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QUEST MEANS BUSINESS
Breaking News: Bridge Collapses in Brazil; Dow Hits 17,000; US Jobs Report; Health of US Economy; Airport Security Tightened; Uganda Airport Threat; European Airport Response; Norwegian Air's New Routes; Make, Create, Innovate: Killing Deadly Insects
Aired July 3, 2014 - 16:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
MAGGIE LAKE, HOST: Fireworks on Wall Street. Trading came to an early end this afternoon as the Dow finally hits 17,000. It's Thursday, July the
Tonight, breaking news from Brazil. An overpass collapses in a World Cup host city. At least one person is dead. We'll be live in Brazil shortly.
Just a job. Stocks pass a milestone as America gets back to work.
And the CEO of Gatwick Airport tells us tighter security won't keep you waiting.
I'm Maggie Lake. This is QUEST MEANS BUSINESS.
Good evening. We'll have the day's full business roundup in just a moment, but first, we have breaking news from Brazil. At least one person is dead
after an overpass bridge collapsed in the city of Belo Horizonte in Brazil. Two buses are trapped underneath the fallen structure, which was under
construction. You are looking at live pictures right now.
Now, Belo Horizonte is a World Cup venue, and one of the semifinals is due to be played there on Tuesday. Shasta Darlington joins us, now, from Sao
Paulo. And Shasta, can you bring us right up to date? What do we know about this?
SHASTA DARLINGTON, CNN BRAZIL BUREAU CHIEF: Well, Maggie, the firefighters have confirmed one death. We're working to confirm media reports that a
second person has died, that at least 19 people are injured.
This accident happened about five kilometers from the stadium where the World Cup is being played out, as you mentioned. Luckily, it wasn't on
game day, it wasn't during rush hour. But if this were next Tuesday, we really could have seen a much bigger accident here.
Again, this was an overpass that was under construction, part of a mobile - - an urban transportation project that was supposed to be finished for the World Cup. It wasn't. And it was going right over a major thoroughfare in
Belo Horizonte called Avenida Pedro I.
So, this overpass collapsed, crushing a bus and at least one other vehicle. Again, we're working to confirm more details. There are some reports that
there were actually three vehicles under that overpass. We'll be hoping to talk to firefighters and also get some reports from nearby hospitals as
these rescue works continue.
And also, just again, keeping an eye on these different construction projects, this is the third one that immediately comes to mind that has
happened in World Cup cities and possibly near different venues.
So, this is -- this could conceivably have a bigger impact on the way people are viewing the World Cup as we play it out. We've still got
another ten days to go. So, an important incident here, Maggie.
LAKE: Absolutely. Shasta, do we know at all what caused this collapse? I know as you and I had been talking the weeks leading up to this, there was
a lot of concern about the fact that many of these projects were behind. Many of -- certainly when it came to the stadiums had not been tested at
Do we know what caused this? And while you're answering, by the way, I just want to remind our viewers, we are looking at live pictures of the
scene right now.
DARLINGTON: We don't know the cause. It's much too early to talk about causes. We do know that it was under construction, so it wasn't a fully
built and stable piece of engineering and that it was supposed to be done for the World Cup.
It wasn't done in time, and officials have insisted over and over again that a lot of these urban transportation projects are aimed to help the
people of Brazil and not necessarily the fans. So, I think at this point, if it wasn't done before the World Cup, there wouldn't necessarily have
been a huge rush to try and get it finished.
So, it's not the kind of accidents, for example, that we saw at the stadiums, where there was a lot of criticism that people were working 24
hours and maybe not in very safe conditions. So, there will be a lot of investigation going on, but we don't know the cause at this point, Maggie.
LAKE: All right, Shasta Darlington, live for us with the developing story from Brazil. And we will, of course, continue to monitor that closely.
Thank you so much, Shasta.
Well, traders head off to the holiday weekend with a major milestone in the bag. Take a look at that number behind me. The Dow has finally crossed
17,000. After a week of pulling up short, a strong US jobs report was enough to push the Dow into record territory this session.
Now, it was one of the best months for US jobs since the long, slow recovery began. Employers added 288,000 staff in June. And this is an
important number. This is the kind of number that we want to see to signify strong growth.
It means a net gain of 1.4 million jobs in six months. That is the best half year for hiring since 2006 Unemployment is now down to 6.1 percent,
and importantly, more Americans are joining the labor force.
Meanwhile, Fed chairman Janet Yellen breathing a sigh of relief tonight, we must imagine. She's been saying slow wage growth and its effect on
consumer spending are a key concern. Today we learned pay is rising, but only by 2 percent over last year. US president Barack Obama put the latest
jobs report in context.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It's a sort of economic patriotism to -- where you say to yourself, how is it that we can start
rebuilding this country to make sure that all of the young people who are here, their kids and their grandkids are going to be able to enjoy the same
incredible opportunities that this country offers as we have.
(END VIDEO CLIP)
LAKE: Earlier, I spoke with Jason Furman, chairman of the White House's Council of Economic Advisors. I asked him after several months of healthy
job creation in the US if the growth is sustainable.
