Return to Transcripts main page

QUEST MEANS BUSINESS

Former Starbucks CEO Faces Backlash Over White House Run; U.S., Taliban Agree in Principle to Peace Framework; CBO Report Suggests U.S. Economy Lost $11 Billion During Shutdown; White House Holds First Press Briefing of 2019; Suspect Arrested After Brazen Theft of Museum Painting; Missing Red Panda Cub Found After Escaping Belfast Zoo; Food Giants Warn of Consequences of No-Deal Brexit; U.S. Announces Sanctions on Venezuelan State Oil Company; Kudlow: No Permanent Damage to U.S. Economy from Shutdown. Aired 3-4p ET

Aired January 28, 2019 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


PAULA NEWTON, ANCHOR, CNN: The good news, folks, we are off the lows of the day. It is unfortunately a bad start to a very big news week and that

is what is moving the markets on Monday, the 28th of January.

Let the blame games begin. Yes. It's a massive week as earnings and companies are already pinning bad results on China. Oil prices are sinking

as Venezuela's crisis gets ever deeper. And we have, of course, an exclusive report from inside Venezuela. And cleanup on aisle 50.

Britain's top supermarkets warn of higher prices if there's a no-deal Brexit. I'm Paula Newton, this is "Quest Means Business."

All right, as I was saying, it's the busiest week of the quarter for earnings. Yes, rocky start. The Dow is down about 1%, as I was saying,

that was off its lows. This is the final hour of trade. Of course, the S&P 500, bad news here, back into correction territory. Now, two companies

of course set the tone for the day right off the bat. Caterpillar says demand for its machines has slowed. The company reported its biggest miss

on earnings in a decade. And then there was NVIDIA. It cut its sales guidance. Both are blaming China's growth slowdown.

Now, chipmakers and industrial stocks are of course down as well. It just basically came - the whole sector came down with it. Alison Kosik is at

the New York Stock Exchange. Alison, you know, I was just with you there at the Stock Exchange, I hadn't been back there in a few weeks, and

sentiment has in fact changed. In fact, it has gotten a lot more depressed, I would say.

Caterpillar, they had a lot of signs, didn't they, that they thought that China would really hurt earnings this time around.

ALISON KOSIK, CORRESPONDENT, CNN: Yes, but what's interesting, Paula about Caterpillar, is it is only 5% to 10% exposed to China. But still it's

earnings certainly rattling the market. And if you look at the broader market, Wall Street, it already knew about China's slowing economy.

But now the impact, the fact that it's showing up in corporate earnings, that's why you're seeing stocks move lower. So yes, we've talked about

Caterpillar posting its biggest earnings miss in a decade, blaming China. Then you've got NVIDIA, the chipmaker blaming China as well because it

slashed its outlook because of what it calls deteriorating macroeconomic conditions specifically in China.

And then you look at NVIDIA shares right now, they are down now about 14%. Caterpillar shares down about 9%. Here's the thing, we're knee deep in the

middle of earnings season. Tomorrow, Paula, begins the slew of tech earnings that come out, beginning with Apple. Apple is reporting tomorrow

after the bell.

Remember, Apple had already warned about weaker iPhone sales because of guess what? China. So what you're seeing now is really investors bracing

themselves for this possible China theme that may weigh down corporate earnings season, Paula.

NEWTON: Yes, what's been interesting here, too, is the fact that we do have the Fed coming in to the fray in the middle of the week. And I don't

seem to get the same impression about slower growth in the United States really rattling the market at this point in time.

KOSIK: Well, you know what? We're not getting a whole lot of reports because of the government shutdown. Now, we should start to see those

reports trickle in again to start to see whether or not there is a trend.

Before the shutdown, I know, we did get some indications of some weakening a little bit in the U.S., so - but one report doesn't make a trend. So

we'll see as more reports come out. It is going to be interesting to see what the Fed says based on what data the Fed has. As you know, Jay Powell

has said his decision making is data dependent -- Paula.

NEWTON: Yes, and we hung on those two words, didn't we? Data dependent. The market was like, "Whew, he said it, thank goodness."

Alison, thank you so much. Truly appreciate the update there from the market. Now, with today's warnings from NVIDIA and Caterpillar, as Alison

was just saying; we have two new entries in our Earnings Hall of Blame. This is the China gallery. Companies who have blamed China's slowing

growth and the trade war for poor results.

Now, other entries this season, not to be missed include chipmakers Texas Instruments and Intel, along with Goodyear and FedEx. They all say China's

slowdown hurt their bottom line.

And there are more exhibits coming soon in the tech, automobile, food and luxury sectors. These companies all make a substantial amount of their

sales in China -- Apple, Qualcomm, McDonald's and LVMH -- all report this week. Now, earlier this month, Apple told investors that it was blind-

sided by the magnitude of the slowdown in China.

Joining me now is Scott Wren, he is a Senior Equity Strategist at Wells Fargo Investment Institute. Thanks so much for being here, Scott.

[15:05:04]

NEWTON: I mean, this blame game, this story of blame for China. Is it real? And do you think it will go on for some time?

SCOTT WREN, SENIOR EQUITY STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE: Well, you know, Paula, when you look back from time to time, there's always

kind of the scapegoat. Certainly, China is the scapegoat during earnings season this time.

And for us, we're still looking at - our economists are still looking for 6.2, 6.4 type of GDP growth here out of China, so they are in a controlled

slow down. It has been pretty controlled and gradual. They want their consumers to start driving their economy more rather than having to rely on

us to buy their stuff.

So it makes sense that growth would be a little bit slower. Certainly though, the stock market has been volatile of late based on trade, which

plays into the whole global growth story. We've certainly seen overall a little bit of a slower story internationally than what we maybe thought we

were going to see six months ago.

