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Quest Means Business

Spain's Recovery Threatened by Variants, Lockdown Confusion; Iberia CEO Sees Green Shoots of Recovery after Tough Times; Angela Merkel Visiting White House Likely for Last Time as Chancellor; Floods Kill at Least 46 in Germany and Belgium. Aired 3-4p ET

Aired July 15, 2021 - 15:00:00   ET



RICHARD QUEST, CNN HOST: Tonight, COVID enters a new phase of crisis in Europe. The hope of a summer recovery is narrowing, and the delta variant

is surging across the continent, and new restrictions being imposed.

We are in Spain tonight, along the Costa del Sol, where many of the continent's biggest concerns are converging.

Live from just outside Malaga, Fuengirola on the Costa del Sol, I'm Richard Quest and I mean business.

Good evening. It is a tense moment here in Spain, as the various forces of COVID are converging. The number of cases are rising, and different regions

are considering whether to introduce new restrictions and it all happens as the country becomes a case study for Europe's battling to emerge from the


It couldn't be happening in a sense at the worst time, as the European summer vacation season is supposed to be well and truly under way.

But a good effort is being made. The reason for the latest problems, the delta variant cases are spiking. Restrictions are being imposed, and here

in Spain, the country's Constitutional Court has ruled last year's total national lockdown as unconstitutional. It has left an element of confusion

as the summer rebound is now in jeopardy.

It's all challenges for the country's central government. As a result, the Cabinet of Prime Minister Pedro Sanchez was dramatically reshuffled last

week. The Prime Minister called it a government for recovery.

Several top ministers left, and some were promoted. The Economy Minister, Nadia Calvino has now taken on the task of number two Prime Minister, First

Deputy Prime Minister. She was the ideal person to speak to during the course of the week, with the situation in Spain worsening, with the country

now open and with tourism being so important, I asked the economy minister what next in this crisis of COVID?


QUEST (voice over): It's the moment of truth for Spain and its economy. Recently, the country has had one of Europe's highest COVID infection rates

and yet, Spain has lifted national restrictions and opened the country up to most vaccinated travelers.

It's with this in mind that Prime Minister Pedro Sanchez has reshuffled his Cabinet. The Finance Minister Nadia Calvino now also becomes the First

Deputy Prime Minister. It's a sign the economy will play a central part in the government's thinking.

GDP shrank last year as Spain endured one of Europe's toughest lockdowns. Its tourism industry has been pummeled. It used to make up 14 percent of

the economy before COVID, and the virus still looms large, even with nearly half of the country fully vaccinated. Some regions are now re-imposing


When I spoke to the finance minister, she said Spain would soon be an engine of growth for Europe.

NADIA CALVINO, SPANISH ECONOMY SECRETARY: So indeed, we are right now being hit by the delta variant and that is having an increase in the number of

cases, but it is quite targeted to the young people under 30, those that are now suffering the disease and of course, the impact in terms of

hospital cases and intensive care unit use is not comparable to the previous waves, and that is thanks to the vaccination rates.

Spain is one of the countries that's having the fastest rate of vaccination. We are now around 60 percent of the population already with

one shot, and 46 percent with two shots. We're moving very fast and thus, we think very soon we will reach a situation that will certainly make it a

very different impact and allow us to resume tourism and mobility in a safe environment.

QUEST: There seems to be a new understanding, you know, I look at the U.K., where the prospect of 100,000 cases, but still opening. I look here in

Spain, where numbers are going up, but there's no talk of further restrictions.


QUEST: Are we moving to a situation of a chronic disease? One where we accept there will be many cases, but they won't be serious, and they won't

put the healthcare network under undue pressure, and that's the way we'll just have to live with vaccinations?

CALVINO: Well, it would be a bit daring because I'm not a medical expert on the medical side, you know, so I wouldn't like to use expressions that

maybe can be misunderstood, but what is clear is that the vaccine is a game changer that since the month of March, we saw that the progress with

vaccination was also making us go into a different phase in terms of the economic recovery.

The Spanish economy is recovering very strongly. Everybody is foreseeing a very strong growth in 2021 and 2022, that Spain will be one of the engines

of growth in Europe, and worldwide. And that is, I think the new situation. We have to be prudent because the virus is still amongst us, but it looks

like national tourism is going to be very dynamic and some of our strongest tourism markets such as the U.K. are also going to be resuming their growth

this year and that will bring us to a growth pattern that we are really looking forward to.

