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US President Defends Cyber Surveillance; Companies Deny Knowledge of Prism Program; Surveillance Concerns; Obama's China Summit; US Jobs Report Stronger Than Expected; US Stocks Gain; Jobs and the Recovery; European Markets Up; Dollar Rising; Grocery Shortages Dividing Venezuela

Aired June 7, 2013 - 14:00   ET


NINA DOS SANTOS, HOST: Your Facebook, your e-mail, your online searches. Tonight, how US authorities are reportedly monitoring the world's biggest internet companies.

"We're not listening to your phone calls, though." The US President Obama defends the sweeping surveillance.

Also on the show, just a job. US markets celebrate the latest employment numbers. Hello, I'm Nina Dos Santos and this is QUEST MEANS BUSINESS.

Good evening. The US president has defended an unprecedented cyber surveillance campaign which reportedly has been going on for years. "The Washington Post" and "The Guardian" newspaper both report that the National Security Agency has direct access to servers at the world's largest internet companies here.

Microsoft, Google, Facebook, Skype and Apple, you name it out here, allegedly intercepting everything from e-mails to Facebook messages. The program is called Prism. The "Post" and "The Guardian" now say that British intelligence has also had access to this data.

Without giving any details, the US president, Barack Obama, defended the program by saying that it didn't apply to US citizens. Well, all of this --


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: -- telephone calls, nobody is listening to your telephone calls. That's not what this program is about. One of the things that we're going to have to discuss and debate is how are we striking this balance between the need to keep the American people safe and our concerns about privacy. Because there are some trade- offs involved.


DOS SANTOS: This all follows Thursday's revelation about the report of secret collection of telephone records. Barbara Starr is at the Pentagon for us this hour. Barbara, obviously, all of this is worrying and begs the question, why were they collecting this data and what for?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, Nina, the government case that they are making is that they are collecting data, information, about these activities, but not listening to the content, not watching the content itself.

So, think of it this way: collecting phone data, patterns of phone calls, patterns of internet activity, but that they're not -- the president says we're not listening to your phone calls, we're not eavesdropping.

When they develop these patterns of activity, especially and particularly they say, they are focused on outside of the United States. Then this helps them begin to understand if they see patterns of terrorist activity.

But the internet, of course, has no global boundaries, so this becomes very problematic. A lot of people have a lot of questions about the purpose for collecting it and could it lead here in the United States to spying on Americans? Listening to our phone calls, looking at our e-mail postings? This is the big concern, Nina.

DOS SANTOS: The other issue is also the age gap as well, Barbara, isn't it? Younger people seem to be less concerned about this because they use the internet more, they use mobile phone communications more, but of course, this is like trespassing to people who don't have an e-mail account.

STARR: Well, or -- some of the research data has shown that older Americans in particular may be less comfortable with some social media, with internet activity, that sort of thing.

But the question is -- the real trade-off that's emerging in the United States, I think, is personal privacy, civil liberties versus national security. How much are you willing to give up if the government tells you it's going to help prevent a terrorist attack. How much of your privacy are you willing to give up? How much are you willing to let the US government see what's going on on the internet?

All the data seems to indicate that older Americans may be more willing to let the government have a look. It's not an ironclad trend, but some of the data is pointing that way.

DOS SANTOS: Just going back to what the US president has said. He's come out and made this statement. There wasn't an awful lot of information in that statement, perhaps, for his critics to get hold of. And the other issue is he said, well, I never welcome leaks like this that could undermine security. That's a very strange message to be sending people who are presumably angry about this.

STARR: Well, it's part of the president's list of issues, shall we say, that he's dealing with in Washington right now in the political framework. There are a number of leak investigations already going on, leak investigations involving the news media. So, the White House is very sensitive right now, as they always are, to the issue of leaks.

And I think the president to some extent is throwing this gauntlet once again, taking a very tough position on leaks to the news media and trying to make the case that it is not helpful and also adding in once again that reassurance, no, we're not listening to your phone calls. But for a lot of Americans, that's still something that has to be proven.

DOS SANTOS: OK, Barbara Starr at the Pentagon for us this hour. Thanks ever so much for that.

Well, the three of the biggest companies allegedly who had been involved inside this Prism system have all denied knowledge. Let's start out with Apple, which issued a simple and very straightforward deny as you can see here. "We've never heard of it," is what they said, referring to, of course, Prism.

Google issued a more detailed statement here saying, as you can see there, "From time to time, people allege that we have created a government backdoor to our systems, but Google does not," it says, "have a backdoor for the government to access private user data."

And finally, if we take a look at Microsoft, obviously the world's biggest software provider, it says "We don't participate in any national security data gathering program." I should also point out that this is a company who says its slogan is "Your privacy is our priority."

One man who's been writing about this very issue for years is James Bamford. His book about the National Security Agency is actually called "The Shadow Factory," ominously enough. He joins us now, live from our Washington Bureau this evening.