NEWTON: And I'll get to some of what you brought up in a second. I am glad you used the word "scapegoat" not me. But do you worry about that

whole China contagion thing? Because okay, we're going to deal with 6% growth. Some people question whether or not you can really hang your hat

on any of those numbers, and how accurate they are, but at what point does the Chinese growth news start to really weigh on the global economy given

this is not even ten years ago, right? The global economy really hangs on a lot of China growth these days.

WREN: It really does. Let's face it. They're the second biggest economy in the world. They have 1.3 billion plus people. A lot of people moving

into the middle class. So China is going to be a story for a long period of time. For us, if you look at global growth, you know, we're somewhere

3.5, somewhere like that, 3.5% GDP, something like that. That's okay. It's about as expected.

Probably, the real worry people should probably really be focused on Europe because that's where at least we've downgraded our growth there from 1.9 to

1.6. So we're a little bit more worried about Europe than we are China.

Emerging markets overall though, really, if you look at various surprise indexes and these emerging market overall, their data is coming in really

coming largely better than expected. So actually things in many emerging market economies are looking better. And we've been favorable on emerging

markets since September.

And on a relative basis, it's worked out so far. So we like the emerging markets. We think there's opportunities there. We certainly continue to

like the U.S. market though as well.

NEWTON: And I've got one question left. But I still have two on the table here. So I am going to let you decide which one you want to answer there.

If I take a deeper dive on some of the earnings, again, the blame China story, I actually think margins are not looking good. I think costs aren't

as low as they should be, maybe a little bit of the tariff action and even dare I say it, wage inflation starting to creep in. Is that a story, or do

you want to talk to me about Jay Powell and the Fed meeting in the middle of the week and how some people believe they could still screw this up.

WREN: Jay Powell, they are not going to screw it up this week. We think they're going to pause in March. They're not going to do anything this

week. I'm sorry, your other question is --

NEWTON: N, no. Now I don't have time to answer, but I'm going to give you the one - I am going to give you the one-word question, are you worried

about margins especially at these valuations? Wage inflation, things like that?

WREN: Twelve point three percent, they're really good margins.

NEWTON: Got you. Scott, thank you very much. Really good. We tidied all of that up so quickly. Appreciate it.

WREN: All right, thanks, Paula.

NEWTON: Thanks, Scott. Now, the opposition party in Caracas is planning yet another week of massive protests as two Presidents battle for control.

We'll give you an exclusive look at the daily struggle to survive for millions of Venezuelans. And a deadly accident in Brazil is raising new

questions about mining giant, Vale, the mining company behind two major disasters in just three years.

(COMMERCIAL BREAK)

[15:10:05]

LU STOUT: Venezuela's self-proclaimed interim President, Juan Guiado says there will be another massive rally this week. Now amid economic collapse

and now political crisis, the opposition controlled National Assembly, is trying to oust Nicolas Maduro's government.

Nick Paton Walsh got this exclusive look at the tensions boiling over in Caracas.

(BEGIN VIDEO CLIP)

NICK PATON WALSH, SENIOR INTERNATIONAL CORRESPONDENT, CNN (voice over): Cross into Venezuela's unending disaster, the worst growing refugee crisis

and it's like the world as you know it, is slowly ending.

Oil once made them the richest in South America, but this is now the line for three days and nights to get a full tank. In the capital, there's a

queue for everything, everywhere. Hunger breeds a special kind of anger.

PATON WALSH (on camera): These is how hyperinflation works. These groceries cost $50.00 now because of what's happening with the local

currency, they will be worth double at least by next month. People paying tomorrow's prices for today.

PATON WALSH (voice over): There is no queuing for the youngest living off what even here nobody wants. This isn't play, it's practice for self-

defense.

"My brother got killed in July by another gang," says 14-year-old Ismaria (ph), "They found the body in the river." "We gather stuff, we beg, a

piece of chicken skin to take home." In the socialist utopia that now leaves nearly every stomach empty.

This was the day change was meant to come, hundreds of thousands flooding central Caracas watching opposition leader Juan Guaido swear himself in as

interim President. But it fast turned sour.

They've had this standoff outside the military airfield here for months. But this is the first time with an opposition leader claiming the

Presidency. All eyes were on the army and whether it, too, would rise up.

PATON WALSH (on camera): This is the whole question really in the standoff. It's about the military's vote. They may be throwing stones at

them here, but what they really need is the army to switch sides.

PATON WALSH (voice over): That didn't happen. And the police teargas and motorcycle charges sent us fleeing down side streets. Some likely wounded

although dozens reported dead during the day.

It was up here in a normally loyal slums where the fight was nastiest. Special Forces entered these streets. They have been coming back to make

arrests all during the afternoon when we were invited to meet Carolina's extended family where Maduro's base has long lived.

The state handouts bought their loyalty for years. But now this is all she has to feed four this day. And they say now they, too, want Maduro gone.

"We can't hold it in anymore," one of her cousins says, "We're being crushed. We're beggars now, always begging. This isn't political, it's

survival. People are killing each other for a kilo of rice -- for water."

Army defectors outside Venezuela called on soldiers to rise up, but we hear from one junior officer that even when you can't feed your family, it's

more complicated.

[15:15:08]

PATON WALSH (voice over): "I would say 80% of soldiers are against the government, some even go to demonstrations. But the big fishes, the senior

officers are the ones eating, getting rich, while on the bottom, we have it hard. I get a dollar and half every month promptly enough for one chicken

and a food box from the barracks. Then we have to work magic to make it last, like everyone else."

WALSH (on camera): Would you or the soldiers you know at your level - would you open fire on resistance people in the streets?

"I'd rather quit. That person could be my brother or my mother. We need a general to flip - to make a change."

And, as Washington says Maduro isn't President, but Moscow insists he is, everyone else walks zombielike, further and closer towards starvation.

Nick Paton Walsh, CNN, Caracas.

