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Marchenko Pulls Out As Candidate For IMF; Tough Friday on Wall Street ; Pressure on Profits; India's New Rich; Coffee in Africa; Education Agenda; Interview with Gordon Brown

Aired June 10, 2011 - 14:00:00   ET


JOHN DEFTERIOS, GUEST HOST: Two's company, three's a crowd. Marchenko tells me I will not run for the IMF job.

A Friday scare. Oil prices and stocks markets are down sharply.

And Toyota's warning it could lose $1 billion in profits this year.

I'm John Defterios in for Richard Quest. Of course, this is QUEST MEANS BUSINESS.

Good evening.

In just a few hours time the race to become the new IMF managing director will officially become a two-horse race. Christine Lagarde and Augustine Carstens will be left as the two main candidates after a third contender dropped out of the race on deadline today. Grigory Marchenko, the governor of Kazakhstan's national bank says he will not be in the running. He'd been put for the job by the former Soviet state. In an exclusive interview with him earlier, from the Kazakhstan capital, I asked him why he decided not to run.


GRIGORY MARCHENKO, GOVERNOR, KAZAKHSTAN NATIONAL BANK: Well, today is the last day to present to (ph) many nations, so we had a whole round of discussions and I decided not to do it for a couple of reasons. One, it more or less that Mrs. Lagarde is going to be elected. And second, developing countries are not able to unite around a single candidate. So, I think it is better to withdraw and not to put some of the countries into an embarrassing position.

DEFTERIOS: Have you told anyone about your decision? And if not, how will you go about doing so?

MARCHENKO: Well, I have discussed it with the prime minister and the finance minister. So they know, here in Kazakhstan. But otherwise I haven't spoken with any of the media or the public. And I think I mean, there would be some sort of announcement on Monday.


MARCHENKO: It was a decision taken, basically, a couple of hours ago.

DEFTERIOS: Some see this as a competition but this is not the Olympics. Is it really truly a case where a lot of countries have to be involved, or has that been a mistake?

MARCHENKO: Well, it does look that way, yes. I think lots of people were saying that selection or election should be on the basis of merit and irrespective of the country of origin of a candidate. But it looks more or less obvious that Mrs. Lagarde is going to get the job. And she is a very good candidate, no doubt about that.

DEFTERIOS: How about yourself? You are a central bank governor. Do you think you would have been a good managing director? What is your true belief?

MARCHENKO: I think I would-I mean, everyone could nominate at least a dozen candidates and Augustine Carstens, whom I know for many years. He is now a governor of the Central Bank of Mexico. He was a finance minister. And he was at the IMF and at the University of Chicago, which is a very good school. So, quite a few people do have credentials but again it is not about fair competition, it is about politics. And I think a political decision has been taken already.

DEFTERIOS: So it is politics weighing over economics at a very critical time for the global economy. And is it right to have a European? What is your view?

MARCHENKO: Well, I think it is important to have a good candidate with good political skills and I think Mrs. Lagarde possesses all the skills and if developed countries, and now it looks like a few developing countries as well, are going to support her, I do hope that she is going to be a good managing director.

DEFTERIOS: Let's clear something up for the record. Would you take the number two job, which could under this political scenario, as you suggest, could go to an emerging market candidate?

MARCHENKO: I can think that there are quite a few good emerging market candidates. And if they are interested in the number two job, well, I mean, we would welcome, in general, that there would be better presentation of developing countries in the IMF. But I, personally, am not interested in number two job.


DEFTERIOS: Once again, Grigory Marchenko from the Kazakh capital of Estana.

So, Marchenko believes Christine Lagarde's appointment is a foregone conclusion. Her campaign machine has been in overdrive this week. She traveled to Portugal after wrapping up a two-day tour of China. Before that she was in India and Brazil. She has even been active on Twitter, hosting an open Q&A with followers on Thursday. Her emerging market tour has so far, however, failed to win her the kind of concrete support she was hoping for. But Lagarde insists that in this race nationality is not an issue.


CHRISTINE LAGARDE, FINANCE MINISTER, FRANCE: The IMF does not belong to anybody. It belongs to the 187 members of the fund. And the management of the fund does not belong to any particular nation or region, which is why the selection process should indeed be open, transparent, and only based on the merits of the candidate. Equally, you cannot be banished or punished because of your nationality.


DEFTERIOS: That is one way of putting it. This is not an open door (ph) for Christine Lagarde, not since Agustin Carstens announced his candidacy. He, too, has been ramping up his charm offensive. He met today with India's Prime Minister Manmohan Singh to try to secure Indian votes. The support of emerging markets is his ace in the hole, if you will. But just as those nations believe Lagarde's nationality shouldn't win her the job, Richard asked Mr. Carstens last month if he needed more than just outsider status to win the job.


AGUSTIN CARSTENS, GOVERNOR, BANCO DE MEXICO: I think that nationality at the end of the day shouldn't play a role in this. I think what we all want is a merit-based process, where the best possible person gets the job. And I think that is why I am in this process.

RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: Well, what would you say is your principle argument for why you should be the IMF managing director?

CARSTENS: One, very wide policymaking career and record, having been minister of finance of Mexico, Central Bank governor, as I am right now. And I also have that I was also the deputy managing director of the fund. In addition, I know the fund from all possible angles. I was executive board member.

I was also deputy managing director so I was part of the management of the fund following the relationship of the fund with 80 countries. I also know the fund from the point of view of the authorities. So, I have a complete 360 degree knowledge of the institution.