Great to have you on the show, James Bamford. This is a subject that you probably know better than many people in the world, except obviously those people behind those closed doors at the NSA. What do you think they were up to, and are you surprised by any of this?

JAMES BAMFORD, AUTHOR, "THE SHADOW FACTORY": Well, not really surprised because I've been writing about this activity for many years, and I've interviewed people from NSA who have alleged very similar activity.

But this is a big surprise because it's the first time that actual documents from the inside, top secret documents that document the actual activity -- these are slides that are shown at the NSA that were top secret as well as a court order from the foreign intelligence surveillance court. So, this is the proof that what a lot of people have alleged or a lot of people suspected.

DOS SANTOS: OK. How worried should we be about it then? The US president says they weren't monitoring Americans. Well, for those of us outside of America, what were they doing and were they monitoring us?

BAMFORD: Well, I think people should definitely be worried, because this is a -- done in total secrecy. The administration has said for years and years that they're not really doing this type of thing, and now it turns out that they are.

And the reason why I think people should be worried is because what do the agencies do with this? How long do they keep it? Who do they give it to? How much do they share all this information? This is private information, information of who's calling whom, how long you're on the phone for, what your phone numbers are, all this information from Google, where you're doing internet searches --


BAMFORD: -- e-mail, all this information, and they're saying don't worry about it. Well, of course people should be worried about it.

DOS SANTOS: I'm glad you mentioned people like Google, because we've seen those flat denials about the Prism system come out from Google, Apple, you name it. But they must've been involved, don't you think? Have they been complicit in this?

BAMFORD: Well, that's what's -- I think there should actually be a congressional hearing or something into this. Forget the secrecy, there should be hearings into what's going on, because that's the big question. Was this cooperation, or was this secret access to the -- did they tap into the lines?

That's -- you get this ambiguous answers. The agencies are saying we had permission, and the telecom companies and the internet companies are saying we never gave them permission.

DOS SANTOS: Now, the NSA's been in hot water before, quite recently, monitoring journalists' conversations, notably at AP, without even notifying them. Is the NSA overplaying its hand here? Because of course, the legal system in America doesn't require them to pass bills through parliament to do this, like in the UK, where I am.

BAMFORD: Well, that's right, and that's what's -- I was just in London the last ten days, and I was very surprised, because over there, they have a sort of similar issue. It's a question of whether they should force the internet service providers to keep all this data for a year or more to -- so in case the government wants to go through it.

But the way it was handled in the UK was somebody proposed a bill, somebody put the bill through parliament, and it was voted on. It was actually voted down, and I think it's coming up for another vote again or very soon.

Which is completely different from in the United States, where all this was done in absolutely secrecy. Nobody from Congress was allowed to even know about it or speak about it, let alone -- except for the Intelligence Committee -- let alone putting a bill through Congress or having the American public debate the issue.

DOS SANTOS: James Bamford there, the author of "The Shadow Factory," there, and many other publications on the National Security Agency. Thanks for joining us from Washington this evening.

Well, of course, this scandal could undermine President Barack Obama's attempts to press the Chinese vice president on cyber attacks coming from China. The leaders of the two world's largest economies are currently at a two-day summit in California.

Our chief White House correspondent, Jessica Yellin is there and joins us now, live from Palm Springs. All of this is going to be a big embarrassment to President Obama as he meets Xi Jinping.

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Hi, Nina. Well, the president has made it clear that, in essence, he's not embarrassed. That he is in compliance with US law, that the US Congress has been briefed on all of this, and that what he is engaged in, what the government is engaged in, is overseen by both court and the federal -- the congressional checks and balances. I don't know that that will satisfy any foreign government, though.

The distinction the president will try to make is that the US's accusation against China is that China is stealing businesses, US businesses' intellectual property for profit, and that's undermining businesses here in the US, whereas the government of the US is observing what suspected terrorists are doing. You could call it a privacy violation, but they're not actually stealing any information and then using it for profit. I don't -- I'm not certain that that won't fall on deaf ears, Nina.

DOS SANTOS: Jessica, the Chinese are very, very good at manipulating news like this to their own benefit. Is there any indication some might think that the Chinese will say, well, look, they're not being clear with their own people and they're accusing us of censorship on the internet and following people?

YELLIN: Well, there's an obvious attack to make here and an accusation that America, which prides itself on being democratic and protecting of individual rights and privacy, here is engaging in the kind of behavior they typically accuse other closed governments of doing. So, it's a -- it's a clear irony that this comes out just as President Obama is meeting with President Xi.

I would point out that both leaders do want this meeting to be a success, at least they are looking to find a way for both countries to have -- reengage on issues ranking from North Korea, Syria, Iran, to some of the business issues that have typically focused on trade and now are turning to cyber, to create a more -- equal partnership where they talk as leaders who can understand one another.

