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QUEST MEANS BUSINESS

Portugal Flirting With Disaster As Bond Pay An Unsustainable 5 Percent; U.S. Government on the Verge of a Shutdown; The Price of Cocoa; Economics for Life; Barack Obama Speaks on Budget; Royal Wedding: Memorabilia Madness

Aired April 6, 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: Cornered, cowed, but not bailed out yet. Portugal pays the price for going it alone.

Still no deal, the U.S. faces its first government shutdown in 15 years.

And slaves to chocolate, we explore the darkest secrets of the cocoa industry in our "Freedom Project".

I'm Richard Quest. I mean business.

Good evening.

Portugal is on borrowed time. Today the country paid a hefty price to raise $1.4 billion in short-term debt. And soon it may be struggling to find buyers at all. Major Portuguese banks are now saying they don't want to invest in the government bond. Don't come running to us.

Yields on the auction of six-month bonds came in at more than 5 percent. Just weeks ago yields on the same bonds were less than 3 percent. And Portuguese banks are becoming increasingly reluctant to expose themselves to government debt. They'd like to see funding coming from bailout instead. And if you take those numbers, that April 6, 5.1 percent, and you compare it to what German government bundes are, they are less than 1 percent. You can see that a mere 4 percent differential is having a devastating effect. And yet even so, Portugal's finance ministry insists it can meet its debt obligations.

Valentijn Van Nieuwenhuijzen is the chief economist at ING Investment Management Company. And I asked him, frankly, is Portugal just day dreaming?

(BEGIN VIDEOTAPE)

VALENTIJN VAN NIEUWENHUIJZEN, CHIEF ECONOMIST, ING INVESTMENT MGMT.: Well, it is obviously kind of a strange story. Especially since the rest of Europe doesn't have a clear counter party in negotiating additional loans to this country. And of course, the banks within Portugal are now problematically obsessed with this. But in the end, it seems still very likely that everybody in Europe is sort of aligned in solving this problem without a disruptive, haircut, or restructuring in the short term. And that continues to be our view on it.

QUEST: They may wish-they may fool themselves to believe they can do this. But you have ministers saying that there will be no haircut, no orderly reorganization of debt. But you have private economists saying-"The Economists" magazine itself said, these countries are broke.

VAN NIEUWENHUIJZEN: Well, obviously, now it is pretty easy to pick the very dark scenario, but you have to realize that if you were getting to scenario where you are having these haircuts. That it is not a zero-sum game. Probably it is a negative-sum game. And it will be a negative impact for these economy involved, but also for the rest of Europe. There will be very negative feedback mechanisms into the broad European economy and that is why there is a strong incentive not to go that route.

QUEST: So, the sooner Portugal puts its house in order and applies for funds to prevent a worse calamity the better.

VAN NIEUWENHUIJZEN: Well, absolutely. And in that sense, you know, it has been postponed already too long. And in that sense, you know, all these kinds of liquidity facilities and action in the tertiary (ph) markets of Portugal might have postponed today, where they actually applied to these loans, because they need to do that. There needs to be very strong structural reform which then, creates a way out of a stronger growth future for the Portuguese economy.

QUEST: If the ECB does not raise rates tomorrow, they will have failed in their telegraphing to the market, won't they?

VAN NIEUWENHUIJZEN: Absolutely. I mean, that is amazingly unlikely, unless we see a very dramatic event overnight, we are strongly convinced that they will hike rates and they will suffer enormously over credibility and signal inside (ph), if they will not hike without any massive news event overnight.

QUEST: So, let's just recap. ECB raises rates tomorrow. The Bank of England, when does that raise rates?

VAN NIEUWENHUIJZEN: The Bank of England, probably, it seems be on track of raising rates in May, at June, at the latest. It is not necessarily the right step to take, but it is probably by far the most likely at this point in time.

(END VIDEOTAPE)

QUEST: The scenario on interest rates at the moment. In Ireland, excuse me, banking deposits are rebounding after last week's stress tests. If you come to the library, I'll show you what I mean. The Irish banks, you'll remember, the stress tests were ordered to put in $34 billion into the banks on Thursday. Now, the stress tests made the Irish debt situation more transparent. The Central Bank of Ireland, in deciding how much and how the recapitalization should proceed, said it is all about confidence.

(BEGIN VIDEOTAPE)

MATTHEW ELDERFIELD, CENTRAL BANK OF IRELAND: The goal of this transparency is straightforward: To address market skepticism of the bank's financial position by being completely open about the results of this process. So that market participants can make an independent judgment about the conclusions of our exercise.

(END VIDEO CLIP)

QUEST: Showing the overall view in Europe, Q4 Euro Zone GDP, gross domestic product, gained 0.3 of a percent in Q3. Now, that is the Euro Zone. If you look at the E27, it was just-it was marginally lower than that. The core point, of course, is that the ECB, tomorrow, will be deciding on Euro Zone interest rates. And as you just heard, from Valentijn, that it is more than likely-well, it is a racing certainty. I'll eat me hat if they don't actually raise interest rates.

