BUSINESS-01
Spending; U.K. Leaders Pressed on Brexit; Mexico's Finance Minister Exits
in Wake of Trump Visit; Starbucks CEO Endorses Hillary Clinton; Sony
Launches PS4 Pro; Paralympic Opening Ceremony Begins in Rio; FC Barcelona
Opens New York Office. Aired 4-5p ET - Part 2>
Sebastian, Shasta Darlington >
Howard Schultz; Josep Maria Bartomeu>
iPhone 7 is here. Donald Trump says it's time for the U.S. to spend more
on its military. The Republican nominee said the armed forces are
unprepared for the threats they face. The British Prime Minister, Theresa
May, was back in Parliament after her G20 visit to China. She says she
will take her time with Brexit and warns not to expect regular updates on
the British position. Howard Schultz referred to Trump's policies as
vitriolic and divisive Wednesday. As the CEO of Starbucks, endorsed
Hillary Clinton for U.S. president. Sony is unveiling a new gaming console
today for the PlayStation 4 Pro. It targets the hard core gamer who values
high definition display. After a wrath of well-documented troubles, the
Paralympics are under way in Rio. Ronaldinho opens the FC Barcelona Office
in New York City.>
Policies; Europe; United Kingdom; Food and Beverages; Paralympics; Latin
America; Electronics; Consumers; Sports >
EL-ERIAN: So there is. And ironically the best thing to do right now is to have dry powder. Because we are entering a very volatile period in principle. And what tends to happen is when volatility gets hold of markets, good names and bad names get hit equally and you get good names at bargain prices. So not just yet. But wait, make sure you're building up cash, because I certainly believe there will be attractive opportunities.
LAKE: Building up cash and doing your homework. Because you've got to be able to tell the good from the bad when it happens because they all look the same when the fallout calms.
EL-ERIAN: And to have that list because emotions tend to play in too big a way when markets are moving.
LAKE: That's right. Especially when so many of us are still recovering from the battering and the financial crisis. I think it's hard. It's hard to get in there. Mohammed, it's always a pleasure to talk to you, especially in person. Thanks so much for coming by.
EL-ERIAN: Thank you.
LAKE: The European markets posted gains on Wednesday. The FTSE is up 0.3 percent, despite weak manufacturing data that we mention from the U.K. Investors were also reacting to the bank of England, Governor Mark Carney, said a further cut to interest rates is possible. The DAX was the best performer of the day. Up a little more than half a percent.
Just ahead, how Donald Trump's trip to Mexico could be to blame for the country's finance minister losing his job. We'll have the details.
(COMMERCIAL BREAK)
[16:30:00] Hello. I'm Maggie Lake. Coming up on the next half hour of QUEST MEANS BUSINESS, the CEO of Starbucks tells us why the next president of the United States should be an obvious decision. And the president of FC Barcelona tells me about the team's expansion right here in New York City.
Before that, these are the top news headlines we're following on CNN this hour.
Donald Trump is proposing an increase in U.S. defense spending. The Republican presidential nominee says the best way for America to keep the peace is to showcase its military strength. He wants to build up the military with more troops, fighter aircraft, ships, and submarines.
The U.S. defense secretary says it is working with both the Syrian government and opposition forces and the objective remains the defeat of ISIS. High-level talks were held in London Wednesday about the ongoing Syrian conflict. Ash Carter tells CNN they are trying to manage the tension between pro and anti-Assad forces.
(BEGIN VIDEO CLIP)
ASH CARTER, U.S. DEFENSE SECRETARY: We understand what our interests are here, which are the defeat of ISIL. We communicate that to them and we work with both sides. And we try to manage the tension, which we understand. But the way to manage that is for each of them to know exactly what they're doing and for us to establish the way with them, ways that they cannot interfere with one another in the pursuit of their separate objectives.
So, for example, we have agreed with them about where each party will be geographically in such a way that they can conduct their operations against ISIL and not run into each other, which might create a circumstance in which there could be a collision between the two of them which we don't want to see.
(END VIDEO CLIP)
LAKE: U.S. President Barack Obama and Philippine President Rodrigo Duterte have finally come face-to-face. They exchanged pleasantries just before the ASEAN gala dinner in Laos. The exchange comes after the meeting between the two leaders were canceled over controversial remarks by the Philippine president.
Two suspects are being held in Paris after several full gas cylinders were found in the back of a suspicious care. It was parked near Notre Dame Cathedral and spotted by a bar employee. France remains on high terror alert since a string of attacks in the past year.