Now that the Chinese leader is a much younger, more sophisticated person, President Obama in particular is hoping he can forge a connection with him. But my main point here is that there is a motivation on both ends to try to make this work, even if Xi goes back to China and points a finger at the US for this latest embarrassment to the administration, Nina.

DOS SANTOS: OK, Jessica Yellin, our chief White House Correspondent, joining us live from Palm Springs covering that summit. Thanks for that.

Still to come on -- tonight on QUEST MEANS BUSINESS, a Friday fixation. The US jobs report was such a big focus on Wall Street today that some called it, quote, "the most important payroll release in years." We'll break it down for you when we come back.


DOS SANTOS: Hello, welcome back. The latest US jobs report is out, and this is what it shows: in May, employees managed to hire 175,000 workers. That's more than in the previous months of April and also March, as you can see in those blue columns.

The increase was stronger than expected, and economists on average had actually been predicting a gain that was quite a bit less than that. We're talking about 158,000 versus the 175,000 registered.

The unemployment rate, though -- and here's the bad news -- managed to tick up to 7.6 percent for the month of May from 7.5 percent, and the reason for that is that more people entered the labor force in search of work.

The slow and steady jobs growth is unlikely to affect the Federal Reserve's monetary policy going forward because the Fed has repeatedly said that it's looking for substantial improvement in the jobs market before it starts to scale back on that quantitative easing program. And "substantial," some economists say, is more than the figure that we've seen today.

The jobs report has pleased Wall Street so far. Let's go to Alison Kosik at the New York Stock Exchange for more. Alison, how are they taking it?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: They're taking it pretty well. This jobs report, Nina, it seems to have been kind of the sweet spot that Wall Street was looking for. Investors seem much less worried now about whether the Federal Reserve is going to go ahead and pull back on its economic stimulus.

So, with this jobs number, investors wanted it to be good, they just didn't want it to be too good. So this may have been just right for investors. That's not to say Wall Street didn't want to see more improvement in the jobs picture, but the status quo really seems to be sitting well with the market, as we see the Dow up more than 150 points right now.

As for stocks, they've been all over the place this week. We have seen more volatility, more uncertainty come back into the market. We thought we could have been seeing the start of a pullback on Tuesday and Wednesday.

Actually, Tuesday and Wednesday was the biggest two-day decline of the year, but stocks are certainly showing resilience again. It's on track for gains for the week. Ultimately, with the Fed in the picture and this jobs report makes investors believe that the Fed is going to stay in the picture for longer than it thought, let's say, yesterday. Nina?

DOS SANTOS: OK, Alison Kosik there on the floor of the New York Stock Exchange, where things are wrapping up after a busy Friday. Thanks for that.

Well, Anthony Chan is the chief economist at Chase Private Client, that's part of JPMorgan Chase, and he joins us now live from New York with more on what this means going forward. Good to have you on the show, Anthony. 175,000 jobs. How are you taking that? Do you think that it's sustainable? Presumably we need far more jobs than that for things to start ticking higher.

ANTHONY CHAN, CHIEF ECONOMIST, CHASE PRIVATE CLIENT: Well, I think it's a good start. I think that right now you need about 115,000 or so just to basically keep the labor force or absorb the new people entering the labor force.

What you saw in this report was that the labor force participation rate reversed course and actually increased, so that even though the household employment survey created over 300,000 jobs, you ended up seeing the unemployment rate picking up a little bit in this kind of an environment.

So, I would say that overall, the report was fairly encouraging, and certainly stronger than some of the much softer or weaker whisper estimates that were being bandied about in the street.

DOS SANTOS: Now, one of the things that you and I often address when we talk about the jobs reports is the amount of people who are longterm unemployed and don't have the confidence to get back into the workforce.

We're seeing the rates -- jobless rates tick up slightly to 7.6 percent, but there's a good reason behind that. That's because some people have the confidence to start looking for a job again, isn't it?

CHAN: That's exactly right, and that of course was captured by that labor force participation rate. I know that some of the people that want to sort of cast a dark cloud on this number will say well, but look at the discouraged workers and look at those people that are working part time, and they'd rather be working full time.

So, when you look at that broader measure, namely the U6 unemployment rate, even there you saw a decline by one tenth of one percent. We still need many, many more jobs, there's no question.

We lost 8.7 million jobs during the financial crisis and we've gained back a little over 6 million, so we're still short almost 2.4 million jobs, but we are making progress, and certainly from the trough of the financial crisis, very few people would argue that we haven't made some progress.

DOS SANTOS: There's a big distinction to be made here between Wall Street and how Wall Street has fared over the last couple of years and Main Street and how Main Street has fared. As you were just saying before, there's a lot of people unemployed.

But the reality is is that the stock market has been doing extremely well and companies are absolutely cash rich. When is that money going to filter back to Main Street and when are companies going to be able to hire again?