(END VIDEO TAPE)

NEWTON: Now, as Venezuelans, their struggle to get on with everyday life, on the other side of the Atlantic, in London, the Governor of the Bank of

England has emerged as an unlikely player between the standoff of the two Presidents in Caracas.

Bloomberg is reporting that Mark Carney blocked an attempt by Mr. Maduro's officials to withdraw more than a billion dollars' worth of gold held in

the U.K. Central Bank. Now, in a letter, Juan Guaido says it would be, in his words, illegitimate to go ahead with that transaction, that would be

used to repress and brutalize the Venezuelan people.

Eric Farnsworth is Vice President at the Council of the Americas. Mr. Farnsworth, I know how closely you've been watching the issues in Venezuela

now for quite some time. We do seem to think that things are coming to a head, just from that story that I gave you, just from that gold

transaction, financially this is very complicated and yet, do you believe it is those - pulling those financial strings that in the end will bring

down the Maduro regime?

ERIC FARNSWORTH, VICE PRESIDENT, COUNCIL OF THE AMERICAS: Well, I think that's clearly one scenario. And I think it's as good as any that the

international community has at its disposal right now.

I mean, without financial resources, the regime cannot pay off the military, cannot pay off the security forces. Frankly can't pay its debts

to China, to Russia, et cetera. So that is very much a vulnerability of the regime. There is no question about it.

And I think the U.S. Treasury has coordinated with other countries, so the Bank of England and others to try to put pressure on precisely those

financial flows.

NEWTON: Sanctions have had some effect certainly. And yet, some people wonder, do they need to go from what some people call, the nuclear option,

which means basically cutting off oil exports from Venezuela into the United States?

FARNSWORTH: Yes, that's exactly right. Sanctions have primarily, at this point have been on individual leaders in Venezuela to prevent them having

access to the United States, either real estate or the financial markets in the U.S. or what have you.

They really have not been targeted at the economy. The reason why the U.S. and others have not taken steps against the energy sector is for the very

real concern that that will deepen the financial and economic crisis and that will impact the people of Venezuela very negatively, and nobody wants

to do that.

I mean, people are trying to influence the behavior of the government, not punish the Venezuelan people, many of them who don't support the Maduro

regime in any event. But that is something that has to be under consideration, particularly since it is the greatest leverage point that

the United States continues to maintain in terms of Venezuela.

So to the extent that the situation continues to deteriorate, I would anticipate this will also be a topic of real consideration.

NEWTON: Are there any financial levers though that you believe that will be more adequate than others especially at trying to avoid the bloodshed?

I mean, look, I'm going to have to remind you, everybody looks towards the military and says "When will they defect?" But that obviously is

incredibly risky when it comes to what could be an incredibly bloody situation on the streets.

FARNSWORTH: It's very risky. There's no guarantee of success, and the fact of the matter is, nobody wants to see bloodshed in Venezuela. That's

absolutely something people are trying to avoid, but the options are limited. I think that's accurate and to the extent Venezuela maintains

positive relations with countries like Russia, like China and frankly, like Turkey and others, they are able to move money and accounts, and they have

been able to get what they've needed in order to sustain the regime.

So I guess the question is, are people trying to really force an outcome here in the near-term, or are they willing to let it continue to fester to

the point where the Venezuelan people just decide they have absolutely had enough, can't take anymore, and the military does switch sides.

NEWTON: Yes, I can tell you from firsthand experience, most Venezuelans have already had enough.

FARNSWORTH: Well, that's a fair point.

NEWTON: So we will see whatever outside influence there can be. Eric, we're so happy to have you here. Do please just stand by because we have

got a lot going on today. We want to bring you an update on Brazil and that catastrophic dam collapse that has now left 60 people dead and

hundreds missing. Now Brazil's top prosecutor warns the company that owned the mine where it happened that she'll hold those responsible.

[15:20:00]

NEWTON: She says executives at the giant mining group, Vale, may face criminal charges after its second deadly disaster in three years. Nearly

300 people - 300 people are still unaccounted for and efforts to find them are continuing, although people are really losing hope there on the ground.

Officials said, it's unlikely that many will be found alive.

Vale's Chief Executive said Sunday said the dam's construction was in fact, they claim, in line with regulations. From Sao Paulo, Brazil, journalist

Marcia Reverdosa joins me now by telephone. I mean, what can you first tell us about the recovery efforts in that area? I mean, to hear the

devastating pleas of the community, they could still use a lot more help.

MARCIA REVERDOSA, JOURNALIST, SAO PAULO, BRAZIL: Yes, it's a very devastating situation in Brazil. Efforts have been concentrated, rescuers

efforts have been concentrated in areas that are drier, so the whole rescue operation is very slow and difficult.

You can see the fire fighters are even crawling to get to some of the areas affected. You can also see, and it's very distressing to see those

pictures. Even families are looking themselves for their family. They are going to areas where they believe their relatives and friends were. They

are digging by themselves in an attempt to find the bodies, and to have a dignified funeral for them.

So it's been very, very difficult. It's of course after 48 hours. It's very difficult to find anyone alive, but they're still hopeful. I spoke

with firefighters earlier today, and they still hopefully will find survivors, although the situation is very difficult.

It's very difficult to reach those areas, but they are still hoping that they could find someone alive.

NEWTON: Yes, it definitely seems like the communities there are behind them and they are hoping that as you said, there's some kind of miracle now

that some people will be found alive. Marcia, thanks so much for the update. We appreciate it, and as we were just talking here, not just where

the collapse happened, but right across Brazil, anger is rising over the damage being caused by this mining company, Vale, the world's largest iron

ore producer.

Now, one of the country's part-owned subsidiaries - one of the companies, pardon me, part-owned subsidiaries agreed to pay up $6 billion in

compensation after a similar disaster that we've been talking about in 2015.