The opening ceremony of the Paralympic games is about to start at any moment. The Paralympic torch arrived earlier in Rio at the statue of Christ the Redeemer. About a million tickets for the games remain unsold even after last-minute rush for seats.
Mexico's finance minister has been replaced and Donald Trump's visit to Mexico may be to blame. The circumstances around Luis Videgaray's exit are not fully clear but Mexican sources have told CNN it was the finance minister's idea to invite Trump and Hillary Clinton to meet with Mexican President Pena Nieto. Rafael Romo joins me now. Rafael this is a bit of a curious story. Exactly what went on here?
RAFAEL ROMO, CNN SENIOR LATIN AMERICAN AFFAIRS EDITOR: Yes, Maggie, and now the question is, was the finance minister's the fall guy to last week's Trump visit fiasco. There was no official explanation given. President Enrique Pena Nieto simply said today he had accepted his finance minister's resignation
Luis Videgaray has been the president's right-hand man since Pena Nieto was the Mexico's state governor. Videgaray was also the president's chief architect of his presidential campaign in the brain behind the president's economic and education reforms. A Mexican government official and a source close to the Mexican government, as you said, both told CNN previously that the whole idea behind extending an invitation for Donald Trump and Hillary Clinton to meet with Pena Nieto came from the finance ministry, meaning Mr. Videgaray himself.
Now Pena Nieto didn't even mention anything about the controversy in today's announcement. He only said that he was deeply grateful to Videgaray, whom he considers a personal friend. And Donald Trump is almost universally despised in Mexico, as you know, as a result of comments he has made on the campaign trail calling Mexican immigrants criminals and rapists and promising to build a wall at the border. Now Maggie, the interesting thing is that the Mexican president is not much more popular either. A recent poll by a Mexico City newspaper puts the president's popularity at just 23 percent. So not a very popular guy in any case, but again, Videgaray, his friend is gone.
LAKE: I think a lot of people were surprised he held a meeting at all. I guess hindsight's 20/20. How are investors going to react to this? A lot of times when you have a change in finance minister, it creates a level of uncertainty. Often investors don't like that. What do you think the fallout is going to be in terms of markets?
ROMO: Trying to find an explanation as to why he was invited to Mexico, meeting Donald Trump.
[16:35:00] Some people in Mexico in the financial circles were speculating that it had to do with the fact that every time Hillary Clinton was above on the polls, it seemed to favor the Mexican peso and the reverse happened when Trump was ahead. And so it could've been an effort to contain that. But again, that's just speculation. There's no reason to believe that that's going to be the case in the long term. And what people in Mexico are saying is that a meeting like that should have happened after the election with a president elect and not with the candidate even if we're talking about a candidate from a major political party in the United States. Maggie.
LAKE: Yes, Rafael, this election cycle has been full of the unexpected. We'll put this on the list with the rest of them. Thank you Rafael.
Howard Schultz referred to Trump's policies as vitriolic and divisive Wednesday. As the CEO of Starbucks, endorsed Hillary Clinton for U.S. president. Schultz is a lifelong Democrat and is known for being outspoken on social issues. But had not yet announced his stance on the 2016 race for the White House. Poppy Harlow spoke to Schultz and joins me now. Poppy, we had these made up. I don't think they're going to be selling this one.
POPPY HARLOW, CNN CORRESPONDENT: it's a collector's item.
LAKE: Although the choice was pretty clear for Howard Schultz and he's really not mincing his words when it comes to this election.
HARLOW: I mean, he's not. Look, this is the CEO who, as you said, I think has been the most outspoken CEO period, on everything that doesn't have to do with coffee and the core business. Right from guns to gay rights to race relations in this country to politics. I mean, Maggie, you remember a few years ago he called on all business leaders and the American public to stop giving any money to Washington, any money to politicians at all. So I was really surprised when this morning, add a CNNMoney American opportunity event that we held, where he was the key speaker. He came out and he endorsed Hillary Clinton. And not only did he endorsed Hillary Clinton, he also talked about perhaps dipping his own toe into politics. Watch.
(BEGIN VIDEOTAPE)
HOWARD SCHULTZ, CEO, STARBUCKS: I think it's obvious that Hillary Clinton needs to be the next president of the United States of America. And I think the reason for that is so clear. We have a situation in America today of such divisiveness, of fractured leadership, and on the other side, I think we've seen such vitriolic display of bigotry and hate and divisiveness and that not the leadership we need for the future of the country.