JASON FURMNA, CHAIRMAN, WHITE HOUSE COUNCIL OF ECONOMIC ADVISORS: I think the economy is clearly strengthening. You're seeing that in terms of
consumer spending, you're seeing that in terms of our businesses.
But there's a lot more we need to do to keep that progress up. We still have challenges, like too much long-term unemployment, wages that haven't
risen in decades. And that's why we're so focused on everything that needs to be done, even while we recognize that the economy truly is
LAKE: Jason, the jobs are coming back, but there are still economists who look at business investment and say it is lagging and not where it should
be. What can be done on that front?
FURMAN: You're certainly right that over the last year, business -- actual investment in plans and equipment in the economy hasn't grown as much as
profits or stock market valuations would lead you to think you might see. So, we'd love to see more of that.
I think part of what got in the way last year was some of the uncertainty created by Washington with the sequester, the debt limit, the shutdown.
The good news is, our fiscal policy is in a much more sustainable course over the next year or two, with agreements about overall spending levels in
But I think over the longer term, our business tax system now is the highest tax rate of any country in the world. We could reform that, bring
that tax rate down, close loopholes, and that would also help investment.
LAKE: If the administration wants to send a pro-business message, is going after banks the right way to do that? The president this week again saying
the unfinished business is to crack down on Wall Street and banks. Is that the most effective policy to take right now? What does he mean by that?
FURMNAN: Let me tell you exactly what the president said and what he means. We had a financial sector that played a role in the worst crisis
this country has seen since the Great Depression. We put really serious reforms in place to deal with that.
We have done much of the implementation of those reforms. We need to continue implementing them. The financial sector plays an incredibly
important role in the economy, channeling credit to businesses and families that need it.
But it's also grown a lot over the decades, and that's something the president's saying we should be taking a look at and asking the question,
what can we do to have more talented engineers, scientists, factory workers, health technicians all across this country. Those are all really
important parts of our economy and would love to see them growing.
LAKE: Well, stock markets certainly gave the impression of a healthy economy. The Dow closed up half a percent at the end of a shortened
session. In fact -- and this is really the important number -- stocks are up almost 14 percent over the past year. The Dow jumped 1,000 points from
16,000 to 17,000 in just seven months, if you can believe that.
Well, for more on the health of the US economy, Ben Willis is senior floor broker at Princeton Securities. He joins me in the studio tonight. Ben,
it's so great to see you here. We're usually chatting on the floor of the New York Stock Exchange.
A lot of people very excited to see this kind of rally, but they're also a little bit worried about whether it's really justified. What's your sense?
BEN WILLIS, NEW YORK STOCK EXCHANGE TRADER: It's absolutely justified. What we've been seeing is the recovery of the global economy going back for
about four years now. The jobless claims number is the single biggest number that will move a market, and that's exactly what we saw today.
But the fact of the matter is, the world economy has been improving. The central banks throughout the world have been able to move and inflate the
asset bubbles, if you will, and I will call them bubbles, particularly in the fixed income market.
But now, the stock market is starting to realize that, and the Dow Jones Industrial Average, it actually has lagged some of the other major indices
in pointing in that direction, but it is a great indicator for the world economy, and an indicator for the investor at home to realize that they're
missing an opportunity here. If they want to retire on time, they can't be in the bond market.
LAKE: And that's the thing. In the months leading up to this -- because it's been a good run. This isn't a rally that just happened --
LAKE: -- as we just showed on that chart. But what we were hearing from people is there's a disconnect between the economy, this is a result of
extraordinary central bank policy. It's Kool-Aid. Everybody's hooked on the Kool-Aid. Are the fundamentals finally catching up to the rally, or is
that still a concern that there's something about this that is artificial?
WILLIS: The stock market is a forward indicator. The bond market traditionally is a place where people who live with a little bit more fear
in their lives like to keep their money. So, what the stock markets have been telling you is that the economies around the world, including the
United States, most importantly, have been improving.
Not as rapidly as we would want. As a matter of fact, 288,000 jobs is a very good number compared to the numbers we've had over the last four
But in the scheme of things, it's actually a weak number. You need that kind of growth in order for the economy to continue to grow at the 5
percent. We've been growing at 2.5. As a matter of fact, Goldman Sachs today lowered the growth expectation.
So, that being said, it still -- you need to take a look at where you want to be in a year and where you want to be in five years, and that's what the
stock market is about. That's why you've seen the markets rally off its lows.
When there was panic in the market back four, five years ago, when the money center banks of the United States of America were trading at $1 a
share, you had to keep your head about you --
LAKE: That's right.
WILLIS: -- and know that was a generational buying opportunity.
LAKE: And some people did.
LAKE: And they are really sitting pretty for now. For those who didn't, do we get in now? Are we going to see a big allocation? Should we think
about taking money out of bonds and putting them to work in stocks? How much more can this run to the upside?
WILLIS: I think it -- as a professional trader, I would look for an opportunity to buy a little cheaper. You should get some sort of pullback.