The markets are all pretty much encouraged by what they've seen. All the financials were higher. Lloyd's was up nearly 4 percent, (UNINTELLIGIBLE) up 4.8. Even in Portugal, despite the fact that the country is in somewhat of a financial turmoil, the banks gained also quite strongly.

Now, while European governments are facing their debt crisis, in the United States the government looks more and more likely to shut down by Friday. You are looking now at live pictures. This is the U.S. Senate, it is in Washington. Expected talks between rival parties on next year's spending cuts, did not materialize today. Republicans and Democrats are at a stalemate over the extent of the spending cuts needed to rein in the deficit. If no deal is struck by midnight on Friday, then parts of the government will begin closing down. Federal agencies have already been ordered to prepare for the shutdown. And some health care services could be affected and hundreds of thousands of passports and visa applications could go unprocessed.

You are listening, or you are just watching the U.S. Senate, been debating at the moment. Well, one of the biggest and most talked about topics on social media is the effect of that shut-shut-that shutdown.

I do beg your pardon.

Today's "Tweets from the Top" come directly from U.S. senators on Twitter. The Republican Senator Chuck Grassley of Iowa: "Democrats controlled all the branches last year, so should have had all the proposals signed by October 1.

(DESK BELL CHIMES)

Democratic Senator Mark Udall of Colorado: "We need a budget plan that makes smart and responsible cuts while attracting support from both sides of the aisle."

You can always rely on Chuck Schumer, of New York, to come out with a strong, robust statement: "Late night talks on budget night provide glimmer of hope to avoid shutdown."

We are going to talk later in the program with Professor Rogoff, of Harvard, who will make some common sense and put into perspective the likelihood of a shutdown on Friday.

How does the market take what is happening in the U.S.?

(DESK BELL CHIMES)

Are they taking it in their stride? More than in their stride. Small gains with the market up 26 points, that is a fifth of a percent. The Nasdaq and the S&P is flat. The markets looking for direction. Remember the Fed minutes that you and I heard about yesterday, they showed a split on interest rates. Tech stocks doing well after Oppenheimer graded the- some of them quite a bit higher.

Markets are keeping a close eye on the Japan crisis, as supply chains around the world continue to be disrupted. One of the companies hit is the world's largest carmaker, Toyota. And today, the ratings agency Moody's put Toyota on a downgrade watch because of the impact of the quake. Tomorrow, that is Thursday night, we will be airing the first part of an exclusive interview with Toyota's chief exec, Akio Toyoda. It is the first time he has spoken to the media since the spate of recalls that rocked the company over the last two years. The CEO of Toyota, only on CNN.

(COMMERCIAL BREAK)

QUEST: Millions of the U.S., they will have been receiving the warning for days; a massive data breach at one of the biggest e-mail marketing firms, Epsilon. It has put the security of online shoppers across the world, at risk. We'll talk more about that a little bit later in the program.

First, though, we'll talk about the man who has got new territory much on his mind. He's already got a handle on space toys. Now, Richard Branson wants to take you to parts of the world that you have not been to before. Virgin Oceanic will boldly go where no man has gone before; to the deepest depths of the ocean. Sir Richard Branson spoke to our own Poppy Harlow.

(BEGIN VIDEOTAPE)

POPPY HARLOW, CNN FINANCIAL CORRESPONDENT (On camera): So, Richard, you have sort of conquered the air, you have conquered so many things. And now you are working to conquer some of the deepest depths of the ocean in, honestly, what looks like a plane to me, behind us. But this is a deep, deep water submarine? What is this all about?

SIR RICHARD BRANSON, CHAIRMAN, VIRGIN GROUP: Well, it is all about is that our oceans haven't been explored. You know the furthest American submarines, or British submarines, or French submarines, have been under the sea, is about 18,000 feet. And because the pressure is so enormous below that, they have never built a submarine to go deeper. We built this submarine with the aim of going 36,000 foot under the water and to explore mountains and valleys, and trenches that mankind has never visited and never seen before.

HARLOW: That is the goal of this? I mean, is this going to turn into a commercial endeavor, sort of like, uh, Galactic, like your airline? Will people-will you be touring people in depth, below the surface of the ocean? Or is this purely scientific, purely sort of explorational (sic)?

BRANSON: Well, you know, our dream is that if this is successful, if we can withstand 15,000 times the pressure that an airplane has to withstand, at 36,000 feet, then we one day will build a bigger craft, and we'll have astronauts-not astronauts, we'll have aquanauts.

(LAUGHTER)

BRANSON: You know, traveling with us to the bottom of the ocean, to help, you know to help map out the oceans. Uh, there is something like 90 percent of the species in the world have not been discovered. And because they have never had a craft that could go below 18,000 feet. So, you know, we hope to be able to discover, literally, numerous species down there. We'll find numerous wrecks.

HARLOW: Sure.

BRANSON: I mean, you know, there are literally thousands of wrecks down there that nobody has ever seen. Lots of Spanish galleons, with lots of gold.