Shares in Vale nose-dived on Monday. A relative of one of those missing said she wants Vale to be held accountable.

(BEGIN VIDEO CLIP)

MARIA, RELATIVE OF MISSING PERSON (Through a translator): The accident happened due to the misconduct of the company. Vale's misconduct. My

nephew called my niece about a week ago before the accident and said they were told at an internal meeting that this mine may be dangerous, but the

company did not issue any warning to alert its employees.

(END VIDEO CLIP)

And Eric Farnsworth thankfully is still here to go through what has been an absolutely devastating event in Brazil. And yet it brings up so many more

issues, especially when you are dealing with a new government in Brazil and an inspector of deregulation. Now, by all accounts, this mine was in line

perhaps with Brazilian standards, but not international standards. How much of a problem do you think that has been and could be going forward

especially, as I said, the new government has said it is business friendly. It wants to de-regulate, not re-regulate.

FARNSWORTH: Yes, there's a lot to going on here. The first thing is, we have to know that this is an immense human tragedy, and our hearts go out

to the families affected. This is really a hideous scenario and we hope for the very best for remaining survivors.

But this is clearly going to be politically complicated going forward. It's a private sector entity that owned it. It's not the government. But

you do have the Bolsonaro government that has come into office as of January 1st very clearly articulating the vision for development

prioritization over the environment and whether it is a development in the Amazon or whether it's potentially pulling out of the Paris Climate

Accords, I mean, there is a government here that is perceived to be walking away from some of Brazil's environmental commitments.

And so, to the extent that this dam disaster is really reminding people of that, and it's also a continuation of what we saw in 2015, and there are

many other mines in the country, that's a real problem and people are going to demand answers pretty quick and the government is going to have to

respond.

NEWTON: And when you talk about the government responding, is there a hope that perhaps, it will move it in a different direction? Look, many people

have pointed out that what companies like those mining companies get away with in these smaller, more remote communities is, as you said, to use the

word, "hideous." That they are putting peoples' lives basically - they are putting their profits ahead of peoples' lives.

FARNSWORTH: Yes, regulations really do need to be tightened up, and it's not just the regulations at the Federal level, the inspections have to be

improved, intensified, made more serious, and damages really have to - or potential complications have to be fixed before they become real problems

and damages.

[15:25:10]

FARNSWORTH: Look, there's another issue though here, and that is that much of the iron ore that is being mined actually goes to China, which has

developed a relationship with Brazil over the years that the Chinese and Brazilians both have called strategic.

The new government in Brazil has said they want to re-evaluate that relationship, but this is going to remind people, perhaps that there is a

cost as well for some of those international obligations that Brazil has taken on over the eyars.

So there's a lot going on here and we're going to have to see how it sorts itself out in the coming days.

NEWTON: And I'm glad you brought up the issue of inspection because that's one of the problems. You can have lots of rules on the books, but how are

they actually carried out. Does the issue of also that corruption point, not just in Brazil but throughout South America also bother you? Because

it doesn't matter how good the international standards are, I mean, the company of Vale for its part is saying, "Look, we're going to go well

beyond international standards now. We are learning our lesson," but what does it matter if the inspections can't be counted upon?

FARNSWORTH: Well, and here again, there's a deep vein, no pun intended that's being tapped into. I mean, over the past several years, Brazil has

been turning itself inside out on corruption investigation called the Lava Jato and in fact, this has really taken down senior executives in major

companies in Brazil and political leaders and that sort of thing.

And so to the extent that there is corruption here or that this is perceived as being regulatory laxness because of bribery or corruption,

that's a real problem. And again, it is going to go to the heart of popular anger and the government is going to have to respond.

NEWTON: Yes, and hopefully they will respond of course, as you point out, to the pleas and the suffering and the grief of those families who are

beginning to wonder whether or not the lives lost will mean anything in terms of change in Brazil and elsewhere. Eric, thanks so much. Really

appreciate it.

FARNSWORTH: Thanks for having me.

NEWTON: Now, when we return, supermarkets and restaurant chains in the U.K. are warning - get this - food shortages are on the menu if Britain

leave the E.U. without that Brexit deal.

(COMMERCIAL BREAK)

[15:30:00] PAULA NEWTON, HOST, QUEST MEANS BUSINESS: Hello, I'm Paula Newton. Coming up in the next half hour of QUEST MEANS BUSINESS, Donald

Trump says he doesn't have the guts. Michael Bloomberg says he doesn't have a chance. So why does the former CEO of Starbucks want to run for

president?

And I want you to get out your phones here and go to cnn.com-slash-join. Tonight, we're asking you, if a no-deal Brexit would -- wouldn't be that

bad after all? First though, these are the headlines on Cnn at this hour.

The U.S. envoy to Afghanistan says the Taliban has agreed in principle to a framework for peace. The plan involves a commitment from the Taliban to

keep the country from being used as a hub for terrorism. An Afghan source tells Cnn a cease-fire and withdrawal of U.S. troops was discussed, but no

final decisions were made.

The U.S. government may be back in business at least for now, but some of the $11 billion lost in GDP during the shutdown will never be recovered.

That's according to a new report at the Congressional Budget Office.

The White House meantime is due any moment now to hold its first press briefing of 2019. Now, that hasn't been a proper briefing since December

the 18th. In case, you were wondering, we of course will bring it to you live the minute it begins. You're looking at live pictures right there.

Russian police have arrested a suspect in the brazen theft of a painting from a busy museum in Moscow. And as you can see from this footage, the

thief just walked up and plucked the painting straight off the wall and then strolled out. The suspect was arrested the next morning.

A red panda cub that went missing from Belfast Zoo has now been found, thank goodness after taking what police called a surprise vacation. The

zoo sounded the alarm early on Monday morning, asking local residents to join in the search. Around three hours later, the zoo said the cub had

been found, and I hope safe and sound.