But the correction that professional traders are telling you about seems to be happening on a sector basis. We saw it happen in the biotech stocks.
WILLIS: But now, the biotech industry year-over-year is up almost 17 percent from that -- so that correction was in between. So, if you like
the company in that sector, like Merck and Pfizer did, because they went out and bought biotech companies when they sold off.
Warren Buffet went out and bought the money center banks, including Goldman Sachs stock, when nobody else wanted to buy it. Those are your buying
But for a long-term investor, you need to take a look at what you're returning. And the fact of the matter is, you thought you were safe in the
bond market. As interest rates go up, that account that you used to see growing 1 or 2 percent is actually going to go down, because the principle
will be lost in the value of those bonds.
So, if you're that kind of conservative investor, I would tell you to be looking at dividend-paying stocks. You can look in the energy sector.
They're called master-limited partnerships. The utilities stocks actually sold off today because of the fear of rising interest rates.
But if the economy's improving, utility companies will be selling more product, and therefore, their stock will become more valuable.
LAKE: All right, there we have it, the advice. Ben, thank you so much.
WILLIS: You're welcome.
LAKE: Have a fantastic weekend. We absolutely love the tie.
WILLIS: Thank you very much.
LAKE: Enjoy. Well, still to come on QUEST MEANS BUSINESS, next time you're boarding your plane, don't be surprised if security takes an extra
close look. We've got all you need to know about the latest safety crackdown in just a minute.
LAKE: Increased security on some flights headed to the US could last for the foreseeable future. British deputy prime minister Nick Clegg says the
new measures stem from an ongoing review of security checks.
A US official told CNN terror groups may be creating new explosives that are harder to detect. Speaking to ITN, British prime minister David
Cameron said passenger safety must come first.
(BEGIN VIDEO CLIP)
DAVID CAMERON, PRIME MINSTER OF BRITAIN: This is something we've discussed with the Americans, and what we've done is put in place some extra
precautions and extra checks. The safety of the traveling public must come first. We mustn't take any risks with that. I hope this won't lead to
unnecessary delays, but it's very important that we always put safety first, and we do.
(END VIDEO CLIP)
LAKE: Our chief US security correspondent Jim Sciutto joins us now, live from CNN Washington. Jim, why are we hearing about this now? Is there
some sort of credible threat that's come up that we need to know about?
JIM SCIUTTO, CNN US SECURITY CORRESPONDENT: Not a specific threat, but this has been an ongoing threat. It's been something that US intelligence
and counter-terror officials have been following for some time. And that is the attempts by AQAP, al Qaeda in the Arabian Peninsula, to refine bombs
to the point where they're not detectable by current screening methods.
They know -- intelligence officials know that AQAP has been trying this. And clearly, in the last several weeks, they received new intelligence that
showed that the threat has grown greater, and they have to improve their screening methods as a result. It's not specific to a particular plane at
a particular time, but it is enough of a threat that they wanted to take this step now.
LAKE: And Jim --
SCIUTTO (voice-over): They are the first line of defense for the American homeland: foreign airports with direct flights to the US. And now, the
Department of Homeland Security is directing those international airports to step up their security screening.
In a written statement, DHS secretary Jeh Johnson said, "We are sharing recent and relevant information with our foreign allies and are consulting
the aviation industry."
Among the changes passengers may see, more screening of electronics and shoes. More explosive detection machines. And in some cases, extra
screenings at boarding gates.
SCIUTTO: Driving the new directive is increasing concern that terrorists from al Qaeda in the Arabian Peninsula, or AQAP, are refining bombs
designed to avoid detection by current airport screening methods.
SETH JONES, RAND CORPORATION: Al Qaeda in the Arabian Peninsula has long looked for vulnerabilities in airport security, and in particular, finding
ways to put together bombs using non-metallic material that could make its way through metal detectors.
But also trying to hide bombs in body crevasses that will not be easily identified by some of the newer machines in place at airports.
SCIUTTO: This is the man believed to be behind the threat, AQAP master bomb maker Ibrahim al-Asiri. In recent months, US officials have warned
that Asiri and AQAP terrorists trained under him were improving designs of new explosive devices, such as shoe bombs, that could fool screening
We spoke about the new measures today with former DHS secretary Michael Chertoff.
SCIUTTO (on camera): How concerned should fliers be about what this means, about the threat?
MICHAEL CHERTOFF, CHAIRMAN, THE CHERTOFF GROUP: I would be mindful of the fact there is probably increased risk. I don't think it's dramatically
different. I wouldn't not fly. And the good news here is that the government's sharing information with others in other parts of the world is
respondent to this.
SCIUTTO: We know that these new screening methods are going to take place at airports specifically in Europe and the Middle East, and that fliers
flying those paths, direct flights from there to the US, will likely see these changes, Maggie, in the next several days.
LAKE: Jim, in a separate development, the US embassy in Uganda is warning that there may be an attack on the airport within this hour. Seems a very
specific time frame. What do we know about this?