CHAN: Believe it or not, all of those things are happening. They're probably not happening fast enough, and some people are growing impatient, and I don't blame them.

But the truth of the matter is, Wall Street and -- or Main Street is hiring again. We are seeing more and more jobs being created, whether they be part-time workers, whether they be full-time workers, jobs are being created, more than 6 million jobs have already been created.

And the truth of the matter is, we are starting to see at least a glimmer of hope on capital equipment expenditures, we're seeing a lot more share buybacks, we're seeing some evidence that some companies are spending a little bit more money in capital equipment expenditures. So, all that is taking place.

What I would say, though, is that I'm a little disappointed that it's not happening faster. After all these years, it's still been a recovery that is still too weak, by historical standards, but very few people would argue the case that it's not a recovery. It's just a very soft recovery, but it is one.

DOS SANTOS: A so-called "L-shaped" recover, some might say. If we talk about the Fed, this obviously brings us to the big elephant in the room: the Fed and its ongoing monetary stimulus. Are today's jobs figures good enough to buoy the markets, but not too good for people to think that the Fed will turn off the taps anytime soon?

CHAN: I think that's right. This was a Goldilocks in the traditional sense kind of report. I think you want to see numbers in the neighborhood of about 200,000 per month for a few months for the Federal Reserve to gain the confidence that it's certainly safe to go.

With this number, it's good -- 175 is not bad, we'll take that all day long. But it really isn't strong enough, especially in an environment where the Federal Reserve has said that they would love to see the unemployment rate come down to 6.5 percent.

Of course, if we continue to see 175,000 for 6, 9, or 12 months, the Fed probably will act, no doubt. But with 175, I don't think they have the urgency until they see this for quite some time. 200,000 or more every month for three or four months, for sure they'll go, 175,000 they'll go, but only after a slightly longer period of time.

DOS SANTOS: OK, Anthony Chan, chief economist there at Chase Private Client in New York. Thanks for your time this Friday.

Now, Europe's equity markets followed Wall Street's lead, as you can imagine. Gains all around on this final trading session of the week on Friday. In Germany, the Bundesbank did cut its forecast for growth for Europe's largest economy for this year and next. Didn't affect the DAX, as you can see there.

And these numbers were offset by stronger than expected industrial output and trade figures, especially on the German front again. I should point out that exports and imports in Germany both rose for the month of April.

Time now for a Currency Conundrum for you. The actor Martin Short has designed a new Canadian coin to celebrate Canada Day. Which Canadian building did he choose to print on the coin? Is it A, Parliament Hill? B, CN Tower? Or C, his own house? I'll have the answer for you later on in the show.

Onto the jobs reports and the effect on the currencies that that's been having. Well, as you can see, the dollar has been rising against both the euro, the British pound. It's also up against the Japanese yen as well, which will be some relief to Japanese exporters.


DOS SANTOS: Supermarkets in Venezuela are running out of things to sell. Everything from toilet paper to Communion wine is in short supply, and that's because of high inflation, currency restrictions, as well as price controls. Venezuelans outside of the country have even started sending goods home to help their loved ones. Adriana Hauser now reports.


ADRIANA HAUSER, CNN ESPANOL CORRESPONDENT (voice-over): This is a supermarket shelf in the US. This is one in Venezuela. The shortage of basic product is a cause for concern for many Venezuelans living in South Florida.


HAUSER: This Venezuelan stylist lives in a Miami suburb and says she's helping her sister by sending her flour, soap, and rice.


HAUSER: The owner of this grocery store is also Venezuelan, and he says he has seen an increase of clients buying basic products to ship to their country.


DOS SANTOS: Apologies for that. Obviously there's a problem with the translation from those Spanish sound bites there.

Now, let's move along and tell you what we've got coming on QUEST MEANS BUSINESS after the break. The great and the good of the airline world finally pack up and head out of Cape Town, South Africa. This as the curtain falls on the IATA conference. Richard is going to be talking to the director-general of IATA about what's at stake.


DOS SANTOS: Hello and welcome back, I'm Nina Dos Santos. These are the top stories that we're following for you on CNN.

The UN is asking for more than $5 billion for Syria, its biggest humanitarian appeal ever. Most of the aid will go to help refugees living in neighboring countries. The UN says that Syria is in such chaos that half of its population will need aid by the end of the year.

Chinese state media is reporting that at least 42 people have been killed in a fire which started on a bus in southeastern China in the city of Xiamen. At least 33 people were injured as a result. The bus was traveling on an elevated traffic main during rush hour. The cause of the fire is not yet known.

Officials in Pakistan say that at least 6 militants have been killed by a drone strike in the north of the country. This comes just days after the newly-sworn in prime minister, Nawaz Sharif, told parliament, quote, "The campaign of drone strikes should be shut down." He also pledged to ensure Pakistan's sovereignty.