(LAUGHTER)

But the scientists are frothing at the mouth with excitement, with the idea that we might overcome the technological problem of getting a submarine down there.

HARLOW: You are taking this sub to the five deepest points in the ocean over the next two years, all around the world. Where did this idea come from?

BRANSON: Well, the original idea interestingly came from Steve Fossett, before he died. You know, he just wanted to break the record for being the first person to get, you know, a solo dive to the deepest part of the ocean. You know, we have taken his idea, you know, developed a submarine, hopefully overcome all the technical problems that we needed to, and expanded the idea.

And working with scientists we literally want to, you know, explore the Puerto Rican Trench, which is the deepest place in the Atlantic, the Marianna Trench, the deepest place in the Pacific, and the deepest in Arctic, the Antarctic and the Indian Ocean.

You know, some of the life forms that we are going to find down there are going to be breathtaking and we just have to hope that no giant squid fancies the us for dinner.

(END VIDEOTAPE)

QUEST: So they can get to the bottom of the ocean, and they can explore what is happening there. They can get into space, and space tourism is in the future. And yet, political parties of both persuasions can't manage to come to an agreement that would prevent the shutdown of the U.S. government. Ken Rogoff is with me at the moment, from Harvard.

Ken, how likely do you think it is that a shutdown will now take place?

KEN ROGOFF, ECONOMICS PROFESSOR, HARVARD UNIVERSITY: It is hard to say, but it does seem very, very likely that a shutdown will take place for a while. Mind you this is something of a farce, because the government has cash in the bank so to speak, where it can run for a while. But this is no way to do business, especially when you are the world's biggest debtor.

QUEST: Every time I read either side-and you and I are not now going to get in the minutia of the two sides-because everybody says the same thing, don't they? Each side says they were the ones for responsible debt reduction. They are the ones for responsible revenue raising, and still, we are no closer to an agreement.

ROGOFF: There is a lot of brinkmanship here. I mean, there is a little bit of good coming out of this, and that the fact is that the United States is on an unsustainable path, it needs a comprehensive plan, not just a budget resolution. This is a skirmish in a much larger battle. But on the other hand, you know I wish they would do it like adults.

QUEST: The debt ceiling, I was looking at the trillions of dollars that the debt ceiling is at, yes, the U.S. economy is a vast economy. More than $10, $11, $12 trillion big, but you can't keep raising the debt ceiling forever.

ROGOFF: U.S. debt, government debt, relative to income, when you count everything state and locals, government enterprises, is the highest it has ever been. And no, you can't keep going at this pace. Especially, because private debt is also by far at the highest level it has ever been. You have to do something to get us on a different track.

QUEST: OK, but is there ever a danger that the markets will decide not to buy U.S. Treasuries? And I am not talking about, you know, push the yields up, you know, 10 basis points. I am talking about push the yield Portugal style. It is a risk. I mean, I don't think it is going to happen tomorrow. I don't think it is an urgent risk. But if the U.S. keeps doing business like this it certainly could happen. I think it is more likely, Richard, that the yields will start climbing very rapidly, put pressure on the system to really do something. And maybe we will. But, boy, this is just no way to run a business.

I can't tell you when the debt crisis will happen in the United States, but it not more than 15 years away. But that doesn't mean you have 15 years. It is like saying your kid is going to college in 15 years, you start saving at the last minute.

(LAUGHTER)

QUEST: Finally, I just very quickly need to ask you, Portugal-I mean, we heard earlier, on our program, before you joined us, that they don't need to restructure debt. Greece doesn't need to restructure debt. Ireland doesn't need to restructure. Ken, talk some common sense. Does a restructuring need to take place?

ROGOFF: Yes, restructuring need to take place in all of these countries. I think it is a fantasy to think they are going to make it through without something. Maybe they can dress it up, ram it down the throats of local creditors, but it under the rug and claim that it is not a restructuring. But of course, they do need it. Their debt levels are just way, way out of kilter with anything that is politically sustainable. And I don't see the Germans wanting to walk in and pay for everything, especially when later, down the road they would still need to worry about Spain, Italy, and the larger countries.

QUEST: Ken, lovely to see you. Thank you for joining us. Taking time tonight, Ken Rogoff, joining us from Harvard.

QUEST: They are calling it the hack of the century. Well, the century is only 11 years old, so perhaps that is not too much of an achievement. Anyway it is a massive marketing data breach. It put e-mail addresses out in the open and I'll explain why you should be concerned, after the break.

(COMMERCIAL BREAK)

QUEST: Now were you like me this week and got an e-mail that said that there had been a massive data breach at one of the world's biggest e-mail marketing firms. And it has put the security of our account, perhaps, a little bit at risk. I got the e-mail, you may have got the e-mail. In fact, the truth is that thousands, hundreds of thousands of people got the e-mail. Some of the most well-known companies, like American Express, JP Morgan Chase, even the hotel company, Ritz-Carlton, the consumers and customers of these companies, suddenly found they had gotten e-mails.