SCIUTTO: No question, you're right. This is a specific threat in that you know the target, Entebbe International Airport, that's the only
international airport in Uganda. And the timing imminent.
What we know is -- that's really what we know. The target and that it's clearly something they're concerned about that they put out this warning
right now. It's coming, according to the US embassy, from an unknown terror group.
Now, we know in the past that al-Shabaab, a Somalia-based terror group, has carried out attacks in neighboring Kenya, and once before in Uganda.
That's a possibility. But the terror group has not been identified.
And we also know that security forces in Uganda already reacting to this. Increased security on the roads to the airport and increased screening at
Entebbe Airport, as you would expect in this case. But US officials warning Americans or foreigners traveling in that area to delay travel
because of this threat.
LAKE: And no doubt going to be a very tense evening there, Jim. Thank you so much for bringing us right up to date. Appreciate it.
SCUITTO: Thank you.
LAKE: Well, Jim Boulden has been at Gatwick just outside London, where he spoke to the airport's CEO. Jim joins us from CNN London. And Jim, how
are the European airports responding to this latest security?
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: You know, Maggie, it was just a coincidence that we were going to go behind the scenes at Gatwick
Airport today, and I said -- I went through security as well, and I couldn't see any visible difference.
And so, I asked Stewart Wingate, the CEO of Gatwick Airport, if it was more about things that we wouldn't necessarily see right away. He didn't give a
lot away, but listen to his response.
STEWART WINGATE, CEO, LONDON GATWICK AIRPORT: Well, we take security very seriously here at Gatwick Airport. We're working very closely with the
various different authorities, as we do day in and day out. All of the measures are in place. So, my advice to passengers would be just make sure
you get to the airport in good time.
BOULDEN: Is there something more enhanced that you're doing now?
WINGATE: Well, we're following all of the measures that we need to follow. Clearly, we don't go into detail on what those measures are. But for the
majority of passengers passing through Gatwick, you shouldn't expect too much disruption.
BOULDEN: I went through today and I didn't notice anything different, so it must be something behind the scenes or profiling, because it certainly
wasn't anything about going through bags more than they already do, I would say.
WINGATE: Yes, passengers shouldn't expect too much disruption. Get to the airport in good time, and we're following all of the protocols that we need
to follow. We take security very seriously, and we've got some of the toughest security arrangements in place from around the world.
LAKE: And that is certainly true, Jim. And no surprise, really, that he didn't want to get too detailed about what they were doing.
LAKE: One couldn't help but notice he was standing in front of a gigantic Norwegian Air get there --
LAKE: -- which was the purpose of your trip. I understand you also caught up with the CEO of Norwegian Air, who is launching a new service today.
BOULDEN: Yes, this new service that others have tried before and failed. Maggie, I don't know if you would like it, but the idea of a low-cost long-
haul flights. And so, Norwegian Air is launching three flights to the States, three cities: Los Angeles, Fort Lauderdale, and JFK, New York.
So, people are going to pay something around 150 pounds to 200 pounds to fly to the US from the UK.
Now, other airlines have tried this. And so, I did put it to Bjorn Kjos that this is a tough sell. Take a listen.
BJORN KJOS, CEO, NORWEGIAN AIR SHUTTLE: We are here for everyone, not only the rich people. Everybody should have an affordable ticket over the
Atlantic, and so that's our mission.
BOULDEN: And it's from Gatwick. Tell me why you chose this airport as opposed to others have tried from Stansted and many other airlines, of
course, are at Heathrow.
KJOS: First of all, Stansted, we have a very large network ourselves in and out of Stansted, but Gatwick probably has the highest frequency of low-
cost flights in and out of Gatwick. So Gatwick is ideal for a low-cost setup because of all the flights that we have.
BOULDEN: We have seen other airlines attempt low-cost transatlantic, but you say you're in it for the long haul.
KJOS: We are in for the long haul, that's for sure. But as I say, that's one of the reasons why we have ordered a lot of these aircraft --
KJOS: -- because this is actually one of the things you have to do if you are flying low-cost long-haul.
BOULDEN: The idea being the Dreamliner, being about 20 percent less fuel, cheaper for you to run, and obviously a lot of seats.
KJOS: Yes. This aircraft compared to other aircraft will save you 10 million pounds per aircraft per year just in fuel. So you can imagine it's
impossible to compete with other aircraft, especially on the low-cost side. You have to have this type of aircraft.
BOULDEN: So, not being a legacy carrier with old 707s sitting somewhere in a hanger, that gives you the advantage?
KJOS: That's for sure.
BOULDEN: So Maggie, low-cost, no first class, no business class. There was premium class, which I think might attract some people for that 11-hour
flight from Los Angeles to London and vice-versa, Maggie.
LAKE: Oh! Packed in like sardines. I don't know if a lot of people are going to look forward to it, Jim, but I've got to tell you, with the way
airfares are, there may be some people who simply opt for it. All right, Jim, thank you so much for bringing it to us.
LAKE: Coming up, how killer mosquitoes may be getting a dose of their own medicine.