British businesses are doing their best to stave off the possibility of a no-deal Brexit. A string of big names in the U.K. are warning British

consumers will face higher prices and food shortages if it crashes out of the EU. And a warning came in a letter signed by food retailers

Sainsbury's, Marks and Spencer and LiDL and other supermarket chains.

Now, U.S. restaurant chains also are joining that, KFC and McDonald's added their names to the list. Now, I want you to get those phones out and go to

cnn.com-slash-join, our question for you tonight, would a no-deal Brexit be such a catastrophe? We're -- oh, pardon me, we're going to hold that

thought for a second, we now go to Sarah Sanders at the White House.

SARAH SANDERS, PRESS SECRETARY, WHITE HOUSE: The United States economy is growing at record levels, putting the president in a strong position to fix

long-standing trade concerns with China. On Thursday, the president will meet with the Chinese Vice Premier who is here this week for continued

talks.

President Trump is committed to achieving greater market access for U.S. exports, and better treatment for our farmers, ranchers and businesses.

Fair and reciprocal trade with China will boost long-term economic growth, not only in the United States, but globally.

As the president said last week, the United States proudly stands with the people of Venezuela who have courageously spoken out against the corrupt

and illegitimate regime of Nicolas Maduro. Maduro must do what's right and allow for free, fair and credible elections in accordance with Democratic

principles.

To speak more about U.S. policy towards Venezuela and to take your questions, I'd like to welcome to the podium national security adviser,

Ambassador John Bolton, Secretary of the Treasury, Steven Mnuchin, and director of the National Economic Council Larry Kudlow. And after that, I

will be up to take other questions of the day. Thanks guys.

JOHN BOLTON, NATIONAL SECURITY ADVISER, UNITED STATES: Thank you very much, Sarah. As you know, on January the 23rd, President Trump officially

recognized the president of the Venezuelan National Assembly Juan Guaido as the interim president of Venezuela.

Venezuela's National Assembly invoked article 233 of the country's constitution to declare Nicolas Maduro illegitimate. This action was a

statement that the people of Venezuela have had enough of oppression, corruption and economic hardship.

Since then, 21 other governments in the region and across the world had joined the United States in recognizing Guaido as Venezuela's interim

president. Today -- and I'll turn the podium over to Steven Mnuchin for this purpose, we're going to announce sanctions against Petroleos de

Venezuela, Sociedad(ph), Anemma(ph) or PDVSA as its known by its Spanish acronym, the state-owned oil monopoly.

[15:35:00] We have continued to expose the corruption of Maduro and his cronies, and today's action ensures they can no longer loot the assets of

the Venezuelan people. But we expect that Secretary Mnuchin will go into this in more detail that today's measure totals $7 billion in assets

blocked today, plus over $11 billion in lost export proceeds over the next year.

We also today call on the Venezuelan military and security forces to accept the peaceful, democratic and constitutional transfer of power. And to a

certain extent, this has already begun. We have seen Venezuelan officials and military personnel heeding this call.

The Venezuelan defense attache here in Washington recognized President Guaido a few days ago, and just within the past hours, the first consul of

Venezuela's Consulate in Miami, Scarlet Salazar has also declared for interim President Guaido.

I call on all responsible nations to recognize interim President Guaido immediately. Maduro has made clear he will not recognize Guaido or call

for new elections. Now is the time to stand for democracy and prosperity in Venezuela. I reiterate that the United States will hold Venezuelan

security forces, responsible for the safety of all U.S. diplomatic personnel, the National Assembly and President Guaido.

Any violence against these groups would signify a grave assault on the rule of law and would be met with a significant response. Now, let me give the

floor to Steven Mnuchin who will describe the sanctions that we're imposing.

STEVEN MNUCHIN, SECRETARY OF TREASURY, UNITED STATES: Thank you. Today, Treasury took action against Venezuela's state-owned oil company, PDVSA to

help prevent the further diversion of Venezuela's assets by former President Maduro.

The United States is holding accountable those responsible for Venezuela's tragic decline. We will continue to use all of our diplomatic and economic

tools to support interim President Guaido, the National Assembly and the Venezuelan people's efforts to restore their democracy.

PDVSA has long been a vehicle for embezzlement, for corruption for Venezuelan officials and businessmen. Today's designation of PDVSA will

help prevent further diversion of Venezuela's assets by Maduro and will preserve these assets for the people of Venezuela where they belong.

The path to sanctions relief for PDVSA is through the expeditious transfer of control to the interim president, or a subsequent democratically-elected

government who is committed to taking concrete and meaningful actions to combat corruption.

Today's actions against PDVSA follows my determination that persons operating in the Venezuelan oil sector may now be subject to sanctions.

Today, OFAC also issued a number of general licenses that authorize certain transactions and activities with PDVSA for limited periods of time.

To minimize any immediate disruptions and support of ongoing humanitarian efforts. Citco assets in the United States will be able to continue to

operate, provided that any funds that would otherwise go to PDVSA, instead will go into a blocked account in the United States.

Refineries in the United States have already been taking steps to reduce their reliance on imports from Venezuela. Those imports have fallen

substantially in recent months. We have also issued general licenses to ensure that certain European and Caribbean countries can make an orderly

transition.

We continue to call on all of our allies and partners to join the United States in recognizing interim President Guaido and blocking Maduro from

being able to access PDVSA funds. Thank you with that, and I'd be happy to answer some questions.

UNIDENTIFIED MALE: Ambassador Bolton, if I could, you've mentioned the word significant response. How do you define significant response?

BOLTON: Well, we're not going to define it because we want the Venezuelan security forces to know how strongly we think that President Guaido, the

National Assembly, the opposition and most importantly American personnel are not harmed. This is an unequivocal statement on our part.