Flood barriers in the center of the city of Dresden in Germany appear to have held back the Elbe River so far, but other parts of the city are now underwater. At least 15 people have died in Europe's worst flooding in a decade. Emergency crews in Hungary are now preparing for an expected onslaught there.

Britain's Prince Philip is said to be progressing satisfactorily. He had an exploratory abdominal surgery today at a London hospital. No word yet on the results, though. The prince is expected to stay in hospital for a couple of weeks. He'll turn 92 on Monday.



DOS SANTOS: The world's airline bosses are flying home this weekend after the IATA Conference in Cape Town. Richard Quest has been talking to the major players there.


RICHARD QUEST, CNN HOST: This week, we have shown you the weather in Cape Town and some of the sights. This is the magnificent airport built in time for the World Cup. The airlines who came here for the IATA Conference were pretty much agreed on what needs to be done to return to sustainable profitability. From all sections of the world, there was one voice.

GOH CHOON PHONG: We have to be all very nimble in a challenging environment. And this is where the growth is right now, which is through the region, which is Southeast Asia, China, India as well as Australia.

DOUG PARKER: Having been positioned as one of the leading global airlines in the world, one that can serve both through the oneworld alliance but also through our own mainline airline, more markets than anyone else in the world and can provide the kind of service that people all around the globe are looking for to get them to different points around the world.

CHRISTOPH FRANZ: We are hauling rehaul (ph) airlines. We wish to move to the new airport as fast as possible. We built a hangar, the hangar is built. It's ready. It's empty.

JOHN SLOSAR: The competition is always a challenge and competition never stays the same. By definition, it's dynamic; it changes. We need to find ways of responding to it. But it's not just about responding to it. It's also about getting ahead of it and doing things that give your competitors problems, not just waiting for them to give you problems.

QUEST: Pulling the views together, so that aviation speaks with one voice is the director-general of IATA, Tony Tyler.

As he pointed out, the airlines may be making money, but there's a 1.8 percent profit margin, it's pathetic.

TONY TYLER, DIRECTOR-GENERAL, IATA: When governments think, oh, we can easily tax the airline industry, they're making lots of money, they're not. They're making four bucks a passenger. (Inaudible) the tax on and you're now putting them in a loss of $6 a passenger.

QUEST: So what needs to happen? We've heard from the various CEOs during the course of the week. And each have got their own strategy for growth, for alliances, for new members or whatever it might be.

But as an industry, what needs to happen?

TYLER: Of course, what drives the industry, like any other industry, is world economic growth and development. And the GDP growth of 2 percent seems to be the benchmark at which airlines either make a profit or loss. Other 2 percent, they lose money; above 2 percent, they make a bit. But there's nothing we can do directly to change that.

So what governments can do to help is get off our backs with taxation and overregulation. And let us get on and do business. Provide the infrastructure that we need in the way of airspace, clearly airspace, clearly let's have some better ways of managing air traffic and provide the runways we need to come and go.

QUEST: You are the head of a world organization that has over 240 members. But at different points in the economic cycle and with different growth strategies.

So how are you balancing it out between this still disgruntled in some parts of the world and the very fast-growing that says you solve your own problems; don't worry about us.

TYLER: Of course, there's a lot of issues in our industry that affect all airlines; doesn't matter whether they're big or small or fast-growing or mature. And those are the issues that we tend to concentrate on because they all tell us to do so. And there are things like, you know, like lobbying governments to adopt more sensible policies towards taxation and things like that.

You know, infrastructure, and because the big one is safety. We do a lot of work on safety. When you think that last year there were no Western-built jet hull losses in the world on -- from IATA airlines or airlines on the IOSA (ph) registry, our safety order (ph) registry, I think it's a fantastic achievement.

QUEST: What's going to be your number one priority?

TYLER: Restoring or achieving sustainable profitability is really the key priority for this industry. And not, of course, in simple terms, it means getting your revenues up and getting your costs down. And so, as an industry body, try and help our airlines to do that. And there's a multifarious (ph) ways in which we do it.

We do -- spend a lot of time trying to get governments to adopt more aviation-friendly policies. And the places where they do, where they really get it, are places where those economies are going well, where jobs are being created, social development is continuing apace.


QUEST: Tony Tyler, the director-general of IATA.

Next year's IATA meeting will be held in warmer climes: Doha in Qatar in the spring.


DOS SANTOS: Of course it's a bit chilly there in South Africa now, because it's the other side of the planet and, of course, they're having (inaudible) winter.

Well, I'll be back with more QUEST MEANS BUSINESS after this short break (inaudible).





DOS SANTOS (voice-over): (Inaudible) tonight's "Currency Conundrum" for you. Earlier in the show I asked you which Canadian building did Martin Short choose to be printed on a new coin? And the answer is C, it's something you might well have guessed -- that's his own house.