LAKE: For decades, the Chikungunya virus has been in Asia and Africa, but over the last six months, mosquitoes have carried to the Caribbean and the
US. One company has come up with an unconventional solution to the problem. They're the focus of this week's Make, Create, Innovate.
NICK GLASS, CNN INTERNATIONAL CORRESPONDENT (voice-over): No other animal is as deadly. As a spreader of diseases, the mosquito is still the biggest
killer of them all.
LUKE ALPHEY, FOUNDER, OXITEC: What if we were to release male mosquitoes carrying a gene that would mean that their offspring died?
GLASS: In effect, breeding them out of existence.
ALPHEY: Well, normally, a male meets a female, has lots of little babies, males and females. And so the population continues. But what if we were
to arrange that there were modified males, so that when they mated the wild female, the offspring died because of the gene passed on from this male.
GLASS: The focus here in the lab at Oxitec is one particular species, Aedes aegypti, carrier of Dengue Fever.
ALPHEY: It's often called breakbone fever, which tells you something about the sort of pain that it can cause.
GLASS: Dengue has spread with globalization. As we travel, so does the mosquito. Today, there are 400 million cases a year, and tens of thousands
of deaths, especially among children. There's no cure or vaccine.
HADYN PARRY, CEO, OXITEC: Brazil spends about $1 billion a year trying to control this one mosquito species. It probably costs the global economy $5
billion, $6 billion, $7 billion. But there's a huge opportunity there, not only to do good, but also to make a very viable business.
GLASS: The killer gene was created in the lab in 2002 and injected into a single male mosquito. They've been breeding from him every since. The
gene carries a phosphorescence so that the sterile males can be trapped.
ALPHEY: There are our engineered mosquitoes, and so we need to breed lots of them to produce eggs to ship out to a field site. And so, to produce
eggs, the females have to have blood. I could just put my hand in, but of course, we don't do that. So, I have animal blood. So then, if I put that
on the cage, they can --
GLASS (on camera): Oh, look at the excitement.
ALPHEY: They get pretty excited about that, that's right. You're looking at it. Every little black speck is a mosquito egg. So there might be
20,000 or so eggs on -- just on this one paper. And you can see, they're very light and easy to ship, so we can just -- we could brush the eggs off
or we could just cut up these strips and send them to another country.
GLASS: That's your product.
ALPHEY: That's it. That's what goes out to the receiving country.
GLASS: That's thousands and thousands of engineered mosquitoes?
GLASS: And this is the first of its kind shipping container turned into a mosquito factory that can be sent anywhere in the world at a moment's
notice. This factory is expected to go to America, specifically the Florida Keys, before the year is out.
GLASS (voice-over): They're currently waiting for approval from the American authorities. In field trials, the sterile mosquitoes are simply
released into the wild in their millions. The technology has been successfully tested in Brazil and in the Cayman Islands.
Oxitec now wants to develop the killer gene to tackle other pests: mosquitoes that carry malaria and insects that attack crops. The company
sees the main challenge as overcoming a general suspicion about anything genetically tinkered with.
ALPHENY: It's a very new approach, and people need to become familiar with it. I hope that it will become a major part of the control of some major
pest insects. If we - if we could reduce even in some countries the burden of diseases like dengue, that would be fantastic.
LAKE: Still to come on "Quest Means Business," is Europe's economy improving? We'll hear from the heads of two of Europe's central banks
LAKE: Welcome back, I'm Maggie Lake in New York. These are the top news stories we're following this hour. At least one person is dead after an
overpass bridge collapsed in the city of Belo Horizonte in Brazil. These are live pictures of rescue workers at the scene. Two busses are trapped
underneath the fallen structure. Belo Horizonte is a World Cup venue. One of the semi-finals is due to be played there on Tuesday.
Violence has flared again on the streets of Jerusalem. At least ten Palestinians were injured in clashes with Israeli security forces earlier.
Protesters are demanding justice for a Palestinian found dead in the city on Wednesday. The teenager will be buried tomorrow after police return his
body to his family. Thirty-two truck drivers are safely back home in Turkey hours after ISIS militants released them. The drivers were abducted
in Mosul, Iraq three weeks ago. Dozens more tourists taken from Turkey's consulate there are still missing.
Today marks one year since the Egyptian military overthrew President Mohamed Morsi. His supporters are holding marches and protests across the
country. There are reports of clashes with security forces and a number of arrests. Ukraine's president says he is prepared to restore the cease-fire
in the east of the country if pro-Russian separatists agree to certain terms. The offer came in a phone call between Petro Poroshenko and U.S.
Vice President Joe Biden. Among the terms he outlined, the separatists must release their hostages.
European Central Bank left interest rates steady today, a month after it cut the rate - key rates - to a record low of .15 percent. ECB President
Mario Draghi says the bank is changing how it does things. From next year, policy meetings will be every six weeks instead of once a month. And to
improve transparency, minutes will be published after each meeting. As for monetary policy tools, Draghi said, "Unconventional measures are still an
option if needed but they're being kept in reserve for now." According to him, the ECB cannot and should not act every month.