QUEST: So, let's talk about the economy. First of all, you are going to receive up to 140 billion euros in recovery funds, if you will. This is an

opportunity. How -- and I know that the Prime Minister in promoting yourself -- congratulations on that -- is calling it a government of


How to you anticipate spending that money?

CALVINO: Well, the Spanish recovery plan, which indeed was approved yesterday by the European institutions, and that paves the way for the

first transfers of 9 billion euros and then 10 billion euros in the course of this year to flow, the recovery plan is -- the Spanish Recovery Plan is

particularly ambitious, I think, from a three-pronged perspective.

First of all, in quantitative terms because indeed Spain can receive up to 140 billion euros between now and 2026. Seventy billion in transfers, so

it's a very, very large amount, which corresponds towards Spain has been receiving in structural funds since we joined the union in 1986, that has

been a formidable change for Spain, you know, driving prosperity and growth.

It is also ambitious from the qualitative point of view because it's an ambitious program of structural reforms and then, thirdly, timewise, we

want to frontload these investments and reform so most of it is in 2021 and 2023, to have a structural change.

QUEST: You know, in the United States, they have the infrastructure bill, as you're well aware, going through Congress and being debated and this,

that, and the other. As I get it, as I understand it, for politicians like yourselves, this is a key moment. One in which for valid reasons of

recovery, large sums are being made available in a once in a lifetime opportunity. Do you see it that way?

CALVINO: Absolutely, yes. I think, it is a unique window of opportunity to make the right decisions for the future, you know, to launch these large

investment programs, and also to undertake the structural reforms that happened and delayed for years, and so put the Spanish economy on a more

sustainable track in the long run.

QUEST: What message do you think the Prime Minister was sending with this - - you know, I'm not an expert on Spanish politics, but I have read enough about this to know it was one of the widest ranging, deepest, and most

significant Cabinet reshuffles in modern Spanish history -- so, what message was being sent?

CALVINO: Well, I think the key message that is being sent is that this is the government for the economic recovery -- economic and social recovery of

Spain. We have been suffering terrible months, you know, as a consequence of the pandemic. I think this is not unique in Spain. You know, all

countries and all governments have been under enormous stress, and this reshuffling is putting the first vice presidency in the hands of the or

under the responsibility of the economics minister.

I am responsible also for digitalization, which is also a sign of how important this is in our political priorities, and secondly, it is bringing

to the Cabinet, younger persons, many women, even more women making it probably the most feminist or female -- or the government with the largest

female representation in the world probably.


CALVINO: And so, the message is one of, we have new energy to face the final part of our mandate and make sure that Spain has a strong recovery

that puts us on the track for a sustainable and fair growth going forward.


QUEST: The recently promoted new First Deputy Prime Minister, who is also the economy minister on the government for recovery here in Spain.

And the reason of great concern is that there is now starting to be unrest across Europe over the various COVID challenges coming from the delta

variant. For instance, in France and in Greece, there have been protests over mandatory vaccinations.

In The Netherlands, they are closing night clubs and again asking people to work from home, and as the Minister said, it's a regional issue, but here

in Spain, they are re-imposing various restrictions.

Let's talk about this fifth COVID wave in Spain, at a time when the country is reopening, and accepting pretty much tourists from all over the world.

And so, multiple regions are introducing their own restrictions. For instance, a maximum of 10 people can meet in Valencia. There are curfews in

Tenerife. Catalonia is pushing for further restrictions with nonessential activities to stop at 12:30, I suspect clubbing is not nonessential, which

is why in Navarre, night life venues are closing at 1:00 in the morning.

With me here in Fuengirola on the Costa del Sol is the Deputy Mayor of Fuengirola, it is Rodrigo Romero.

Sir, good to see you. Thank you first of all, for having us here. It is good to be in your area.

RODRIGO ROMERO, DEPUTY MAYOR OF FUENGIROLA, SPAIN: Thank you very much. Thanks for coming to Fuengirola.

QUEST: I'm glad, I got the pronunciation right. But then, my family has been coming here for many years.

Mr. Deputy Mayor, how bad and how prepared are you for the situation if it gets worse here?