And it was all because this company was broken into, electronically. Epsilon is the company that hosts the mass marketing, the newsletters, the e-mail lists for those other organizations. It is part of outsourcing that perhaps you and I weren't that familiar with. And what happened at Epsilon and their data banks, was that hackers got in.

Now, what didn't they get? The hackers didn't get our passwords, or our account details. They didn't get any financial data. But what they did get was just perhaps as valuable. The hackers got our e-mail addresses. Once you have that, you have the key to getting in touch with me. Quest @ CNN.com, by the way, if you want to send us an e-mail on this subject.

With that detail, and with those details they can create fake e-mails. They can create fake Web sites. They can go phishing, round and about, so that eventually the scam does take place. When the scam takes place the money gets lost. It is not a problem that is just limited to the U.K. Marks & Spence is in Britain. Sorry, in the U.S., Marks & Spence is in Britain, confirmed its customers had been compromised, too.

So let's talk more about this. Joining me now is Jeff (sic) Kouns, who is the founder and CEO of Open Security Foundation, he is joining me via Skype, from Richmond, Virginia.

Jeff (sic), how serious was this?

JAKE KOUNS, FOUNDER, CEO, OPEN SECURITY FOUNDATION: I mean, it really-it depends who you ask. But it is certainly a concern that the phishing as you referred to, that targeted scams, if you will, people now have names as well as e-mail addresses. So instead of perhaps getting that random e-mail from a doctor in Nigeria that wants to give you $30 million, you know, that kind of scam, this would be one now that is very targeted to where you shop and where you bank. And it may put users more at risk.

QUEST: Sorry, it is Jake, forgive me.

(LAUGHTER)

Jake, when the-well I am so overcome at the thought of all this phishing and scamming, it quite sets you aside.

(LAUGHTER)

But listen, surely, I mean, I have had my bank account attacked, I've had my credit cards attacked in the past, and it is usually been because I have been a little bit negligent. I have got an e-mail and I've clicked through.

KOUNS: Yes. Yes, in this case customers had, you know, no knowledge. Most have never heard of this company called Epsilon until they were getting these e-mails. So it was nothing that they had done at all. It was really organizations that you do business with, outsourcing to this company.

QUEST: Let's just develop that thought. Because when I heard about Epsilon, and I heard that, you know, so many companies, well-known, big name companies are using this company as I have never heard of, really. And I certainly didn't know what they did. How widespread is it? I know people outsource their call centers, and their contract cleaning. But their e-mail lists?

KOUNS: Yes, you know, it is a lot more widespread than I think people know and in many cases for good reasons. A lot of people ask, you know, do you sacrifice security when you are outsourcing to companies. And really the answer is it depends on the organization. For some small companies they may not have the resources or security to do it properly or protect you, so you'll see a sizable increase in security. But you have to be careful. There is this concept of systemic risk that you might be caught up in a breach. For example, Epsilon, we're coming up on what, 60 organizations that are possibly impacted by this single breach.

QUEST: Right. My final question then: Is this an inevitability, that we just have to accept like pickpockets, bank theft, and the normal sort of criminality. It is part of life in the 21st century?

KOUNS: Uh, that is a great question. I think it is part of the way things are heading, but the key point is that security risks remain, regardless of company outsource or they do it in-house. And so, organizations are-they have to know this. They have to manage it appropriately and they have the duty to protect customers' information. So whether they do it internally, or they do it externally, they need to protect our information.

QUEST: Jake, we really appreciate you joining us, putting this into perspective. Many thanks indeed. We'll have you back again on QUEST MEANS BUSINESS.

Now, when I come back in just a moment, it is delicious. In actual fact, it is divine. The dark secret behind cocoa production and why eating some chocolate is actually good for you.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS, this is CNN, and here on this network, the news always comes first.

(NEWSBREAK)

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN. And here, on this network, the news always comes first.

And there's growing suspense over whether the self-declared Ivorian leader will surrender. Forces loyal to the country's internationally recognized president have stormed Laurent Gbagbo's palace and have not yet found him. A Gbagbo spokesman said he would not say whether he's there, only that he is still in Abidjan. The U.N. says attack helicopters could resume operations today.

Libyan rebels have begun their first known export of oil. A tanker filled with crude left Libya for Qatar, where the oil will be refined. It comes as the U.S. responds to a letter believed to be sent by Moammar Gadhafi, reportedly urging the U.S. president to stop the NATO bombings, a request the U.S. administration says it isn't taking seriously.

A former U.S. lawmaker is trying to bring peace to Libya. Curt Weldon is meeting with Gadhafi today in Tripoli. In an interview with CNN's affiliate, WPIX, Weldon said he hopes to persuade Gadhafi to step aside. His proposal includes a cease-fire and an honorary title for Gadhafi as chairman of the African Union.

Tokyo Electric officials say radiation levels are dropping off the seawater in and around the Fukushima Daiichi nuclear plant. And it happened even before workers plugged the radioactive water leak as one of the reactors. Officials warn the crisis at the plant is still far from over.