MARIO DRAGHI, ECB PRESIDENT: I think someone asked me a question last time saying, `What do you do next?' And then I think I responded, I mean, if I
had announced that we were lowering interest rates, would you ask `will you lower it again?' We're not going to say - you see, that's what I meant by
continue self-fulfilling expectations before. Maybe we should move to a six-month schedule rather than six-week schedule.
(END VIDEOCLIP) LAKE: When European Central Bank did announce a rate cut today, in a
surprise move, Sweden Central Bank cut its main interest rate by half a point to .25 of a percent. That relatively sharp cut triggered a sharp
drop in the Swedish Krona's exchange rate. Well earlier I spoke with Stefan Ingves, the governor of Sweden Central Bank. I asked him about the
rationale behind today's decision and whether it would be enough to head off deflation.
STEFAN INGVES, GOVERNOR, SVERIGES RIKSBANK: First of all, we don't have deflation and we don't expect to have deflation either. But, on the other
hand, the inflation has been coming in lower than what we have expected for a while, so that the credit is needed to cut the rate.
LAKE: You have expressed in the past concern about high levels of debt. Isn't this move going to make any forming of a property bubble even worse?
INGVES: Yes. I mean, that's one of the headaches that we have to deal with because by cutting the rate, it becomes easier and cheaper to borrow,
households are likely to borrow more and that means that others will have to take additional measure, making it more expensive or harder to borrow in
one way or the other. Otherwise this won't work.
LAKE: Right, so how do you strike a balance between trying to make sure you have price stability and protecting against the bursting of a property
INGVES: Well that's exactly it - that's exactly the issue. And one thing that we have been doing in the past -- the supervisors -- is making sure
that the banks are well capitalized and they are well capitalized compared to particular other banks in Europe. But at the other - on the other hand,
this time around we argue and we argue actually quite strongly that more needs to be done. So, the low to value ratio, for example, needs to be
lowered, or on the political side, there is a need to deal with interest rate deductibility so that it becomes more expensive to borrow, one way or
LAKE: This move was more aggressive than the market expected. Should we continue more in the same direction or is this it now for interest rate
INGVES: Well, that's of course pretty hard to tell, but in a historic perspective at 0.25, that's pretty low, so presently at least we don't
expect to have to go lower. But on the other hand, you never know what's under - around the corner, so eventually at the end of the day, you have to
do what you have to do.
LAKE: It seems like central banks around the world are in a race to the bottom. Are you concerned longer term what this does to the stability of
INGVES: Well, that's an issue - that's an issue that we're living with because in our case, we haven't had that many problems in the financial
sector, particularly not compared to many other countries. But on the other hand, we have this issue with households borrowing too much and that
of course means that it's very important for us to avoid problems in the future, and it's not so easy to find a proper balance here.
LAKE: You were outvoted for the first time since the bank became independent by your fellow governors. Is the sign of a healthy debate
within the central bank? Or is there an issue of leadership?
INGVES: We have - we always have a - we always have a healthy debate, and a number of other executive board members have dissented over the years, so
it would be kind of odd if it never happened - happened to me. It just happened to be this time around that it was my turn. But I don't see that
as a major issue because actually we are talking of degrees when it comes to views. We're not talking about fundamentally different views on the
LAKE: All right. Thank you so much for taking the time to explain the policy situation in your country with us. We appreciate it.
INGVES: Thank you.
LAKE: Still to come on "Quest Means Business," building the new China - how one of the country's richest men is helping others to chase the Chinese
LAKE: Chinese President Xi Jinping has met for trade talks with his South Korean counterpart in Seoul. He and South Korean President Park Geun-hye
held meetings earlier on Thursday. China is South Korea's largest trading partner. The two-day visit breaks a long tradition of Chinese leaders
meeting North Korean officials before they head to Seoul. China's influence is based heavily on its economic power. Although growth has
eased a little, it is easily enough to create a lot of very wealthy individuals. Our Andrew Stevens met one of the richest.
ANDREW STEVENS, ANCHOR AND CORRESPONDENT AND CO-HOST OF "CNN NEWSROOM, LIVE FROM HONG KONG": Wang Jianlin, a self-described workaholic is taking a
rare moment to relax. This, a favorite song about the Mongolian grasslands brings back happy memories of a time spent in the Chinese military in the
1970s and 80s.
WANG JIANLIN, CHAIRMAN, DALIAN WANDA, TRANSLATED BY STEVENS: The grasslands are broad, open and unconstrained. I love them.
STEVENS: The grasslands are also everything that his corporate position isn't, because Wang Jianlin is literally building the new China. He's the
founder of Dalian Wanda and its flagship Wanda Plaza is a name synonymous in China with retail and property development. There are 88 upmarket
plazas like this now across China. Wang says he's swamped by requests to build more.
JIANLIN: The reason for Wanda Plaza being so popular is that we emphasize the experience for shoppers. It's not just retail. More than half the
businesses here are food, drinks and entertainment.