ROMERO: Well, I hope it won't get worse than what it is, because actually, the problem that we have is not a problem at the hospitals. You know, we

don't have a sanitary situation that is critical because only seven percent of our critical beds are occupied now, and only five percent is by COVID


So, the problem that we have is a problem of the spread of the virus, but it's not a sanitary problem right now.

QUEST: Right, but the spread of the delta variant, you've got a high population vaccinated. Are you going to have to introduce restrictions,

curfews, more curfews, and more closings?

ROMERO: Probably. Probably. I think that the 50 percent of the Andalusian's has already fulfilled their vaccination process, 60 percent has at least

one, but the situation is getting worse very strong, very quickly, you know, so I think probably they will, as all the counties have done, you

know, to lower the possibility of getting down to the street by night, groups of people enjoying in the street, it's something we have to check.

QUEST: How can you have a tourism season? Look, I get it that it's not going to be anything like what you want, but can you have a tourism season

do you think?

ROMERO: Yes, mainly with the Spanish people, of course, you know and well, the British that is the first market that we have here. They have slowed

down with this fifth wave, 20 percent reservations. The revenue that we will have this year is going to be half of the one that we had in 2019.

I mean, it means that Costa del Sol is going to lose about 74,000 million euros, you know, that's something important.

But we have to keep on going, we have to keep on working, and we have to keep on making our country safer.

QUEST: You have done extremely well over the years. You've spent a lot of money beautifying the promenade, the paseo. How -- does this feel like it's

going into reverse?

ROMERO: I think that it is going to be difficult, because it doesn't depend solely on us. At the end, we work -- we are talking about the whole world,

you know, but we are prepared. You know, we have --

QUEST: Are you prepared for things to get worse?

ROMERO: Yes, and for things as they are right now, for example we have our beaches are perfectly well controlled. We have surveillance by drones. We

have a social roving app that tells you exactly at the right time how are the different beaches in Fuengirola, so you can choose to be in the one

that has less people.

In fact, that program has been awarded by the National Technology Companies as the best one that has been this year for the beach in the whole of

Spain, and we are doing a lot of work, 90 people for example, policemen, lifeguards -- 90 people at the beach every day taking care of that.


QUEST: What is your advice to tourists -- to people watching tonight who are concerned? They've got to get on a plane. They are going to get here.

There could be many other tourists. I saw the -- it was packed with Spanish.

It was interesting, all the Spanish were at the front with their umbrellas and their own chairs, and all the chairs for rental were empty at the back.

ROMERO: Yes, that's very typical here. Anyway, first thing, planes are very safe. You know that being inside the plane is like being in a hospital. You

cannot get any virus there. Second thing, if you follow, -- because at the beginning of this pandemic, we didn't know how to behave, but now we know.

If you take your mask, if you don't get involved with a lot of people in a closed place, in a closed space in a restaurant, whatever, if you use like

now, we are in open the air. We are not in risk right now, you know, because we have wind, open air. We know exactly how the virus spreads.

QUEST: Finally, and we're both vaccinated, so another reason why we're both so close to each other without masks. I get the feeling that it will be

difficult for the economy to fully recover. It's going to take several years. There are many cafes that are gone, there are many small shops that

didn't survive.

ROMERO: Yes, a lot, very difficult. It's going to be -- a lot of business has gone down, you know has closed, and of course it's a kind of hit that

you never expected to come and it's not -- as I told you, it's not only Spanish case, it is a worldwide case, so it's going to be difficult because

people have lost a lot of money. They don't have the money for traveling.

QUEST: But you're still here.

ROMERO: I'm still here working.

QUEST: And still open, and the beaches are still here, and it's still a beautiful place.

ROMERO: It is, and I hope everybody comes here to enjoy all the beauty of Fuengirola.

QUEST: Mr. Deputy Mayor, thank you.

ROMERO: Thank you, Richard.

QUEST: Thank you. I am very happy to be here.

We're talking though about how things are getting better. Iberia's chief executive, the national airline, he is saying he is seeing green shoots of


However, the lacking vaccination rates in Latin America are hurting Iberia's full recovery.

That story coming up next.