UNIDENTIFIED MALE: Is there any circumstances under which American forces would get involved?

BOLTON: Well, if the president has made it very clear on this -- on this matter that all options are on the table.

[15:40:00] UNIDENTIFIED MALE: Thank you secretary. You explained that there are some actions being taken here to mitigate some of the impact on

the U.S. oil market. Can you walk us through those and explain how U.S. oil imports from Venezuela will be affected? What's going to happen with

the money and where do you think that is going to have to impact on the oil market globally?

MNUCHIN: Sure, well, let me just comment that we will be releasing FAQs with the general licenses to explain a lot of these issues. But effective

immediately, any purchases of Venezuelan oil by U.S. entities, money will have to go into blocked accounts.

Now, I've been in touch with many of the refineries, there's a significant amount of oil that's at sea, that's already been paid for. That oil will

continue to come to the United States. If the people in Venezuela want to continue to sell us oil, as long as that money goes into blocked accounts,

we'll going to take it, otherwise we will not be buying it.

And again, we have issued general licenses, so the refineries in the United States can continue to operate. So I expect in the short-term, very modest

impacts on the U.S. refineries, we've been working with them closely on these issues.

UNIDENTIFIED MALE: Can you walk us through what's going to happen here in advance or are they hearing about this for the first time right now?

MNUCHIN: They're hearing about this now, but you know, I generally say, we have obviously -- we made a press release recently. I think we've

indicated certain things, so we had not disclosed to anybody the sanctions in advance, but I think a lot of people have been preparing for this over

the last month.

UNIDENTIFIED MALE: With the blocked accounts, what would be the mechanism and what would be the timeline if there is this peaceful transfer of

government? How would the money go from the blocked accounts back? And would Juan Guaido be the operating person to take it back and receive it

back if he's put into power, what's the mechanism?

MNUCHIN: So let me just comment that in general, OK, as we've said in the past, the purpose of sanctions is to change behavior. So when there is a

recognition that PDVSA is the property of the rightful rulers, rightful leaders as president, then indeed that money will be available to Guaido.

We will be working with them on the money in the blocked account, and whether that can be used for them.

UNIDENTIFIED MALE: Could you explain to the country what the strategic interests for the United States are in Venezuela now and in the immediate

future? What's at stake for us, and why this significant response held in a balance if this transfer of government isn't achieved.

BOLTON: Well, we think stability and democracy in Venezuela are in the direct national interest of the United States. Right now under the Chavez-

Maduro government, civil society in Venezuela is disintegrating, the economy is in a state of collapse.

Something in the range of 3 million to 4 million refugees have already fled the country for neighboring countries and the United States. And the

authoritarian regime of Chavez and Maduro has allowed penetration by adversaries of the United States, not the least of which is Cuba. Some

call the country now Cubazuela(ph), reflecting the grip that Cuba's military and security forces have on the Maduro regime.

We think that's a strategic significant threat to the United States, and there are others as well, including Iran's interests in Venezuelans uranium

deposits.

MNUCHIN: Yes, and let me just comment. This is a country that is very rich in oil resources. There is no reason why these resources shouldn't be

used for the economic benefit of the people there. There's no reason for the poverty and the starvation and the humanitarian crisis.

UNIDENTIFIED MALE: Can I ask both of you. The United States has talked a lot about a potential embargo on sales, oil, and also stopping selling of

oil products to Venezuela. Why haven't those been considered yet?

MNUCHIN: So there will be, as part of this, limitations on selling oil products as part of the sanctions. As regards to an embargo, we're not

going to make any comment on that today, we don't comment on future.

UNIDENTIFIED MALE: Thank you Mr. Secretary. Mr. Maduro seemed to anticipate the actions that you've announced today. In a brief moment, he

warned that Citgo is the property of the Venezuelan state, and he further said that "we're the only ones who can decide its fate." What is your

response to Mr. Maduro?

MNUCHIN: Again, it's the property of the Venezuelan people and the proper and rightful leaders of the country. So we agree with that. He's not the

proper leader of the country at this time. And I have said, these are valuable assets that we are protecting for the benefit of Venezuelan

people.

UNIDENTIFIED MALE: The question about the impact on the markets. I want to ask you about the parts you said are the modest impact. What do

American drivers need to know about the possibility of prices at the pump if any at all?

[15:45:00] MNUCHIN: Well, first, let me say. There's been a big reduction in the overall price of oil. And particularly since we

instituted the Iran sanctions, I think you know we've been very careful in making sure that these costs don't impact the American consumer.

Gas prices are almost as low as they've been in a very long period of time. These refineries impact a specific part of the country, and I think as

you've said, we're very comfortable that they have enough supply that we don't expect any big impact in the short term.

UNIDENTIFIED MALE: Do you feel that, that fact emboldens your position or do you feel the United States is able to take these measures as a result of

the low gas prices or low oil prices on the whole, and does that increase the United States leverage in this debate?

MNUCHIN: I would just say, we are very determined whether it's in the case of Iran or it's the case in here to use sanctions, to use them in the right

way. And we're very comfortable that we've coordinated with the Department of Energy and other people on this mechanism.

UNIDENTIFIED MALE: Thank you Mr. Secretary. There have been reports that there's an estimated 25,000 Cuban troops in Venezuela. Troops or secret

police, which is a clear violation of the OAS charter, chapter 4, article 21, about troops of another country in a sovereign nation.

Will the United States raise a complaint if nothing else with the Havana regime --

MNUCHIN: Well, industrial --

UNIDENTIFIED MALE: About troops in Venezuela?

BOLTON: As you know, Secretary of State Pompeo addressed the OAS General Assembly a few days ago. We expect other meetings of the OAS on this and

related subjects in the coming days. Because as both Secretary Mnuchin and I have said, we know what the legitimate government of Venezuela is, and

it's our mission now to make a full reality in Venezuela, what the people of Venezuela themselves want.