The coin features the actor's summer house in northern Ontario. It displays a sailboat on a lake and a boathouse and two deck chairs. The coins have a face value of 3 Canadian dollars.


DOS SANTOS: Now Microsoft and the FBI have teamed up to shut down one of the world's biggest cyber crime rings. The so-called Citadel Network is responsible for stealing more than $500 million from individuals and businesses worldwide.

Greg Garcia is the spokesman for the three U.S. financial industry associations that are involved in this investigation. I should also say that he's also a former homeland security cyber official himself. He explained to me earlier how systems like Citadel's actually work.


GREG GARCIA, FORMER DHS CYBER OFFICIAL: What happens if you think of a cyber criminal mastermind who is able to take over hundreds or thousands of computers. And in those hundreds or thousands of computers, then send their malware out to other computers, infecting them in turn. And it becomes an exponentially growing network.

And many of the hacking tools used by the mastermind are actually sold to other criminals, to further build the network. And then they deliver malware, such as keylogging, a program that simply records your strokes on the keyboard. And it collects your --


DOS SANTOS: -- record your passwords, can't it? That's the problem?

GARCIA: Your passwords, your userids and your account numbers. And they can take over your account and steal your money.


DOS SANTOS: Well, flood barriers in the center of the German city of Dresden appear to have held back the River Elbe for the moment, but other parts of town are currently underwater, as you can see from the recent pictures that we're showing you, though those pictures come from the Czech Republic earlier in the week.

Well, the severe flooding has killed at least 15 people. It's also displaced tens of thousands of people. Now Germany and the Czech Republic that I was talking about before are among the hardest hit countries. But Hungary is also bracing itself for flooding of the Danube later on, perhaps this weekend.

Well, the flooding has also had a severe financial impact on people living in these areas. Early estimates suggest that it could have done damage worth around about $100 million, maybe even more.

Matthew Chance got an exclusive bird's-eye view of the problem as it stands.


MATTHEW CHANCE, CNN SR. INTL. CORRESPONDENT (voice-over): It's a city drowning in its own river. Skies over Dresden, German emergency teams gave us an exclusive look at the flood zone and the sheer scale of this European disaster.

CHANCE (from captions): Wow. Looking at the flood zone form the air is altogether different from the view you get on the ground. You can really see the extent to which the waters of the Elbe River here in Dresden has taken control over vast areas of this historic city.

UNIDENTIFIED MALE: On the right side, you have one of the containers.

CHANCE (voice-over): Among the debris swept downstream, we saw industrial containers. Emergency workers are worried they could contain harmful materials like chemicals or fuel. These ones were checked and found to be safe.

Further down on what was the river bank, the children's water park lies partly submerged, its once pristine swimming pools now overcome with brown slurry.

CHANCE (from captions): Well, rightly we've focused on the human impact of these floods. Tens of thousands of people have been evacuated from their homes as a result. But the economic impact is going to be immense.

Just look at the scene down there, the damage that has been caused by these floodwaters, not just here in Germany but across the region. It's going to run into hundreds of millions of dollars.

CHANCE (voice-over): But for now, the focus remains on stemming the flow of Europe's powerful rivers. Officials say that not until the waters recede can the final cost of this flood be counted -- Matthew Chance, CNN, Dresden.


DOS SANTOS: Let's take a look at how the weather forecast is shaping up for the weekend for the people there in those stricken communities.

Jenny Harrison is at the CNN International Weather Center with more.

Jenny, respite on the way, perhaps?

JENNY HARRISON, CNN METEOROLOGIST: Nina, not really. I have to say there's more rain in the forecast. So not really, it's not a great picture at all. But I think unfortunately we're going to be talking about this through the weekend and also through the next week as well.

In terms of the rivers and whether they have yet crested, as for the cleanup, it is going to be weeks of course before we finish talking about that.

This is the view from space. This is coming to us from NASA. So a month ago, you couldn't actually see where the Elbe River was, not from way up there. But look at this on Thursday. You see it very closely. And of course, the reason you can see it so clearly is because now it is so very, very vast. In fact, in some areas, it is up to 3 kilometers in width.

So no wonder we have got pictures like those coming to us courtesy of Matthew (ph) up there in the helicopter. So as I say, it is all about these rivers, the Danube, the Elbe, when is it going to crest in some areas?

Well, as we know, first of all in Bratislava, it has actually crested here. But of course it is continuing to crest all the way down into the Slovakia-Hungary border. And in fact, probably cresting in Budapest on about Monday.

And then we head up along the Elbe River, and it's cresting right now through Saxony and all that particular region. We've had record levels already in and around Magdeburg. It's probably going to crest there last Saturday into Sunday. And it's going to continue on towards Hamburg, probably not cresting there until about Tuesday or Wednesday.