QUEST: Spain's travel industry constantly gets buffeted by other countries and the decisions taken in far-away capitals. For instance, the United

Kingdom which took another decision which is going to wallop Spain. Ibiza, and Mallorca/Menorca have now been moved to the U.K.'s amber list, which

means, unvaccinated travelers must quarantine when they return back home to England, the result of which has pushed ticket prices up quite


But don't forget, in some cases, vaccinated from those places don't have to. It's very confusing about what is actually going on.

Iberia is the national airline of Spain, it's part of IAG, which is also British Airways, Aer Lingus, and so forth. The Iberia chief executive told

me he is seeing signs of the green shoots of recovery. We spoke in the lounge, at Madrid's Barajas Airport, and as the Chief Executive and I got

talking, well, behind us, a plane started to move. He was delighted.


QUEST: A welcome sign for you.


QUEST: A flight that is leaving.

SANCHEZ-PRIETO: It is leaving, yes.

QUEST: Hopefully with passengers, lots of passengers.

SANCHEZ-PRIETO: Yes. No, hopefully with passengers. You know, the experience that is really appreciated is when you -- I usually fly in the

flight deck so when you are landing and you see that the nobody is moving, nothing is moving, only your plane.

Similar things here in Madrid, although in Madrid, I mean, there are more movements because the restrictions are less intensive than in London.

Yes. It's been a tough time, these months, and we are seeing signs of recovery, green shoots, in a way.

QUEST: So, you say green shoots. Surely, we are seeing more than green shoots now. I mean, this sapling is growing.

SANCHEZ-PRIETO: Well, it depends how you look at this, is it a half empty glass or a half full glass? It's 60 percent of our operations that were

down in three months, but still it's 40 percent less than in 2019. Imagine in 2019, someone will come and tell you, okay, you know what? Your demand

will be reduced by 40 percent. You would be, whoa.

But yes, I mean, we've seen this trend of improvement.

QUEST: So, when we look at your long haul operations, particularly of course, Latin America, the main effects there are what?

SANCHEZ-PRIETO: The situation is more related to the vaccination process and how that process is involving. So, unfortunately, in some of the

countries of Latin America, we're lagging behind, and you know, that's our main market.

In some other, we see some stability, and I think it is also really related to the opening of the borders and the restrictions, so what we see is there

is pent up demand. When a country is open, we see the demand flow in.

QUEST: Right. So, the decision by Spain to open up must have been very welcome.

SANCHEZ-PRIETO: Very welcome. Very welcome. I think the government of Spain has proven flexible, and I think that we all understand that tourism is of

the essence of this country. It is the first contributor to the GDP, the second contributor to the employment, so I think that the Spanish

government has been very proactive in opening.

QUEST: So, where do you see, as the CEO of Iberia, where do you see it within IAG? The growth and contribution it is going to make?

SANCHEZ-PRIETO: I think we have a common aim that is to develop this half and to compete in a more efficient way with the other hubs and to develop

Madrid and to develop Spain, and that needs to be also good for the customers, because this is a hub that is only looking to the West. We need

to look also to the East and that's one of the pillars also of this acquisition.

QUEST: The investment that you're going to make, where will it be?

SANCHEZ-PRIETO: We will continue investing in the customer, not only just in the plane, also in the customer journey, all the tax points. We want

this to be more efficient, and be more digital.

We will invest money in that. We will attempt to manage this crisis -- it's not mine, but I used to say that we are managing this with a microscope and

a telescope. With a microscope, we need to keep liquidity and we need to do a lot of established -- do the fiscals and all of that, but also with a


Air Europa, the development of the hub, the investment in the customer is part of the telescope side.


QUEST: We're here at the moment, but you as the CEO have to think about where the airline is going to be, not just next month, but in five years'



QUEST: That's pretty impossible at the moment.

SANCHEZ-PRIETO: Well, we are trying to anticipate that. One of the things that we have learned over this crisis is that we need to be more flexible

and more agile. So those mechanisms are something that will stay in the airline.

The other thing is, I think that we -- in terms of how our customers will behave, we are seeing some trends that I think will stay.

QUEST: Really?

SANCHEZ-PRIETO: Well, some trends like for instance, they want to have a more agile also customer's journey, they want something that is a little

let's say, touchless. They want more digital.

So, I'm not saying that the situation that we are having now with e- commerce is sustainable, but I do think that part of this will stay.