(CROSSTALK)

UNIDENTIFIED MALE: If you don't mind me, turning your attention to the talks that will take place at the end of this week, that state put out

before you came out here. The talks with China. In your opinion, where does all of that stand right now? Are you comfortable with progress that's

been made in the last couple of weeks.

Larry Kudlow has said that the talks over the next couple of days will be determinative too. Is that your assessment --

MNUCHIN: I think we've had very productive conversations going back between the meeting between the two presidents which was a very important

time. I think you know we sent a team over to Beijing, there were a very significant discussions for that period of time.

We've had conversations since then. Ambassador Lighthizer and I are looking forward to the two days of talks, President Trump is going to meet

with Vice Premier Liu He at the end of those.

Now, let me just remind people, we do have another 30 days after this. So my expectation is that we'll make significant progress at these meetings.

But I would just emphasize these are complicated issues, we have a timeline of how we've mapped out the 90 days.

UNIDENTIFIED MALE: How much progress has been made in the last month if you can sort of characterize it?

MNUCHIN: Again, I will just comment that I think -- I think there's been significant movement and we're working through what are still very

complicated issues.

UNIDENTIFIED FEMALE: Mr. Secretary, I want to go back to gas prices. Too qualifying quantifier, I'm just saying -- just saying the gas prices are

low now. But in the midst of this, with all of this happening in Venezuela, how long do you believe that this will -- the gas prices will

move up to a modest impact on the oil industry? And can you quantify about how much by cents, by tens of cents or even by dollars? I mean, what is the

modest impact of that today?

MNUCHIN: Well, let me comment that in general, I've said this before, markets are not always efficient, they move in different directions. I

want to be careful and not speculating on markets. I mean, I think kind of oil went up a lot right before the Iran sanctions.

We were surprised that it went up so much. I think you know, President Trump had been on the phone with many world leaders in making sure there

was ample supply, prices came down.

The U.S. is a big exporter of oil, so there's a balance here. And but -- you know, I think where oil prices are now reflect the supply and demand in

the market. And as I've said, we're dealing with Venezuelan oil that is a rather modest part of our overall supply.

Again, we're a net exporter of energy, we are particularly concerned that there were a handful of refineries that had a dependence on Venezuelan oil.

I think they read the tea leaves, they reduced that dependence significantly along the way.

Most of them have in the neighborhood of 10 percent or less of their dependence on Venezuelan oil. So I don't expect that people will see an

impact on the gas pumps.

(CROSSTALK)

UNIDENTIFIED FEMALE: From Venezuela. Sweet or sour crude?

MNUCHIN: Again, I'm not going to get into all the specifics of the different oil markets. But let me just say that most of these refineries,

this is -- this is about 10 percent or less.

[15:50:00] There's plenty of supply at sea that's already been paid for. So there's inventories. There's been access, oil, I'm sure many of our

friends in the Middle East will be happy to make up the supply as we push down Venezuela supply.

But let me again just emphasize, you know, the right outcome is a transition for PDVSA, the right outcome for the Venezuelan people is to

have these companies rebuilt and to make sure that they get out of poverty. It's a complete tragedy to have the humanitarian crisis in a country that

has very rich resources.

UNIDENTIFIED MALE: Thank you, Mr. Secretary --

MNUCHIN: Yes? That --

UNIDENTIFIED MALE: Ambassador Bolton, can I ask you a question, please?

MNUCHIN: Wait, we were recognizing her and then you can go next. Go ahead.

UNIDENTIFIED FEMALE: On China, if you would just address the -- what you believe is the -- we've heard this word enforcement quite a bit, and that

being a priority for the administration.

MNUCHIN: Yes, enforcement will definitely be one of the topics that Ambassador Lighthizer and I have on the agenda. And I mean, I think this

is pretty obvious, but we want to make sure that we expect when we get a deal, that, that deal will be enforced.

And I would say in the conversations we had previously with them, there's been an acknowledgment with China that they understand that. Now, the

details of how we do that are very complicated, that needs to be negotiated.

But IP protection, no more forced joint ventures and the enforcement are three of the most important issues on the agenda.

UNIDENTIFIED MALE: So Mr. Mnuchin --

UNIDENTIFIED MALE: Ambassador Bolton, has the president spoken directly with President Guaido and if so --

BOLTON: I beg your pardon, can you start that over again?

UNIDENTIFIED MALE: Sure, has the president spoken directly with President Guaido, if so, can you summarize that conversation and how safe does the

president believe our diplomats are currently?

BOLTON: The vice president has had several conversations with interim President Guaido, including most recently the night before we granted

recognition. He'll be meeting with the interim President Guaido's ambassador here in the near future.

In terms of American official personnel has been absolute top priority for President Trump. The Vice President, Secretary Pompeo and myself, we have

drawn down significantly personnel at the embassy, all dependent personnel are gone.

We believe we are now prepared -- as prepared as we can be. We're re- evaluating the safety conditions at all times. And it's why we have said we've presented credentials to interim President Guaido, we recognize him

as the legitimate president.

He has asked for us to stay, we have made very clear to what's left of the Maduro regime that we hold them responsible and we take their commitment to

do that very seriously.

(CROSSTALK)

NEWTON: And you've been listening to a press conference at the White House. That is U.S. Treasury Secretary right there, Steve Mnuchin,

alongside Mr. Bolton, the national security adviser, announcing now that the United States will sanction the state-owned energy firm, PDVSA from

Venezuela in terms of trying to ratchet up the pressure on the Venezuelan regime, that would be the regime of Nicolas Maduro.

Our Stephen Collinson has been eyeing all of this from Washington as well. Steven, I can't tell you how many years this has been discussed.

Administrations before the Trump administration have been reluctant to do it, even the Trump administration has been reluctant to do it. Why now in

terms of the political calculus for this administration?