And this is what I mean about how long it is going to be. So it could be the middle of next week before we've even finishing talking about when it is going to crest. And when we look at the Elbe River, as I say, Dresden, for example, it did indeed crest on Thursday. The further to the north we're looking at the beginning of next week.

And my goodness, these are some pretty big rivers of course. And the Danube, as I say, again, we've seen it cresting already in some areas. And further downstream, we're looking at Sunday on into Monday.

Now the actual forecast, there's more rain in the forecast. It's very widespread, but quite heavy in some areas. Not huge accumulations, but enough, I'd imagine, Nina, that the residents -- it is the last thing they're going to want to see.

The rain not particularly adding to the situation with the rivers, but even so, we could do with -- we could do with some fine, dry weather.

DOS SANTOS: OK, Jenny Harrison, thanks for that.

And on that note, it's time to say goodbye. Have a great weekend (inaudible).




ROBYN CURNOW, CNN HOST: You're watching MARKETPLACE AFRICA. I'm Robyn Curnow. Now South Africans are relatively spoiled for choice when it comes to fast food. So when America diner Burger King opened its first store on the continent in Cape Town recently, many asked has The Whopper got here just too late?

And as Nkepile Mabuse now reports, with a market growing at twice the rate of the country's GDP, fast food is anything but slow here in South Africa.



NKEPILE MABUSE, CNN CORRESPONDENT (voice-over): The world's second largest hamburger chain arrived in Cape Town in May amid much fanfare. The city's mayor, celebrities and hundreds of curious burger enthusiasts treated their South African palates to a new American flavor.

UNIDENTIFIED MALE: I waited for like three hours for her. It was worth it.

UNIDENTIFIED MALE: I got the last Whopper, yes. I'm very lucky to be the last in the queue.

UNIDENTIFIED FEMALE: (Inaudible) Burger King Whopper. It was incredible.

MABUSE (voice-over): Three weeks later, the queueing continued.

HASSAN ADAMS, BURGER KING SOUTH AFRICA: Well, I thought after the third day it would die down. The novelty you can only judge by the popularity of the bun (ph) and the support of the people. And I'm saying to you that Burger King is here to stay.

MABUSE (voice-over): Cape Town based leisure and gaming mogul Hassan Adams has secured the Burger King franchise rights for South Africa. He says it's not just consumers lining up for the world's famous Whopper. Entrepreneurs want a piece of the business.

ADAMS: We are inundated with thousands of phone calls every day from throughout Africa and South Africa from people who want Burger Kings.

MABUSE (voice-over): Adams says South Africa's fast-food industry is worth nearly $2 billion in turnover a year. He's hoping to secure 10 percent of market share. But competition is stiff. The world's number one burger company, McDonald's, has had a head start of nearly 18 years in South Africa. And many locals remain loyal to their own homegrown brands.

DAVID SHAPIRO, MARKET ANALYST: It's not too late. Burger King will do well. Regardless of where we might think we are, we love America. We love America culture, whether it's music, whether it's sports, whatever it is.

MABUSE (voice-over): Analysts say while the rest of the world is increasingly becoming more health-conscious, the continent's appetite for fast food is growing.

SHAPIRO: (Inaudible) now working. They haven't got time to go home and cook a meal. And we're turning to fast foods.

MABUSE (voice-over): With little concern over waistlines, expansion plans are being accelerated.

ADAMS: On our anniversary, we should have about five or six stores open --

MABUSE: In Cape Town?

ADAMS: In Cape Town.

MABUSE: But Johannesburg is the commercial capital of Africa.

ADAMS: Absolutely, absolutely.

MABUSE: Why start in Cape Town when the money is in Johannesburg?

ADAMS: Nkepile, can I just say to you that I'm too scared to mention Johannesburg because if these queues are so long here, can you imagine how long they're going to be in Johannesburg? So what we have decided to do is to set up the logistical support time. We are importing most of our protein at the moment.

So we have set up a factory which we are building in the next four to six months. And then we will be able to supply everything from locally produced protein and other products, OK? And once that's in place, we can roll out the Burger King throughout South Africa and Africa without hesitation.

MABUSE (voice-over): Ultimately it is its ability to stimulate growth, jobs and the economy that will benefit the country and the continent the most.

SHAPIRO: Well, you can't import your meat from China. You know, there may be ingredients, the spices, there are certain things. But at the end of the day, the buns have to be made here.


SHAPIRO (voice-over): Of course, it does have a huge implication for (inaudible) local (inaudible).

MABUSE (voice-over): That's for as long as demand continues to stimulate the (inaudible) -- Nkepile Mabuse, CNN, Cape Town.


CURNOW: From a branding arrival to a rebranding effort, after the break, I sit down with the vice prime minister of Mauritius for this week's "Face Time" interview.