QUEST: The lounge is up and running.

SANCHEZ-PRIETO: Up and running. I'm happy. I'm happy that it's up and running. The only thing I would like to see is more customers enjoying

their lunch, but we see the ramp up.

I mean, this has been opened two weeks ago and we see more and more customers here. One of the reasons why we have opened this lounge is

because the other one was close to full, so it's encouraging that we are seeing that.


QUEST: Encouraging and things are getting better, the CEO of Iberia, whom I met over the weekend in Barajas in Madrid airport.

Just to tell you where we are tonight. QUEST MEANS BUSINESS is coming from Costa del Sol. We are Fuengirola. You heard from the Deputy Mayor a moment

ago, the gorgeous, beautiful background. We're on the roof actually of the Higueron Hotel here. There should be sun bathers galore, and we've taken

over all their spaces.

But the place is spectacular. The holiday makers may be here in lower numbers, but the Spanish are making the most of it.

Good evening from Spain.

As we continue tonight on QUEST MEANS BUSINESS, a final farewell from Angela Merkel who visits the United States and at the same time, of course,

she describes the floods and the death in her country, as a catastrophe. QUEST MEANS BUSINESS.




QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS on the Costa del Sol in Spain. When we come back here for more, I'll be talking to

the CEO of Telefonica, who said the pandemic spurred decades of changes in a matter of weeks.

And if you want to know really what's happening in an economy, go to the beach. I'll show you how the beach economy tells us really the position of


All of that is after the other news headlines because, of course, this is CNN and, on this network, the news always comes first.


QUEST (voice-over): Lebanon's prime minister designate Saad Hariri stepped down after failing to form a government. His decision comes nearly a year

after the devastating Beirut port explosion and throws the country already coping with a financial crisis and a political stalemate into further


Abu Dhabi is announcing a new nightly coronavirus lockdown starting on Monday. According to the Emirates' media office, the measures will be in

place between midnight and 5:00 am nightly. And during those hours, residents must stay at home unless it's absolutely necessary or to get

essential supplies.

Doctors in Brazil say the president, Jair Bolsonaro, is recovering after being hospitalized with an intestinal blockage. A hospital spokesperson

told CNN he will not need emergency surgery. But the medical staff say he will remain in hospital.


QUEST: The news of the day, Chancellor Angela Merkel is visiting President Biden at the White House. They're expected to give a news conference in the

next hour or so. It's her final visit to Washington as German chancellor, which she has been that for more than 15 years.

They are expected to discuss the pandemic, the transatlantic alliance and the Russian

Nord Stream 2 pipeline, which the president opposes. As Chancellor Merkel tours Washington, back home, there have been a series of deadly floods that

have killed dozens of people. At least 46 people have died in Germany and Belgium.

The German chancellor Merkel called it a catastrophe. The Netherlands and Luxembourg are affected; dozens of people are missing and more than a

month's rain fell in a few hours.

Nina dos Santos is following the story and joins me now.

How bad was it?

And is there more to come?

NINA DOS SANTOS, CNNMONEY EUROPE EDITOR: Yes, these are some of the biggest and most severe floods they've had in about a century, about 200

millimeters of rain falling in the space of nine hours that caused flash floods in places like the North Rhine-Westphalia and the Rhineland-

Palatinate. It was those two parts of Germany that suffered the most loss of life so far.

We know the death toll now has been revised upwards, it stands at about 47 by the latest count. And two firefighters were also among the dead there,

trying desperately to help people out of their homes; two of them overcome by the waters and drowned as a result.

Seventy people still remain missing and, Richard, at this point, it is starting to get dark. People are trapped in homes, where various levels are

flooded, infrastructure is damaged. About 165,000 people across Germany at this point don't have power. Some don't have telephone connections or

running water because sewage systems are overwhelmed as well.

As I said, 70 people are missing so the death toll could rise from here. German troops have been deployed to help evacuate people. The Italian air

force has also sent a plane full of Italian help as well. And Britain said it stands ready to support as and when needed.

The concern of the night has moved towards Belgium and the Netherlands and fears the Meuse (ph) River could burst its banks. The city of Liege (ph)

has been evacuated in the last few hours.

In Maastricht, they've said 10,000 people should be evacuated from two parts of the city, where they fear that, with more rain, the river will

burst its banks at about 3:00 am.