In almost every election cycle going back probably to when I was a young boy when John Kennedy was running for president, the media has framed this election and the elections before it, as perhaps the most important election in a generation. And I think given the challenges that we are facing domestically and all of the hot spots around the world, the life experience and professional experience that Hillary Clinton has had, I think, positions her best to be the next president of the United States and she has my full support. I've spoken to the campaign and I made it clear that in the coming days this is what I was going to do?
HARLOW: What did she say to you?
SCHULTZ: That's a private conversation, so I think we'll just leave that for now.
HARLOW: So every time I interview Howard, I ask you one question. Can times I've asked maybe?
SCHULTZ: Probably more than that.
HARLOW: Should we make it 11.
SCHULTZ: OK.
HARLOW: Will you ever run for president, Howard?
SCHULTZ: You know, I think, as we discussed this many times, my own life experience has given me a unique perspective on the plight of working-class American people and the position and platform I've had at Starbucks has given me the voice and the opportunity to do many things that I don't think I could have ever done as an elected official. Having said that, I'm a young man. There's a lot of time in the future of the country and what I might and I might not do, I would never say never, but this is not the right time.
HARLOW: You have said no previously. This is first time I've heard you say I'm a young man. It's true.
SCHULTZ: Well, I've been reminded by friends of mine who heard me say that this this morning that I'm no longer that young. We'll have to see how that goes.
(END VIDEOTAPE)
LAKE: Poppy, Secretary Treasury Schultz. That would not be a first time. It's been a long time since it came from Wall Street.
HARLOW: I didn't think about that.
LAKE: but the tradition used to be industry is where the Treasury Secretary came from or a new post. This is a very different tone. And it must be an indication of how frustrated he feels.
HARLOW: It is such a different tone. Maggie, four years I've asked that if he would run for president.
LAKE: We've talked about it every time.
Because he writes op-eds in the "New York Times". He's very politically vocal, but he's always insisted no, no, no. So I was shocked this morning when he said that I am a young man. That was the quote, "I am a young man." He's 63. He certainly has time ahead. But he also said to me, people cannot -- talking about CEOs around the world -- he said to me, "People cannot believe what is going on in this country. What we have witnessed in the last year is inconsistent with the guiding values and principles with this country."
[16:40:00] He's had it.
LAKE: Do you think that he stands alone? I mean, there is a sense of frustration. If we take the partisan politics out of it, do you think we will see more engagement from the private sector when it comes to issues. We used to think gridlock was good. I hear from more and more CEOs that that's not the case anymore. That leaders in Washington are not tackling the serious problems. Do you think this is a tipping point?
HARLOW: I do think it's a tipping point. But what I've seen, Starbucks and more companies individually, is go it alone without Washington. Because they find it so frustrating to work with Washington at all. They go it alone. So this event this morning was all about the opportunity gap and the income gap and things at the private sector is doing to help close that and create opportunities for the poorest kids and the kids most in need.
Most people don't remember, Howard Schultz was born in the projects. As poor as can be in Brooklyn.
LAKE: And he led the way on minimum wage.
HARLOW: Right, but is his American dream alive today? Are kids' destinies determined by their zip code too often today, and he essentially said, "I'm afraid so." But I don't know, Maggie. Will he jump in four years, eight years and make a run for the White House?
LAKE: Or will he be tapped sooner.
HARLOW: I know.
LAKE: It's hard to say no to the president. Let's see what happens. To be continued, this conversation. Poppy, thank you so much. Great stuff.
Now Sony has launched its latest gaming console. We'll have more on the tech world after the break.
(COMMERCIAL BREAK)
LAKE: Apple was not the only company with a big product launch Wednesday. Sony is unveiling a new gaming console today for the PlayStation 4 Pro. It targets the hard core gamer who values high definition display. Clara Sebastian joins us now. They may be targeting the hard-core gamer but I know my son is going to start asking me for it. What exactly do I need to know? What is this about?
CLARE SEBASTIAN, CNNMONEY REPORTING: Right. This is balancing act that Sony faces with this. You think of it, you know, done the Apple comparison. It's like the MacBook Pro versus the MacBook. It's more powerful. It's faster. It's got a bigger processor. And crucially it accommodates 4k and HDR. This is what Sony was really emphasizing today. It was the display element of this. This is where the arms race really comes in with these gaming companies. They're fighting to stay relevant, Maggie, in a world where PC gaming and mobile gaming are really taking off.