STEVENS: Retail is only half the story, though. If Wang's not building Wanda Plazas, he's building these - luxury and mid-market apartment
complexes, or these - high-end hotels. Did you ask him to paint this for the hotel? And like so many of Wanda's developments, they bear the
personal stamp of the boss.
JIANLIN: I'm close to the design team, both for the hotel for the apartments.
STEVENS: Wang is particularly proud of the presidential suite here at the Conrad built by Wanda in Wang's home city of Dalian. Wow, that is
something. Dalian Wanda is catering to China's exploding middle class who've moved beyond their parents' generation of struggle to a new level of
wealth and consumption - chasing what President Xi Jinping calls "the Chinese dream."
Do you think the Chinese dream and the American dream, for example, at a basic level are pretty much the same thing?
JIANLIN: I think the basics are the same. The only difference is that China came from a backward, battered past and it gradually developed.
STEVENS: Dalian Wanda has made Wang one of the two richest people in China, but his ambition remains undimmed. Even though he says there's
enough work in China to maintain the company's stellar growth rate for another 20 years, he's keen to expand overseas.
JIANLIN: In 2014, we will become the world's largest real estate company. We will definitely make it international.
STEVENS: And who knows? In the not-too-distant future this could be a bar in New York or London, and the song could be "My Way." Andrew Stevens,
LAKE: Time for a check on the weather forecast. Tom Sater is at the CNN International Weather Center. Hi there, Tom.
TOM SATER, METEOROLOGIST FOR CNN INTERNATIONAL: Hi, Maggie. A little racket made by Mother Nature for you in New York City last night. We'll
get there again, but first I want to start in Europe. No massive storm systems really anywhere to speak of, but we do have a storm system pushing
out of Spain. This is already starting to produce some showers and even some small thunderstorms up into central and west-central parts France.
The last thing they need is another round of storms, especially in the Burgundy region. Much of the vineyards have had too much in the way of
hail damage. But the temperatures have been quite warm - 26 degrees in London, it'll do it again tomorrow.
Again, here's the threat - a level two -- probability now for some large hail with that storm system moving in to areas of southwestern France. A
little warm for the players in Wimbledon I think the next couple of days, but no expected rain delays.
As you look at your Friday high temperatures, 26 in Greece, London and in Paris. I mean, the average in London right around 22 and 1/2, almost 23
degrees. Rome will be warm as well - 31. Let's go to Asia where isolated thunderstorms in Hong Kong isolated but
more numerous as you slide a little more inland. The concerns we have right now - Joint Typhoon Warning Center - a low chance of development -
tropical development - toward Luzon, Northern Philippines. But now we have tropical depression number 8. In the last couple of days, our computer
models want to blow this system up to the potential of super typhoon status. And this means like going over Guam, strengthening to Okinawa
Monday night, possibly Tuesday - late Tuesday in Kyushu in Western Japan and maybe even keeping that strength - typhoon or super typhoon. So we're
going to watch that one closely. In the U.S., we have concerns with the first tropical named storm, Arthur,
category 1 hurricane. We believe here at the CNN World Weather Center this will reach category 2 - that's different. The path is different too. But
first, notice the severe thunderstorm watches. There is a cold front that will help steer and pull Arthur up the coast. In red, a tornado watch box,
something we typically see with land-falling tropical systems. We've already had about two to even three tornado warnings as some of these outer
bands start to reach the inland parts of North Carolina. And with that, we do have some concern. Not only will this system increase
in its strength, but the path has now changed. It was supposed to take a right hand turn hours ago. It's been delayed in that movement, so the
tardiness of this now means that the eye - where the winds are the strongest - could easily make its way over hundreds of miles of high-dollar
resort real estate. This is going to cause some damage. We're going to have infrastructure problems, roads will be washed out, we're going to have
power outages with this, not to mention the isolated tornadoes. So, again, some evacuations have been made. Again, Friday, a holiday in
the U.S. - Independence Day. So as we watch this, this is going to dampen the spirits of millions and even some celebrations when it comes to
fireworks displays. But it does look like this is going to move right over. Currently from Cape Hatteras, about 200 miles or 320 kilometers to
the southwest rapidly moves up. Unfortunately that means some rain in some of the bigger cities such as New York City, Maggie. This was a picture
from last night's cold front. That's still triggering your round of severe weather now, and it does look like maybe a Macy's fireworks display could
have a little shower. In fact, 100 percent chance of rain for you tomorrow, then it drops to about 30/35 percent for the evening period. But
all eyes right now on North Carolina. This could be a category 2 in a matter of hours.
LAKE: Obviously am worrying if it's changed course. A lot of people did expect it to stay off shore, Tom -
LAKE: And you know what that means - that maybe they're not taking all the precautions they would have. So I know you folks there --
LAKE: -- are going to be watching it closely in the coming hours. Thank you so much.
LAKE: Well, still to come here on "Quest Means Business," BMW is making a major investment in Mexico's booming car market. We'll take you live to
Mexico City next.