DOS SANTOS: Not much letup in sight. In the end, there will be more rain over the next few days, according to meteorologists -- Richard.

QUEST: Nina dos Santos in London, thank you.

When we come back, the transformation, the digital fears we have, according to the CEO of Spain's largest telecoms company and one of the largest in

the world, Telefonica, we've all lost our fear of digital living -- after the break.




QUEST: Think of how your life and, indeed mine has changed as a result of the pandemic, particularly in relation to how we use technology, whether

it's working from home, the sudden, much greater use of telecommunications. It all happened so fast. We were rocketed into the next dimension, if you


The chief executive of Spain's largest telecoms group, Telefonica, said what happened is we lost our fear of digitalization during the pandemic. We

became so used to using digital equipment. We had to go completely online. And years of progress were done in a matter of weeks. Our various lives are

testament to the truth of those statements.

Telefonica is one of the world's leading companies. It's headquartered in Madrid, it has major subsidiaries in Germany, the United Kingdom and

Brazil. Here in Spain it has Movistar and various platforms, O2 and Vivo.

I visited the campus for an exclusive interview with the chief executive. He was quite clear, if you think about it, for a telecom company, the

pandemic put them into uncharted territory.


JOSE MARIA ALVAREZ-PALLETE LOPEZ, CHAIRMAN AND CEO, TELEFONICA: At first, nobody was prepared for that, totally unexpected, not in our business plan

of scenarios. We never planned at the network to face a pandemic. Nobody.

So the network was not designed to have 100 percent of the population working from home, being educated from home, having entertainment from

home. So it was total uncharted territory.


ALVAREZ-PALLETE: So it was -- I stressed this for the network and it performed very well.

QUEST: What have you learned as a company from the way people are using technology?

ALVAREZ-PALLETE: It has been an amazing experiment. Every week of the pandemic has been like a year in the organization. In five weeks, we have

been seeing things we were predicting for five years because we have lost fear of the utilization.

When you have all the population that is totally confined, they lose fear of getting totally online -- for working, for our education, for our

purpose, for companies. If they want to keep working, they need to go into the cloud. So things that were predicted to happen in three to five years

happened in five weeks.

QUEST (voice-over): While its customers were hunkered down, Telefonica had to focus on what comes next. It has an entire lab at its headquarters,

dedicated to the biggest innovation yet: 5G.

QUEST: I'm only enough to remember 3G was going to do marvels and the spectrum that was sold; 4G was going to revolutionize. LTE was the Holy

Grail and 5G is Nirvana.

What is it?

ALVAREZ-PALLETE: Well, 5G is more than a revolution. It's really a revolution in terms of mobile network because it's not just much more speed

of access or bandwidth; it's mostly the elimination of latency. Therefore, it opens the door for vital (ph) internet, things that need to happen in


QUEST: Right.

Retailing is one area, correct?

Explain to me, what does 5G enable with this in retail that you couldn't do before?

ALVAREZ-PALLETE: The fact that every single thing is connected and you have enough bandwidth to do that in real time. So it's density of population, of

things connected per square meter, so to say. It's speed of access to the information generated by these things, generally with people, and real-time

processing of that information.

QUEST (voice-over): The 5G lab is vast, covering everything from live video to the internet of things. The only problem is, many of its employees are

still WFH -- working from home.

QUEST: Wall Street wants everyone back in the office. The tech companies say work at home. You're going for a hybrid.

That does that mean in reality?

ALVAREZ-PALLETE: Well, flexibility, has to be very useful, so to say. What we have decided is that we are going to combine both models. You're going

to need flexibility in the workforce.

It means two days out of five, you can decide to stay at home if you want to. At the end, you need to collaborate with your boss at your department

and choose which those two days are going to be. And we are going to give much more flexibility.

QUEST: But you look at it, we're here at your campus, beautiful. You don't need all of this as much.

ALVAREZ-PALLETE: Well, the answer is yes.

And why is that?

Because you cannot go fully remote. There are things that are intangibles, like the culture of the company, the way of doing things. This is a 97-

year-old company. There are ways of doing things that are intangibles.

The key thing here is to make sure the amount of productivity you gain through remote work, the amount of volume that you can create, what you

might be losing in terms of having those two indicators, those two KPIs, what is the productivity impact of flexibility?