This stuff should be absolutely delicious. When you bite into it, well, it should be a moment of joy and delight. It is, of course, chocolate. And chocoholics of the world unite. I'm one.

But before you bite into this chocolate or take a sip of hot cocoa, consider, where did it come from?

And I don't mean the local shop.

It may be that this treat is the product of someone else's hard labor. In the case of the chocolate I'm holding, that is most certainly not the case. But the person who may have sold it, who may have made it, may not even be an adult.

The ILO, the International Labour Organization, estimates between 56 and 72 million African children work in agriculture, many in their own family farms.

Take a look at the seven largest cocoa producing countries. You have the Ivory Coast. You also have Ghana. You have Indonesia, Nigeria, Cameron, Brazil and Ecuador. Now, the Ivory Coast and Ghana, these two here, they are the powerhouse producers. Together, they account for nearly 60 percent of global production. Sixty percent is a phenomenal amount.

And right now, you can still find children working in the cocoa fields, as one film crew did. In 2009, they went to West Africa to make a documentary called "The Dark Side of Chocolate." And what they found, well, they found this girl on a bus a long way from home.

(BEGIN VIDEO CLIP FROM "THE DARK SIDE OF CHOCOLATE," COURTESY BASTARD FILMS)

UNIDENTIFIED MALE: The girl says she's 12, but Yushau (ph) thinks she's younger. She was promised work in Borcai (ph), an area with many cocoa plantations.

UNIDENTIFIED MALE (through translator): What do your parents say if you come home without money?

UNIDENTIFIED CHILD (through translator): They will be angry with me.

(END VIDEO CLIP)

QUEST: I spoke to U. Roberto Romano, one of the men behind the film.

And I asked him how widespread is the use of children on cocoa plantations.

(BEGIN VIDEOTAPE)

U. ROBERTO ROMANO, FILMMAKER: Even the Department of Labor has estimated that there are over 100,000 children involved in the worst forms of child labor on the Ivory Coast. And every single time I've gone to a farm there, I've seen children. Now, some of them may be local children. Some of them may be the children of the farmer. But many times, they are not. And it's very hard to figure out where they come from. And one of the clues you have is that they don't necessarily speak French or the local language.

(BEGIN VIDEO CLIP FROM "THE DARK SIDE OF CHOCOLATE," COURTESY BASTARD FILMS)

UNIDENTIFIED MALE (through translator): How much does it cost to bring children in?

(END VIDEO CLIP)

QUEST: In your documentary, you talk about the price of a child, don't you?

ROMANO: They offered Miki a -- a child. And, actually, given the market conditions in the Ivory Coast and that Miki was, as they say in Tabubu (ph), a white person, the price was very, very high. But in my experience, you know, I've seen children sold or heard of children sold for $100, $125, $200. It's shocking, Richard.

QUEST: The thing that shocked me when I watched your documentary was the - - the blatant way in which people who should know better -- chief executives, ministers and the like -- looked your reporter straight in the eye and said there is no trafficking taking place.

(BEGIN VIDEO CLIP FROM "THE DARK SIDE OF CHOCOLATE," COURTESY BASTARD FILMS)

UNIDENTIFIED MALE: They're coming for vacation. I've seen a truck -- I'm sorry -- a bus with 20 kids. Oh, they're going to work in a farm. But in September, in July, August, September, what are they going to do?

There's nothing to do.

UNIDENTIFIED MALE: What about in April?

UNIDENTIFIED MALE: In April, that's different.

UNIDENTIFIED MALE: Yes, but I -- I saw it in April, actually.

UNIDENTIFIED MALE: In April, that -- that's the only thing. I mean that's the one thing we -- we stop in April. People may -- I mean they will try to do it. But what you have to understand is that even if people try to do it, there is the law against it. We've got the law. Trafficking, child labor, everything, is against Ivory Coast's law. It's against.

(END VIDEO CLIP)

ROMANO: When you see that interview with Adam Malik Touey (ph), the minster there, and he says those children are coming on vacation, it's a stunning revelation to the disconnect that these people have to the lives, that they're literally responsible for and in charge of.

QUEST: If you assume that chief executives and members of the board of directors of major chocolate companies are not immoral, amoral or -- or evil, why do you think they are not putting more pressure to stop this trafficking?

ROMANO: Well, you know, I -- I think we need to look at market economies. And I think they have their eyes clearly set on their stockholders and their profits and not on these children. And that was one of the reasons why we brought this huge screen, you know, to the headquarters to -- you know, to show them exactly what was going on.

I feel that that's my job -- and I certainly know that Miki feels that our job is to -- to -- to shine a light on -- on these issues around the world.

QUEST: Tonight, when I leave the studio and I finish the program and I head for home and I go and buy myself a bar of chocolate, what do you want me to do, not buy it?

ROMANO: Well, you know, Richard, no. I want you to buy chocolate. But right now, I'd like you to buy either a fair trade chocolate or a direct trade chocolate. I'd like you to buy something where you, as a consumer, can vote responsibly, you know, for better treatment of these farmers. And also with fair trade, you know that they're going to be -- or at least they're on the road to being paid a decent wage. And with the inspections that go on, you know that their children aren't working and are getting an education.