LAKE: That's the thing. When you're thinking about that time you have to play and you can so easily get -- we talked about Pokemon earlier and Nintendo. They want to keep their hard core gamers happy. Does it mean, if I don't want to shell out, I don't have a hard-core gamer at the age of eight, am I going to be out of luck? Am I going have to do it because I have to upgrade? That was always the issue with the consoles.
SEBASTIAN: Right, this again is the balancing act they face. They are emphasizing that they are, while they're giving you options to the hard- core gamers to upgrade, they want to keep the casual gamers, family gamers on-site. This they emphasize over and over again in the launch. It's part of the same generation as the original PS4. This counsel here that has sold 40 million -- over 40 million worldwide.
LAKE: I'm looking at this. I'm pretty sure I have. But I have no idea what those other ones are.
[16:45:00] The gaming industry has -- there's been a lot of controversy about how they do the updates and what happens to them. Are they sort of changing their strategy here?
SEBASTIAN: Absolutely. Is what we're seeing. They're going more toward a more kind of Apple-style strategy. More frequent, more incremental updates. I mean, just look this how it's changing.
LAKE: Look at this. This looks like a dinosaur.
SEBASTIAN: This is from 1994 this launch. This is the original PlayStation.
LAKE: I think it brings back memories for some.
SEBASTIAN: Look at the distance between these timewise. This is the PS2. That launched in 1994. This launched in 2000 into the PS2 that was six years. Then another six years, this is the PS3. I think you can see that there. Quite heavy. That launched in 2006 and it was not until 2013 that there was another iteration.
LAKE: This is a lifetime in technology. They try to shrink it and keep everyone hooked into their ecosystem.
SEBASTIAN: Absolutely. The difference with these is the games that you played across these consoles were not compatible with the different ones. So that's what they're moving towards now. They were keen to emphasize today that on the PS4 Pro and on the PS4 they introduced another slim version today. All the games would work the same. They would just look better on the PS4 Pro for those really high end games.
LAKE: while that is a huge relief to me. And I guess the next thing I'm going to have to worry about is virtual reality. But we'll have to wait. To be continued for that as well. Clare, thank you.
Now, ticket sales were sluggish and budget cuts were rampant. Yet the Paralympic games have managed to begin in Rio. We'll be live in Brazil next.
(COMMERCIAL BREAK)
LAKE: After a wrath of well-documented troubles, the Paralympics are under way in Rio. The opening ceremony began a few minutes ago. CNN's Shasta Darlington joins me now. And Shasta, what do we have to look forward to? How is the event going?
SHASTA DARLINGTON, CNN CORRESPONDENT: Well, this is obviously just the beginning of what's expected to be a really exciting day in Rio de Janeiro. The first Paralympic games in South America. I'm standing in front of the Maracano stadium where the opening ceremony is beginning.
This is the same stadium, of course, where the Olympics' opening ceremony was held and a pretty famous football stadium as well. What we expect is a lot of samba, we understand there is going to be a lot of samba bands in there. The artistic director is a well-known Brazilian artist, Devic Muniz.
We'll have more details as this develops, but it's been great. We're standing up here on a ramp that leads in to the stadium. Everybody walking by in their national uniforms. Brazilian families, lots of Brazilian flags. This is really finally kicking off after the financial problems that we talked about before, Maggie.
Local organizers announced they were in dire financial straits. They only sold between 12 percent and 13 percent of tickets, they were going to have to reign in the budget. That was affecting everything from the venues with a lot of the competitions being moved to the central venues, as well as seating and staffing.
[16:50:01] This was even a surprise to the International Paralympic Committee. The local and federal Brazilian government had to step in with an emergency $77 million funding package. Of course, that's really just about half of what they had initially promised, so it's been a frustrating experience for the International Paralympic Committee but they're pleased it's finally come together.
Ticket sales took off in the last couple of weeks. About 1.5 million tickets have sold, about 60 percent of those on offer. They're hopefully more will be sold in coming days with the opening ceremony, of course the torch has been going around Brazil, enthusiasm has been building, Maggie.
LAKE: Shasta, we're going to let go, get to the festivities. But just really quickly is there a sense now that they've hosted the Olympics with all the nerves that went into it, that they have a little bit more confidence that they know what they are doing. And they know what to expect?