And at the same time what are you losing in terms of quality, of attending to your customers the way you do things?

That's the kind of things that we need to balance.

QUEST: What is your strategy?

You've got Spain, Germany, the U.K. and Brazil. But you have this hodgepodge of other investments in Latin America and Central America.

What are you doing with them all?

ALVAREZ-PALLETE: In November 2019 we decided to execute five pillars of action. The first one is to concentrate on the four largest markets for us,

which are Spain, Germany, the U.K. and Brazil.

The second thing we decided is to optimize our capital allocations (ph) into the remainder of Latin America, to reduce our exposure to those

markets in terms of the capital exposure.

The third thing we decided to do was to create Telefonica Tech. Telefonica Tech is value-added service in the (INAUDIBLE) business.

The fourth thing was to locate different Telefonica infrastructure (ph).

And the fifth thing was to do a new operating model, a much more efficient, digitized new operating model.

When we decided that, we never thought that, four months after we have a pandemic, we have been able to execute these five pillars in the middle of

the pandemic.

QUEST: Streaming: now of course CNN is owned by WarnerMedia; WarnerMedia, part of AT&T, which bought and spent a lot of money, inarguably not a

successful merger. You have Telefonica; you have Movistar, which is a platform and a producer.

Why are you producing content?


ALVAREZ-PALLETE: Because I can differentiate my offer through (INAUDIBLE). There are two kinds of content on my customer log (ph), international

content and local content. There is no way I can compete in international content because the cost of producing an episode of "Game of Thrones or

"The Crown" or "House of Cards" is so expensive that I don't have enough scale to compete in that way.

But I can compete on the local content side because the cost of producing an episode is much lower, it's much smaller and, at the same time, I have

the access to all the talent and culture (INAUDIBLE). So as far as I'm able to combine and integrate international content, I'm differentiating my

offer through local content and attractive, I'm more attractive than my peers.


QUEST: And there we have the CEO of Telefonica.

You can't come to Spain and not go to the beach. As we will show you after this break, the beach is a very good barometer of the economy. Surf, sand

and sea, it's all there, right on the beach.




QUEST: Beautiful here at the top of the (INAUDIBLE) hotel, here in (INAUDIBLE), nighttime arriving and the last rays of sunshine before the

day is over. And if you've been on the beach it was absolutely picture perfect. The Spanish tourists were there at the front; there were empty

beds at the back.

There are a variety of ways I can talk to you about the economy. I can give you GDP numbers, inflation numbers and all those sorts of things. Or we can

find out what's happening in the real economy. And that means going to the beach.



QUEST (voice-over): By jingo, it's good to see the beaches along the Med getting busier as more countries are opening up. And if we think about the

beach economy, we'll get a really good idea of the damage that's been done and how things are now getting better.

It costs only five euros, about $6 to rent a beach chair here in Torremolinos. But as you can see, most of the lounges are empty.


QUEST (voice-over): The locals and the Spanish tourists, they tend to bring their own chairs and umbrellas. And the higher-spending tourists from

Northern Europe, they're not here yet.

Put it all together, it's really simple. In the economy of the beach, these empty chairs mean hardship.

A holiday isn't a holiday without an ice cream. And the beauty and the best part is choosing which one.

I like those but I can't have those and so the man has to sell me an ice cream and make money from a mascarpone con something or other. It may only

cost three or four euros maximum. But that's part of the profit center of a place like this, so they stay in business.

Thank you very much.

The cost of a beach chair or an ice cream, relatively small amounts that soon add up in Torremolinos.

Ooh, ooh, I hate it when it does that, when the best of it all falls on the floor.

Grilled sardines on the beach, a local specialty. The restaurants here, in fact, along the coast, have been badly hit. Many won't stay in business as

a result of COVID-19. Thankfully this one is still going.


UNIDENTIFIED MALE (voice-over): For eating, you take the head and the tail.

QUEST (voice-over): Grab it by the tail and the head and dig in. "Keep it simple," he said. And that's the way to think about tourism. Forget this

idea of global tourism being 10 percent of the world's employment.

Instead, remember, it's beach chairs, ice creams and, yes, sardines grilled. Keep it simple and remember that men and women make all this


Ooh, he was right. Use your fingers.