(END VIDEO TAPE)

QUEST: Nestle, whose name you might have seen in that film, referred us to a statement from the Global Cocoa Industry, which I need to read to you now.

It says: "No child should ever be harmed in the growing or harvesting of cocoa. Unacceptable labor practices on cocoa farms are a recognized issue. Independent third party organizations have concluded that the incidence of forced labor is extremely small. Regarding child trafficking, the International Cocoa Initiative, funded by the chocolate industry, says, quote: "Our experience shows that most of the children who work on cocoa farms do so within their family structure and may be exposed to hazards. However, illegal exploitative practices exist. Within ICI's activities, trafficked children in cocoa have been identified and rescued, both in Ivory Coast and in Ghana."

We've printed both statements in full on our Web site. It is at CNN.com/freedom.

When I started talking to you about the business of cocoa, I showed you these bars of chocolate and was pleased to actually do so. This is Divine Chocolate. Now, some chocolate companies like Divine are making every effort to use cocoa which is ethically produced. You can see at the top there, it's got the Fair Trade logo.

Divine is one such company that's owned by cocoa farmers.

Sophi Tranchell, the managing director of Divine, joined me.

And I asked her to explain how does fair trade work in practice?

(BEGIN VIDEOTAPE)

SOPHI TRANCHELL, MANAGING DIRECTOR, DIVINE CHOCOLATE: The way that fair trade works is that there's a guaranteed minimum price. So if the price gets below a certain level, then the fair trade price sets in. And there's also a -- a fair trade social premium. And so that's the $200 a ton social premium. For every ton that we bought, we've paid an extra $200, which the farmers get to decide collectively and democratically how they spend that money.

And that's so there's a very distinct extra piece of money that they've got that they wouldn't have got from selling their market -- their cocoa on the open market.

QUEST: And how does -- and -- and the -- the price that you pay, the core price?

TRANCHELL: It -- it is the world market negotiated price at the time, because cocoa is a traded commodity...

QUEST: Right.

TRANCHELL: -- that changes all the time.

QUEST: So -- so to clarify, so the actual, if you like, fair trade element of this is the $200?

TRANCHELL: At the moment it is. But I've been working for Divine for 12 years and 12 years ago, the world market price was about $800 and the fair trade price was $1,600. So we were paying a lot above the world market price. That's what -- so that the fair trade mechanism is a guaranteed minimum price to protect farmers from the -- the real fall in the price of the market.

QUEST: But you'd agree it is a sort of -- and -- and it is a gerrymandering of the market in one respect, isn't it?

TRANCHELL: No, I don't think it is at all, actually, because it's actually, what we've done is built a consumer market for these products. So what we've done is -- and which people thought was unlikely that we would manage to do -- is get consumers to buy these products and to go out of their way to buy it and to pay a bit extra for it because they knew the farmers would benefit. But what we've done is create the market...

QUEST: And is that working?

TRANCHELL: -- haven't we?

QUEST: Sorry?

TRANCHELL: But that's creating a market.

QUEST: Right.

But is there evidence that people say -- I mean your chocolate looks, frankly, delicious and I'm looking forward to sampling the proceeds before we are finished.

But is there evidence that people say this is fair trade chocolate and I'm not a tofu eating, sandal wearing, tree hugging lover, I just like good chocolate?

TRANCHELL: Obviously, there's loads of people who love Divine because it's fantastic chocolate and who'd go and buy it again because it's fantastic chocolate. But what we certainly saw when we started and we were a little tiny company starting in a very competitive market with lots of people who spend millions of pounds advertising, we had a core group of people who were prepared to go into shops and actually ask for products that weren't there.

QUEST: How much do you involve yourself in the conditions under which the beans and the pods are actually grown, so that you know what's happening down in country?

TRANCHELL: So I think the thing that's important about Divine is that Kuapa Kokoo, the cooperative farmers in Ghana, actually own 45 percent of the company.

QUEST: Yes.

TRANCHELL: And we buy all of our cocoa from those farmers. So those farmers are organized in a cooperative, which has a set of principles. And those principles are about empowering people and about improving people's livelihoods.

QUEST: But do you think there is still some skepticism about fair trade?

TRANCHELL: There's clearly. Yes, there's always going to be skeptics, aren't there?

So, yes, there are people who are skeptical. But what I can say is that it -- from -- from a Divine perspective, Divine uses cocoa from Kuapa Kokoo. I know what Kuapa Kokoo do. I've been there and seen it. The "Fair Trade" mark means that consumers can be assured of that proposition because it's been checked by independent people who've gone and checked that the money has got to the farmers and that the farmers are making a decision that their organization enables them make in a democratic way...

QUEST: All right.

TRANCHELL: -- which means the money is spent fairly and well.

QUEST: Pick a bar, any bar.

TRANCHELL: I'll have this one.

QUEST: Thank you very much.

Thank you very much for joining us.