LAKE: German automaker BMW says it is investing a billion dollars to build a new factor in Mexico. It says cars will start rolling off the production
lines in San Luis Potosi in 2019. That's the latest in a string of car companies to invest in Mexico's booming auto market. CNN's Nick Parker
joins us now live from Mexico City, and, Nick, certainly the government has to feel pretty good about this.
NICK PARKER, CONTRIBUTOR, CNN.COM INTERNATIONAL: Oh, it's a big win for them today, Maggie, no question. Mexico is now the world's fourth largest
exporter of autos and cars with a number of major multinational giants like GM and Volkswagen and Nissan, having major factories in Mexico. And when
you look at why, I think there are two main reasons for this. The first is, as you know, Mexico is a member of NAFTA - the North American Free
Trade Agreement. And that means that they can export their goods and services into the United States without paying tariffs. Now, if you're a
carmaker looking to get an edge, that is a crucial issue for you. So, Mexico has effectively become a staging post into this hotly-contested and
high-prized market for automakers. T The second thing is labor and the cost of wages here. According to Bank of America, Mexico is now more competitive than China. And certainly when you
look at assembly line wages in the United States, workers here get 20 percent - an estimated 20 percent - what workers get in the United States.
I spoke to Mexico's economy minister today after that event. He pointed out to us the foreign direct investment is now at a record high, and so
today's launch marks a new stage in his auto industry.
ILDEFONSO GAUJARDO VILLARREAL, MEXICAN ECONOMY MINISTER: Specifically in the auto industry, Mexico has been extremely successful because today we
export to 130 countries around the world and has - Mexico has - become a very strategic platform for all exports. So, these announcements, together
with announcements that were made last week by Nissan and Mercedes, to produce Mercedes Benz and the Infiniti line of Nissan, together with BMW,
brings Mexico to the premium line of vehicles in the world which a further step that we have not had in the past in the Mexican auto industry.
PARKER: The Mexican economy's growth this year has been somewhat disappointing - forecasts have been cut from 3.9 percent to 2.7. Are you
seeing any follow-through on foreign-directed investment? And if not, why not?
VILLARREAL: Well, to the contrary. When you look at the Mexican economy last year, the growth was around 1 percent. This year is going to be
around 2.7 percent, which means things are moving. And the indicators for the second quarter are much better. Part of what happened has to do with
the opening of the Mexican economy to the world.
If our trading partners are not growing, like Europe wasn't growing and the U.S. was growing at a very slow rate, that really had a direct impact on
the Mexican economy. Fortunately the U.S. is going to grow much better on 2014. That together with the reform package that President Pena is
introducing in the Mexican Congress is giving incentives to investors not to bet on the short-term. They're betting for the long and medium-term.
PARKER: I just wanted to talk briefly about San Luis Potosi where BMW are going to be based. The U.S. State Department advises against all but
essential travel there with the exception of the state capital. Obviously the United States is still concerned there's some security issues in that
state. How were you able to reassure BMW that it's a safe place to base themselves?
VILLARREAL: Well, we didn't have to reassure them. They have made several expeditions, they were trying to look for different possibilities. They
explored four Mexican estates, and they travel intensively in Mexico. And they experienced in firsthand the conditions of security and tranquility in
those areas. Mexico's a big country, and we do recognize that in some spots like you can point out Michoacan or you can point out Guerrero. We
may have problems here and there. Mexico is a map and you have different rates and circumstances in terms of crime.
PARKER: Now, Maggie, I also spoke to the representative of BMW at this event - the head of production - about security issue. He said that when
they were looking for a location, security was an issue. But it was also one of only several criteria that they were looking at. Others included
infrastructure and the availability of skilled labor. So certainly it would've had to have been something of a tradeoff, but we can't assume of
course that they were satisfied with the security picture in San Luis Potosi. Maggie.
LAKE: Ah, very interesting, Nick. Thank you so much for bringing it to us. Nick Parker live from Mexico City. Now, we want to remind viewers of
our breaking news this hour. At least one person is dead after an overpass bridge collapsed in the city of Belo Horizonte in Brazil. These are live
pictures of rescue workers at the scene. Two busses are trapped underneath the fallen structure. Belo Horizonte, remember, is a World Cup venue. One
of the semi-finals is due to be played there on Tuesday. We will be back with more "Quest Means Business" after this break.
(COMMERCIAL BREAK) LAKE: A recap of our top business story tonight. The Dow Industrials
passed the 17,000 point milestone early in Thursday's trading and closed at an all-time high. The jobs report for June said U.S. employers hired
288,000 new staff in June, surpassing expectations. President Barack Obama put the numbers in context.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It's a sort of economic patriotism to - where you say to yourself `How is that we can start
rebuilding this country to make sure that all of the young people who are here but their kids and their grandkids are going to be able to enjoy the
same incredible opportunities that this country offers as we have.
LAKE: A look at the European markets. The London FTSE finished 3/4s of a percent higher and the CAC 40 and Xetra Dax were up over 1 percent on news
the European Central Bank will keep interest rates unchanged. And that is "Quest Means Business." I'm Maggie Lake in New York. Thanks for watching.
(END QUEST SHOW)