STEPHEN COLLINSON, CNN WHITE HOUSE REPORTER: I think there's a calculation in the White House that this is a moment of weakness for the Maduro regime.

And it's clearly the White House putting a strong finger on the scale of the internal political dynamics in Venezuela.

You heard Treasury Secretary Steven Mnuchin say the path to relief for these sanctions which are the seizure of assets and property in the United

States of the oil company is for power to be transferred to the interim President Juan Guaido.

So I think that is a clear message from the White House and this is exactly what they're doing.

NEWTON: Mr. Bolton has been very clear in terms of how this is being handled. And he also repeated what Donald Trump said, and that's that all

options are on the table. Steven, you know as well as I do that, that really sends shivers up the spines of many governments in South America,

even those that agree with the United States that something has to be done about Venezuela.

How serious do you think they are about the military option?

COLLINSON: I think they're serious about talking about it because it sends those signals which he mentioned as far as, you know, how far they have got

in the planning for any military action, I think that's very unclear. It's obvious that the national security adviser John Bolton has worked out how

they would get the remaining U.S. citizens out of the embassy there, the diplomats.

[15:55:00] It was interesting that he mentioned I think for the first time that all the dependents of U.S. diplomats are now gone because they're

obviously in a very vulnerable situation. But I think it's something that the president likes to talk about, I'm not sure how seriously the idea of,

you know, sending American troops to Venezuela is in the Pentagon.

I don't know what the mission would be. And of course, you're going into - -

NEWTON: Stephen, just hold on one second, I'm just going to interrupt you there. We now have Larry Kudlow; the economic adviser to the president

speaking again from the White House. Let's listen to him.

LARRY KUDLOW, DIRECTOR, NATIONAL ECONOMIC COUNCIL, UNITED STATES: Sales, very strong, I still think we're on a 3 percent trend line growth rate. I

am proud of that, and I think that the program of lower tax rates and regulatory rollback and opening up energy and so forth is working and is

continuing to work.

And I think frankly, the optimists, the guys who took the over are going to be right. Yes, major.

UNIDENTIFIED MALE: Do you consider valid the estimates that the shutdown caused U.S. economy between $8 billion and $11 billion?

KUDLOW: You know, I looked at them, I think you're referring to CBO numbers that came out today. We frequently disagree with CBO, with all

respect, they're doing the best job they can, I get that. No, I don't -- I won't acknowledge any of that right now.

And you know, in a $20 trillion economy, it's awfully hard to make even the best guesstimates of those kinds of small fractions of numbers. That's

what you're looking at here. Let's see how it rolls out, we'll get a GDP report in about a week for Q4.

It will take longer for the first quarter, as I've said many times, I think you have just a whole bunch of very temporary factors. And now that the

government has reopened, the switch goes right back on. There's certainly no permanent damage to the economy.

UNIDENTIFIED MALE: Larry, so I just --

KUDLOW: Again, with the greatest of respect to my friends at CBO who often disagree with us, and do not acknowledge the importance about pro-growth

tax cuts, just to put an editorial in, no, I don't really agree, sorry.

UNIDENTIFIED MALE: Right, far often to say from your economic perspective, how disruptive was this, not at all?

KUDLOW: Look, the hardships for individuals was always the key problem here, in my judgment. And as Steve Mnuchin said and others, you know, I'm

glad we're back to work. I'm glad all the federal employees, I'm glad all the people who were furloughed, TSA, you can go right down the line.

I think those individual hardships were the biggest issue. And I think everybody is glad we can reopen and put folks back to work. Regarding the

macro economy, major, I don't think it was a factor. I just don't.

UNIDENTIFIED MALE: So wearing it down, the negotiations did not bear fruit and the government shuts down again, it will likely shut down, reopen and

then another shutdown. Could that compound any economic effect or hardship effect on these federal employees?

KUDLOW: Yes, I just don't want to speculate on "what ifs". We try to process, laid out here, let's see if it bears fruit. I just don't want to

speculate on any of the "what ifs". Again, you know, the state of the economy to me, my colleagues, Kevin Hassett and so forth, looks very

strong.

And I don't think that was disruptive. I don't. I know things have been written in their individual hardship cases, again, I'll repeat that. But

in the aggregate, you know, the numbers we saw, low unemployment claims, unbelievably strong same-store retail sales, the industrial production

number from the Federal Reserve, where business equipment went up for the seventh straight month.

Just a scattered look at all those kinds of data points suggest to us that we're still in a very strong mode right now. And I used the -- you know, 3

percent as our longer-term view, but I also think it's going to pan out in the short run, so we will see. Yes?

UNIDENTIFIED MALE: The Chinese talks this week, is it possible we'll see the framework for a deal emerge?

KUDLOW: I don't want to say anything on that, Secretary Mnuchin is correct. I don't want to make any predictions on that. These are very

difficult -- very important -- the only comment I'll make is -- and I've said this before. The scope of these talks will be the broadest and

deepest in U.S.-China history. We've never had anything this comprehensive. And I regard that as a big plus. How these things will

work out, well --

NEWTON: All right, you are listening to Larry Kudlow, he is the economic adviser to the Trump administration, saying right now that he does not

believe that the shutdown was as disruptive as the Congressional Budget Office says it was. Now, estimates approaching $11 billion on that.

Right there, he was just talking about our favorite topic today, which was China and the negotiations that we'll continue this week that we continue

to follow on those trade negotiations between the U.S. and China. That is QUEST MEANS BUSINESS, Richard -- before I let you go, a quick look at the

markets. They have been having a rough day, but we're off the lows.

(BELL RINGING)

I'm Paula Newton in New York, we get your closing bell down there. As I said eked out less than 1 percent. We bring you now to "THE LEAD" with

Jake Tapper.

END