TRANCHELL: Thank you.

QUEST: So have some chocolate.

TRANCHELL: That's a very good one. I -- I'd -- I'd recommend some of that.

Is it all right?

QUEST: This is more fun than humans should be allowed.

Thank you very much.

TRANCHELL: Thank you.

QUEST: Um, this is delicious.

TRANCHELL: Good.

(END VIDEO TAPE)

QUEST: The one thing you can say when you've got chocolate in this place is that's about all I get left with.

Tomorrow, we'll talk to another firm with an ethical business model. It's The Body Shop.

If you want to know how to help, go to our Freedom Project blogs at CNN.com.

After the break, we have an eye on India. We're in Bangalore for an economy of scale in action that saves lives.

(COMMERCIAL BREAK)

QUEST: One doctor in India is applying economics to medical science. In doing so, it saves people's lives.

This week, we have our eye on India. And in a country of more than a billion people, there's plenty of scope for economies of scale -- one that made all the difference to one special little heart patient Mallika Kapur has discovered in Bangalore.

(BEGIN VIDEOTAPE)

MALLIKA KAPUR, CNN CORRESPONDENT (voice-over): Two-year-old Shila (ph) is recovering from open heart surgery. "Our baby is now well. We are so thankful," says her father. A poor farmer, he traveled 500 kilometers in a bus to bring his daughter to this hospital in Bangalore, run by Dr. Devi Shetty, the physician who, for years, treated Mother Teresa.

Shila was treated for free.

DR. DEVI SHETTY, HEART SURGEON: A hundred years after the first heart surgery, less than 8 percent of the world's population can afford a heart operation. This is ridiculous.

Your reports are looking good.

KAPUR: Shetty is doing something about it. Forty percent of his patients pay premium prices for open heart surgery. This, he says, helps to subsidize the same operation for those who have no health care insurance and can't afford it.

SHETTY: Now pull it (INAUDIBLE).

KAPUR: "I earn $40 a month," says Shila's father. "There's no way I could have paid for this myself."

The average price of heart surgery at this hospital works out to $2,000, a fraction of what it costs in other parts of the world. In the United States, a difficult case could cost as much as $100,000.

(on camera): How do you manage to keep costs so low? SHETTY: We say economy of scale. Traditionally, all hospitals all over the world do two or three heart surgeries in a day. If you do 35 heart surgeries in a day, as you keep doing more operations, your results get better.

KAPUR (voice-over): By driving up volume at his 1,000 bed hospital, he's been able to lower costs -- a simple model that's beginning to transform health care in India, where around two million people who need heart surgery simply can't afford it. Shetty says his goal is to lower the cost of heart surgery to $800 a patient.

SHETTY: It will happen. It will happen in a very short duration of time.

KAPUR: The key, he says, is to increase the number of people who qualify for medical treatment.

SHETTY: Today, Americans buy a mobile phone without paying for it.

How it happen?

Because 750 million Indians bought a T-Mobile phone and use it. Every Indian and every Asian, every African should become a customer for the health care. Then when American pharmaceutical company comes up a magic pill to extend the life 200 years, there are enough buyers.

KAPUR: According to Shetty, a bigger market will drive prices down, not just in developed countries, but around the world. So millions like baby Shila will be able to afford a second life.

At the Multibates Temple (ph) inside the hospital's grounds, there are prayers every day, of hopes and of thanks for the surgeon many say is their savior.

Mallika Kapur, CNN, Bangalore.

(END VIDEO TAPE)

QUEST: Eye On India continues all this week right here, as we give you the in-depth look at out of the world's fastest growing economies. It's Eye On India.

And now I've had me eye on the weather.

Guillermo is at the World Weather Center.

Now, come on, favorite person today, the weather is...

GUILLERMO ARDUINO, CNN METEOROLOGIST: Of course.

QUEST: -- hey, so how long does it last?

ARDUINO: A week.

QUEST: The glorious -- whoa.

ARDUINO: And I thought about you.

QUEST: Now you're talking.

ARDUINO: That's -- that's the only thing I -- I could think about when I saw the maps, Richard, Richard. I said, I need to go on that show. Of course, I have to make it. I mean it's going to be wonderful for -- for the rest of the week, glorious, gorgeous. While many others to the north are seeing awful conditions, in Scandinavia and Northern Germany, in the Baltics here, the Baltic Sea, rain, rain, rain. Elsewhere, fine. England, great -- France, Spain, warmer. And then windy here in the south. You have heard about the problems with a -- with a ship that capsized in the Mediterranean Sea because of the intense winds. The winds are going to get better.

Now, this high pressure is defining and extending the nice weather for England, for Britain, because it pushes the jet stream northward. And that's what happens in the summers. The jet stays in the north, the storms are in the -- in the extreme north and we see OK warm and nice conditions.

For the time being, these countries here -- Northern Ukraine and also Finland, parts of Russia, will have to wait for a little bit more. And Belarus, of course.