XAVIER-LUC DUVAL, VICE PRIME MINISTER, MAURITIUS: (Inaudible) of course and we have a good branding in terms of tourism. But now we are trying to show the world everything that Mauritius stands for.




CURNOW: Welcome back. Now can palm trees, white sand and clear waters be a blessing and a curse? Well, they can be if you're a business- minded official looking to build more than just a tourism getaway.

Well, for this week's "Face Time" interview, I sit down with Xavier- Luc Duval. He's the vice prime minister of Mauritius. And he says he wants to rebrand his island nation. And his inspiration, a success story a continent away.



DUVAL: Mauritius has always taken Singapore as a bit of a role model. We both started our independence fairly poor, an economy not really performing. And over time, have managed to diversify the economy; have managed also to take a place on the world stage.

Obviously now Mauritius is (inaudible) Singapore, but we are doing reasonably well.

You see, all through our history we have been far away from our main markets. But for once in our history, we see ourselves have been very fortunate being located on the shores of Africa, Africa now the continent of hope. And we hope to play a major role in the development of Africa over the next decade.

CURNOW: So it's about policy. It's about putting the right regulations and the creating the opportunity for businesses to come?

DUVAL: Absolutely. It's very important. We have a will and we have a vision. And at the moment, the vision is centered around Mauritius becoming a hub for Africa, being a financial hub, a medical hub or even education hub.

Now underlying all this is our wish to make of Mauritius a good place to do business. Now we have done a lot of effort over the years, to be able to make opening a business, running a business and making a profit very easy in Mauritius. And we're very happy that we -- this year we're in the top 20. We are, in fact, 19th in the World Bank, ease of doing business report.

And that's makes us very, very pleased.

CURNOW: It's important, isn't it, to be part of these lists, because it's basically a way of advertising how well you're doing.

DUVAL: Absolutely. And in fact, the -- our government, and even the population, you know, they look out for our rankings. And in fact we were in the top 10 worldwide in the Wall Street economic freedom index. That makes us very pleased.

Also like to add that the country brand index, which future brand published recently, showed Mauritius in the top 20 world famous brands, ahead of very many large countries.

CURNOW: For many people, Mauritius is a place to go on holiday. But you're trying to attract people to come and, A, spend a lot of money in the country and use your country to facilitate these capital flows.

Who are you targeting?

DUVAL: Mauritius is a tourism destination. It's good branding, but in fact, the truth is that Mauritius, the economy, is so diversified that tourism hardly accounts for 7 percent of GDP; whereas financial services accounts for 10 percent of our GDP. So people don't know that.

But it's good also, of course, that we have a good branding in terms of tourism. But now we are trying to show the world everything that Mauritius stands for.

CURNOW: And you're trying to attract investment from the east? Is this about facilitating Chinese trade through into Africa?

DUVAL: Absolutely. Mauritius now sees itself as a meeting place for the rest of the world. We've just taken off visa requirements for 50 African countries. Now we have no visa requirement for Russians, Chinese, Indians, you know, for the rest of the world, really.

So if you want to be a hub, you need to facilitate that. And you need to make travel easy. Mauritius is building a new airport, which we hope will become the hub of the region. Mauritius -- we are multilingual.

We have people speaking all languages. In Mauritius we have all communities, all ethnic representations. So Mauritius really is a melting pot of different cultures, but also now we see it as a meeting place in this region of the world.

CURNOW: Africa's at a very specific time in its history. There's this sort of rapid transformation and emerging middle class, a resource boom, in a way.

Do you think that's cyclical? And do you think the story of Africa's growth is going to pop? Is this a bubble? Or do you see it being sustained over the next decade?

DUVAL: We see it as being something that is sustainable for various reasons. We don't think that it's just a community's boom, (inaudible) prices increasing and revenues increasing in a short term.

CURNOW: And the key, I suppose, for you, particularly being a small island, is this regional integration and then this sort of connectedness that is there, but it's -- more needs to be done, doesn't it?

DUVAL: Absolutely. We're a small island, but we are a trading nation. We almost all that we manufacture we export, and we consume, you know, most of what we consume is imported. But we also export our services, be it professional, be it tourism, et cetera.

So we see openness, being able to break down trade barriers as being essential for the development of Africa, because if you look at what's happening, Europe obviously has its problems. The BRIC countries are doing reasonably well.

But there's huge potential in trading into Africa. With African countries, sourcing their raw materials from each other and reexporting to each other and also in providing professional services to each other.

For instance, in Mauritius, we may need I.T. professionals. We may have an excess of doctors and things like that. So we see a sharing of services, trading in goods as being essential to uplift the development of Africa, whatever else happens in the world. We believe that Africa has a potential on its own to prosper and develop.


CURNOW: Well, that was Xavier-Luc Duval, the vice prime minister of Mauritius.

And next week on the show, we're going to be focusing on the business of luxury here in Africa. Until then, I'm Robyn Curnow. Thanks for watching.