DARLINGTON: I think -- I think we can't go that far yet. In some ways I am surprised at how little attention this is getting in the national press. This is a big deal in Rio, but as you know, the former president of Brazil was impeached less than a week ago. A new president was sworn in and the national focus is really still on the political chaos of the political drama playing out. This is a big deal for Rio, it is a big deal for the tens of thousands of visitors here but I think they still have to prove themselves on global stage.
LAKE: All right. Shasta Darlington, thanks so much. We're going to keep ourselves focused on the wonderful athletes as we should. Now speaking staying with sports, Barcelona has one the best homes in football, now it is opening a new HQ right here in New York City. The club is looking to expand into the U.S. market and later today it plans to transform some of the Big Apple's most famous landmarks into the red and blue of Barcelona.
The plan has reunited the club with the Barcelona legend Ronaldinho who celebrated the occasion by scoring a pretty easy goal at the press conference. They really did take it easy on him. I spoke to the president of the club and asked why he thinks they can succeed in America.
(BEGIN VIDEOTAPE)
JOSEP MARIA BARTOMEU, PRESIDENT, FC BARCELONA: FC Barcelona from a long time ago, he's already in the U.S. doing soccer schools, doing a lot of agreements with some foundations, social help, basically with UNICEF and also with the Bill and Melinda Gates foundation. We have some sponsors, important for us like Nike, Black and Decker or Gillette.
Our history with the U.S. is from a long time ago. But right now we decided that we have to be here in a way permanent. Being permanent means being closer to our fans, closer to the people, the people that love our club, love our brand, and, well, we think that with this we are going to succeed and we're going to stay a staple.
LAKE: But you acknowledge it's difficult. So many players, so many children participate in the sport. So much competition on a professional level that draws fans in other directions.
BARTOMEU: We have an advantage. Right now for example we are the club in North America with more fans in the social networks. We're very successful. People love the way we play soccer, treat the ball and we see when we do summer tours sometimes, we would have it in Los Angeles, San Francisco, Washington, the stadiums are full. It's true we have a lot of Latin Americans there but in North America it's played in the schools.
LAKE: That's right. You have some of the biggest stars on the planet. Although I think the American audience sees them in the world cup venue and they think, they hear Neymar but they think of them playing in their home country in those tournaments. How can you really build out the Barcelona brand? What are you going to do?
BARTOMEU: What we're going to do is continue, of course, expanding our soccer schools in the U.S. Right now we have one in Florida, North Carolina, soon one in New York, expand -- show to the young children from 6 to 14 years old about soccer. In a way we are finding in our brand and, of course, doing a lot of projects with our foundation which is very important for us.
Children is key for us, help children. Of course, like this, we'll probably receive more sponsorships from companies in North America. We're going to have more events and something that's very important for us we want to do is try also to have a little bit soccer and probably we are going to open a franchise in woman soccer league.
LAKE: Which, of course, is huge especially here. Some argue our women are better known than are men. Are you going to pay them equally as the men?
BARTOMEU: Well, we're going to see how is the market. But we have -- right now we have a professional women team in Barcelona that plays the European champions league.
[16:55:00] So from now on in the future we want to have this team in North America, the U.S. to play. It seems very interesting. I hope to expand our brand in America.
LAKE: Do you feel the pressure to build revenue given the fact that you have U.K. clubs, spending big. New managers who are going to be very aggressive. You have the Chinese in spending.
BARTOMEU: Right now actually Barcelona is one of the top clubs in the world in terms of revenue, in terms of values like "Forbes" magazine said several times. And we're working very much and also we have something which is very good, we have Lionel Messi who is the best player in the world, still young, 29 years old, Neymar, Suarez.
We have a group of players attracting other players to play on our team. This will help us. The team is very successful in the past 30 years. They're winning, they make people laugh, people love seeing how they play. That helps, of course, all the time to be closer to the people and also that a lot of people are interested in our team.
That's why we think we are going to grow. Right now the club is one of the top clubs with revenue in the world. We have a vision to reach $1 billion in four to five years.
(END VIDEOTAPE)
LAKE: Now, if you want a daily digest of the day's top business stories delivered to your inbox, subscribe to the QUEST MEANS BUSINESS newsletter featuring Richard's Profitable Moment. And for all the top headlines from the rest o of the CNN Money team just go to CNNMoney.com/quest to subscribe that. And that is QUEST MEANS BUSINESS. I'm Maggie Lake in New York. The news continues here on CNN.
END
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