K. and also northern portions of Scandinavia, snowstorm, certainly spring just about two weeks or so away. Try telling them that up there across portions of Scandinavia. Snow showers in the forecast, Richard, and cold temperatures, at least the next week or so up there -- Richard.
QUEST: Keep the temperatures nice and toasty.
Pedram at the World Weather Center.
The movie business is one export that's not losing its shine Pinewood Studios near London has thrived on the latest boom. And this week, the company announced its pretax profits were up 31 percent, to $9.3 million.
Pinewood's chief executive told me he's now looking to the future for the next award-winning blockbuster that will drive the U.K. film industry forward.
QUEST (voice-over): The brilliance of Bond.
QUEST: The magic of Fattah (ph).
QUEST: The swashbuckling "Pirates of the Caribbean" -- all jewels in Hollywood's crown and filmed thousands of miles from California, right here, in the United Kingdom.
Pinewood Studios, outside of London, has built up a proud legacy of 75 years making films.
IVAN DUNLEAVY, CEO, PINEWOOD SHEPPERTON: We're attracting a lot of international production to the U.K. They're attracted by the skills, by the craft skills, the technical skills and the creative talent, which we have in abundance.
QUEST: Oscar winning film, "The King's Speech," wasn't made at Pinewood, but it has put British cinema back on the map.
(BEGIN VIDEO CLIP FROM "THE KING'S SPEECH," COURTESY, THE WEINSTEIN COMPANY)
UNIDENTIFIED MALE: Jack and Jill...
UNIDENTIFIED MALE: went up the hill.
UNIDENTIFIED MALE: Went up the hill.
(END VIDEO CLIP)
QUEST: Now, Pinewood's investing even further in the U.K. film industry. Pinewood's picking four small budget productions a year and lending its expertise, facilities and funding in the search for the next Oscar-winning smash.
DUNLEAVY: It's a global market. We're competing with studios around the world. And we're competing on our merits and by offering the infrastructure that we offer at Pinewood, we're combining it with those skills that I talked about in the -- in the technical and the creative areas. And that's a -- that's proving to be a very efficient offer for film customers.
QUEST: Pinewood's spending more than $8 million on a new studio, measuring 30,000 square feet. It's investing in the future to stop its proud past falling to the cutting room floor.
DUNLEAVY: We're very focused over the long-term. And we -- we do see the -- the best potential for Pinewood by keeping itself at the heart of the film industry.
QUEST: With other Pinewood-based productions, like "Captain America," out later this year, this studio is still very much in the spotlight.
(END VIDEO TAPE)
QUEST: And there are more than 1,000 of them worldwide. I'm not one of them. They are the billionaires. And when we come back after this short break, I'll show you where they all are on the "Forbes" data.
QUEST: Carlos Slim has held onto his crown as the top -- excuse me of the "Forbes" list of billionaires. As expected, the mobile phone tycoon beat out Bill Gates -- we told you about that last night -- who landed in second place. But if you look overall, the 2011 list has set new records for the overall number of billionaires and their total net worth.
Join me in the study over here and you will see what I mean.
As we look at the world's billionaires, first of all, we need to define what do we mean by a billionaire?
Well, a one with nine zeros, 1,210 in total -- not only of that, as we look at that 1,210, we can see some particularly impressive things. Forty- seven people dropped off the list. Ten dropped off the earth. And 42 roared back up to top ranking.
But where are these billionaires?
I'll show you.
First of all, in the United States, there's over 400 of them, including the youngest, one of the founders of Facebook, who's just 26 years old -- 26 and a billionaire.
Don't you love him?
Europe has 300, including the oldest on the list, who is from Switzerland, Walter Haefner, who is at -- over 100 years old.
But it's really over in Asia, Asia-Pacific, which has 332 and most important, this is the number, 80 percent growth that is in China. Not surprisingly, the list is particularly impressive as the shift has taken place from the -- from the West across to the East.
So all billionaires are not equal, because it's not just enough to have $1 billion. For example, Carlos Slim, massive at $74 billion. So he is clearly the number one. But relative size, over here, Alfred Mann. Alfred Mann has just $1 billion. When you put that together, you start to see how the billionaires, even within themselves, stack up amongst each other.
Now, that's the way the billionaires look. And, as I say, I am not one of them.
But I spoke to Steve Forbes himself and I asked him what we learn from things like the billionaires list.