QUEST: From sardines on the beach, keep it simple, to Diego Gallegos. We're with a Michelin star chef here.

So your restaurant is just below us.


QUEST: Are you seeing a recovery in the business at the moment? Because it's been pretty bad.

GALLEGOS: Yes, it was bad times but now the front is open. The clients from outside staying are coming a lot, they're working very well. We are fully

booked 15 days after.

QUEST: Really?

GALLEGOS: Yes, yes.

QUEST: Fully booked?

GALLEGOS: Fully booked, fully booked and I hope it continues like that, when finish the summer, because I hope everybody will be vaccinated and the

people continue to travel.

QUEST: What was it like last year?

How bad was it?

GALLEGOS: It was too bad, too bad. But what we -- the most important for us is keeping our team, OK. We make the -- we start -- you continue with then

and now opening and everything works fine. But it was bad days. We lost a lot of money last year.

QUEST: You lost a lot of money last year.


QUEST: But keeping your team so that, when you reopened, you still had employees that came back. Your employees came back.

GALLEGOS: Yes, they came back. They came back. Because (INAUDIBLE) they gave the very helped for the -- for us, for the restaurants and we, for

that, we continue with (INAUDIBLE).

QUEST: That help was essential, wasn't it, the government help was very important.

Are you worried about this year -- Delta variant, new wave of COVID-19 -- are you worried?

GALLEGOS: We are worried the last two months of the year, because it's very -- we don't know what will happen if the variant isn't nice (ph). We don't

know if the vaccine -- if everybody vaccinates, the different kinds of COVID will come and touch everybody.

But we have to be grateful, because now, in summer, you can work and you can make money, too. Staying in winter, very calm (ph).

QUEST: OK, I cannot be here and not talk about actually the food of Spain, which, of course, is magnificent. And you're saying you're fully booked.


QUEST: You're fully booked so I can't get a table. Simple as that. I couldn't get a table if I wanted to. But they brought the food to me.

So what have we got?

GALLEGOS: The lunch, the specialty of the restaurant is caviar, OK. So this is caviar from Granada from Spain.


GALLEGOS: You can taste alone if you want.

QUEST: Oh, no, never eat alone.

GALLEGOS: So this, with both a little bit of fresh tuna from the south of Andalusia and you can taste with the spoon. And this is the traditional, of

course, from Spain, called the gazpacho.

QUEST: Oh, now you're talking.


QUEST: That's very good.

GALLEGOS: We just work through for (INAUDIBLE). We are proud of the persons that to have here in the area. So we (INAUDIBLE) and use this zero

kilometer of produce.

QUEST: Very good, excellent.

Do you think you will do well this year?

Will you manage to survive and go through to the winter and into next year, do you think?

GALLEGOS: I'm -- of course. Of course, we will survive, because, now, after (INAUDIBLE) everything, we do our work nice and we are making the numbers

with the paying (ph) and euro by euro, to take and to survive to the next season.

QUEST: To survive.

GALLEGOS: Survive.

QUEST: To the next season. We can all drink to that, to survive to the next season. Tuna from Spain and a bit of caviar on top. Oh.

Now who is carrying the bill?

Oh, couldn't get a table.

We'll have a profitable moment after the break.

Sir, thank you.

GALLEGOS: Thank you very much.

QUEST: Very good.




QUEST: Tonight's profitable moment from the Costa del Sol. It is so tempting to think of the tourism industry as the big airlines, hotel

companies, the cruise lines, multibillion-dollar corporations. What I hope we've shown you tonight is that tourism, yes, 10 percent of the global

economy is really about the men and women who make our holidays happen.

And I'll go further than that. It's right down to the euro, the yen, the lira, whatever it is, the peseta, whatever it is, in the old days, that you

would have spent whilst on holiday. And so, the Brits will start to travel as the restrictions come down. The Germans will start to travel. More of us

will start to travel.

We have to. And, indeed, with more vaccinations so the tourism industry will gradually recover. But it won't be anything like it was at least not

for the time being. It's been wonderful being here in Spain, a place I've been coming to for many years. And it's great to see things are starting to

pick up, even, even with all the problems ahead.

And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest on the Costa del Sol in Spain. Whatever you're up to in the hours ahead, I hope it's

profitable. I'll see you next week.