So when you look at the satellite picture, France, England and Northern Spain get the best of it. The Balearics, you know, Palma and Majorca, this is the time of the year to be -- this is the week to be there.

Let me emphasize it once more. We have nice -- nasty weather on the weekend in England. Look now -- nothing. In Scotland is where we have storms. Elsewhere, it's clear, in the Low Countries, too.

What about airports?

Fine. We see some foggy conditions in Dublin, maybe, in Copenhagen; some windy conditions in Vienna. But elsewhere, perfect, you know, nice conditions.

And, finally, I'm going to leave with these temps. It's 18 degrees now, Richard, in London. It's 7:50 p.m..

Isn't that wonderful?

QUEST: It is, indeed.

Many thanks, Guillermo.

ARDUINO: Thank you.

QUEST: I'll pay you later.

Now, we were telling you earlier about the stalemate in the U.S. Congress over budget cuts. Barack Obama has been speaking during a visit to a factory in Pennsylvania, where he restated his support of a carefully considered program of cuts.

Have a listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It makes it tough to win the future when you haven't passed the budget from last year. So I asked Congress to send me a budget that makes some serious spending cuts but still invests in things like clean energy, still invests in research, still invests in infrastructure, still invests in education. Investments that are -- are critical for us to be able to compete with any country in the world.

(END VIDEO CLIP)

QUEST: When we come back in a moment, ridiculous, sublime -- no question about it, tacky.

So, the fascination with royal wedding memorabilia, after the break.

(COMMERCIAL BREAK)

QUEST: You can't be too careful when you're washing up your royal memorabilia souvenirs. This one is from the coronation and then the jubilee, Queen Elizabeth. It comes with a very nice fetching saucer.

Then, of course, you've got this, from 1986, Andy and Fergie. Well, the marriage didn't last as long as the tea cup.

Now, of course, to commemorate the wedding of Prince William to Kate Middleton, a loving cup -- a true souvenir.

The fact is our little collection here can all be dried on a suitable tea towel. But this collection is really nothing compared to one lady's giant living room.

As Emily Reuben discovered, some people go quite mad over royal memorabilia.

(BEGIN VIDEOTAPE)

EMILY REUBEN, CNN CORRESPONDENT: So, Margaret, I bought these for your dining table.

Where do you eat dinner now?

MARGARET TYLER, ROYAL MEMORABILIA COLLECTOR: I eat my dinner on my lap.

REUBEN (voice-over): Welcome to Margaret Tyler's home. Every spare inch is given over to her collection of royal memorabilia.

TYLER: Here we are. This is my Diana room.

REUBEN: It's uninsured for $64,000 -- the fruits of a 30-year-long obsession.

(on camera): Do you think there will ever come a point where you'll think, OK, I've -- my collection is pretty much done now, there's no room for anything else?

TYLER: No. No. I don't think so. Well, I'll just shrink a bit more or something like that or move something, because, no, the fun is collecting. And I love that.

REUBEN: And there will be a lot more for her to buy. This shop in Central London has a whole aisle dedicated to the William and Kate wedding.

(on camera): So let's just take a look at the some of the merchandise on offer. You can get yourself a lovely tea tray and a flag, so do you want to get in the party spirit on the wedding day. Let's have a look at this, William and Kate, perfect.

(voice-over): The wedding has boosted sales of general royal memorabilia in this shop, which have been falling. Princess Diana was their best- seller, followed by the queen. But since November, outselling them all, William and Kate.

(on camera): How much of a money center has this wedding been for you guys?

PHIL DOWSING, COOL BRITANNIA SHOPS: I'd say it's been -- it's increased our turnover by probably 10 or 20 percent over the last few months. And it's looking to probably be maybe 30, 40 percent coun -- in the weeks running up to the wedding.

REUBEN (voice-over): Some products haven't met expectations. Guangdong Enterprises is offering a full refund on its mug after Will and Kate mistakenly showed Prince Harry and Kate. And if money is no object, why not head to London's art district for this?

(on camera): A life-sized wax work replica of Prince William the day the royal engagement was announced, complete with a replica engagement ring, yours for a mere $125,000.

(voice-over): And for those who can't stomach any more, one of these will be priceless.

Emily Reuben, CNN, London.

(END VIDEO TAPE)

QUEST: Emily Reuben there.

I tell you, the washing up is never quite complete. And before the royal wedding, I'll have shown you many more tacky getzkas (ph) of royal souvenirs.

A Profitable Moment after the break.

(COMMERCIAL BREAK)

QUEST: Tonight's Profitable Moment.

The Epsilon hacking sends a shudder through all of us, especially if we've been hacked and scammed. If you haven't, you're lucky. Most of us have had a credit card compromised, a bank account accessed. It's not pleasant sorting out the mess that follows.

But now letters of apology and reassurance won't do the trick.

Why should we believe the companies involved when they say they took care, especially since they outsourced information that many of us thought was kept in their own systems?

Oh, outsourcing may be a fact of life, but that merely means anyone who asks for our information has to be doubly certain that it doesn't get into the wrong hands.

And that is 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 after the headlines.

END