STEVE FORBES, PRESIDENT AND CEO, FORBES: Well, what it tells us that part of the global economy is moving ahead, either because of the growth we've seen in China and India in the past and in the present. Also, the commodities boom is reflected in these numbers, as well.
You know, when an economy grows, it just doesn't grow. People have to make it happen. Entrepreneurs have to make it happen. And that's what this list reflects, people who are doers, achievers, making expressions possible. And we see that the momentum is with Asia right now and with commodity countries, while the United States and Western Europe, not so good.
QUEST: And if we look, of course, we see in the top 20 names, with one exception, everybody else saw their wealthy increase.
At a time of austerity, doesn't that merely reinforce the view that the rich always get richer and the rest of us get the short end?
FORBES: No, what it tells you, one, is that the number of successful entrepreneurs is rising up, particularly in Asia. That's why they're moving ahead. It also tells us that the global economy is, in many parts of the world, getting back on its feet. That's good news. And so the rest of us who aren't moving ahead ought to be asking what are the obstacles that are in the way?
I can give you a whole litany here in North America, in the United States, and I'm sure you can in the U.K. and elsewhere.
QUEST: We'll, but we'll get to politics in one second.
The -- the...
QUEST: -- just stick with us -- stick staying with the list.
What -- I do -- whenever I read rich lists, part of me has this almost frustration and -- and anxiety that one wants to be part of that uber rich or to -- to have that sort of wealth. It's an understandable human reaction, perhaps.
FORBES: Well, these are people who have done some extraordinary things.
This fellow Wilson from Canada, whoever thought that starting yoga places would stretch to making him a billionaire?
He took something that's very common, yoga, and made it a successful business, just as Schultz did years ago with Starbucks.
So it's that ability to innovate, to see a need, whether it's in things like commodities, oil and gas and the like, retailing, high technology, pharmaceuticals. A new rich man in China, Lee-Lee (ph) did it in pharmaceuticals now. It wasn't even near the list a year ago, now worth $5.7 billion.
These are people who are making things happen and that's what this list points out, sections of the world that are doing well, areas that are doing well and areas that aren't doing as well.
QUEST: Right. And -- and if we look, for example, at the top two -- and nothing's changed there. Carlos Slim is still number one, Bill Gates number two. But the phenomenal, ferocious resources that those men have at their disposal, it's quite extraordinary.
FORBES: It is until you realize that governments make them look like pygmies. You know, the U.S., a $15 trillion economy; $58 billion barely gets you a cup of coffee, in that respect.
So what is remarkable about these people is that they are able to achieve great things. And their success means our success.
Warren Buffet has saved a lot of companies, put them back on the right track again, got them to expand.
Larry Ellison, the same thing in software and elsewhere.
So these are people who enable us to enjoy a better life. They're not just sitting home eating bonbons and counting their gold bars.
(END VIDEO TAPE)
QUEST: That's -- that conjures up a thought for all of us -- sitting at home, counting the bonbons or eating the bonbons and counting the gold bars. Knowing some of my luck, I'll be eating the gold bars and counting the bonbons.
The Tweets from the Top.
And we have to start off with a selection. And we start, of course, with the man you've just been hearing from, pre -- Steve Forbes, who Tweeted this about his famous list: "An interesting billionaires' list, note, Albert Gubay dropped off the list because he donated one of his -- most of his $1.1 billion fortune."
He's referring to the British retailer who made a pact with God to give the money away.
And the world leader who's keeping everyone up to date on discussions in Brussels on the Libyan opposition, the Swedish foreign minister, Carl Bildt, who seems to spend all his time Tweeting.
He sent the following: "Sweden recognizes states, not regimes. And most of the E.U. countries are the same. Unclear what France -- what France does."
And this is a reference -- because I've had some -- a few people who have been at the meeting have -- have been talking about France recognizing the rebel regime.
A Profitable Moment on oil next.
QUEST: Tonight's Profitable Moment.
We have talked a great deal about oil on this program tonight, from the Libya, with ENI, through to our Q&A, Bob Parker. And for one reason -- oil is one of the most important raw materials we have.
Try and get around in your car or on your bus, on your plane, try to heat your homes without oil or gas.
The thirst for oil is simple -- it's all about economic growth. Businesses need it to run their business, from manufacturing of goods to delivering them. And we, of course, need them to use them, to heat them, to light our homes.
The dependency makes it more volatile. It's known as the resource curse. In other words, the paradox of the plenty.
And that's QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I hope it's profitable.
"PIERS MORGAN" is next.