DEFTERIOS: Carstens may have the support of emerging markets, but the executive board that decides who gets the job is dominated by Europeans. They are the biggest block of all with more than a third of the votes, then comes the United States with around 17 percent. Then it is the BRIC nations, Brazil, Russia, India and China, with just under 12 percent. Quota subscriptions fill most of the coffers for the IMF. The current formula is a weighted average with GDP at 50 percent, openness ranked at 30 percent, economic variability at 15 percent, and international reserves at 5 percent. But there is some imbalance between what countries and put in and the percentage of the voting bloc they get, especially if you are a member of the country executive board.

Let's take a look at what I'm talking about. Come on over. We took a sample of four countries, in two categories. What they put in and what they get for those votes. Very complicated, now you understand, after you look at this, why nobody wants to give up the executive board seats. So let's start with Italy. It is of course, a member of the G8, but it is only the 10th largest economy in the world, contributing 3.17 percent. But its contribution is at 4.264 percent. The most populous country in the Middle East is Egypt, its contribution to the fund here, 0.41 percent. But if take a look, look at this jump up to 3.13 percent.

Now I don't have to tell you about what Lee Wan Ju (ph) did in Singapore in terms of overall growth. The Singapore state contributes 0.59, just over half a percent in to the fund. Look at the voting power that it gets, though, right now, with the size of its economy, 3.89 percent is worth noting that Singapore is in double digit growth right now as well. And we thought this was the most interesting play of all.

If you come down to Lesotho, you have an economy in Singapore in the ranks of the fastest growing economies in the world. And then you have tiny Lesotho in the play at 0.04 percent in terms of its contribution, but having that executive board seat is pretty sweet. Let's take a look at this, 3.23 percent. And obviously Lesotho representing Sub-Sahara Africa and that big voting bloc in Sub-Sahara Africa, and then take a look at Egypt the most populous state in the Middle East, but the North African state, with a very large voting bloc. And before the uprisings, Yousef Boutros Ghali (ph), the former finance minister sitting on the executive committee there, representing the emerging markets at 3.13 percent. And look at the fire power of Italy still. A G8 member, but still the 10th largest economy in the world.

Of course, you are watching QUEST MEANS BUSINESS. I'm John Defterios sitting in for Richard. In just two day's time, Turkey goes to the polls. Why money and politics are a potent combination for the country's front runner. We'll have the details and a look at why oil prices plummeted today. It will surprise you.


DEFTERIOS: No love for oil the price of crude tumbled this Friday, the most in four week's time, in fact. Brent crude for July delivery slid after a newspaper said Saudi Arabia will hike production by 10 million barrels a day next month. That is quite a jump, by the way, going from 8.3 to 10. NYMEX also felt the pain. It didn't help that China came out with a smaller than expected trade surplus. And India's industrial output came off the boil in April, adding to worries that that global economic recovery may be slowing down.

Well, it is not just oil that is falling. We have seen a sell off on Wall Street today. That has pushed the Dow back below the 12,000 point for the first time in months. Alison Kosik is over at the New York Stock Exchange and she joins us.

DEFTERIOS: Now this is a very unusual Friday. A lot of turbulence and before we saw the oil prices falling that didn't even help the market as well, Alison?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Oh, yes, you talk about turbulence, the VIX, that fear measure is up by 5 percent. And you know what is dragging the market down, John? It is the usual suspects. We got a weak housing market. We have slow manufacturing growth and slow growth with jobs as well. Also, you know, not much economic news is out, so investors don't really have a lot to guide them.

But what did come out wasn't good. It was what you mentioned, the lackluster trade figures out of both the U.S. and China. That was enough to really help push the Dow below that psychological mark of 12,000 for the first time in almost three months.

The Nasdaq, by the way, has now erased all of its gains for the year. We are definitely watching shares of insurers and financial shares as well. They are lower across the board. This as Travelers says that it is going to take a $1 billion loss on the storms in the Midwest and the South. Traveler shares right now are down almost 3 percent.

But you know what? It is really that overall malaise, the concerns about the pace of the economic recovery, still front and center, and really is the big factor that is pushing the market even lower today, John.

DEFTERIOS: Is there some concern right now that the QE2 is going to be pulled out at the end of June, still, after we heard the comments of Mr. Bernanke earlier in the week? Or not? Are they willing to pull the punchbowl away from the party?

KOSIK: I think, you know, you talk with traders down here and they are already convinced that it is already baked into the market. That everybody expected the Fed to go ahead and pull the punch bowl away, as you said. That QE2 is really going to end an there is really little expectation that the Fed is going to come back with anything else that is even related to QE2 and we got that impression when we heard Fed Chief Ben Bernanke speak last week.

So, the expectation of what the Fed will do, it is really anyone's guess at this point. But the expectation definitely is that QE2 is going to end at the end of this month. And that nothing will really come after that. Who knows the market may be pleasantly surprised, John.

DEFTERIOS: Yes, below 12,000, though, at least going into the weekend it looks like right now. Alison Kosik at the New York Stock Exchange. You have a nice weekend, of course.

Well, tonight a tale of prosperity and politics and even a little ambition mixed in as Syrians flee to Turkey to escape their government's violence, voters in Turkey are preparing to go to the polls on Sunday.

Turkey is enjoying a bit of a moment, if you will, with one of the world's fastest growing economies opinion polls say that should propel incumbent Prime Minister Tayyip Erdogan to a third term. Since his Justice and Development Party, or AK Party, came to power in 2002 it has transformed the country's economy. Before Mr. Erdogan Turkey had to go cap in hand to the International Monetary Fund. Now Turkey has Europe's highest growth rate, more on that in a moment.

Mr. Erdogan's challenger in Sunday's parliamentary election is Kemal Kilicdaroglu, of the Republican People's Party, or the CHP. He's running on his anti-corruption record.

But is it really all about the economy in Turkey? Here is a quick recap of the country's bottom line. Let's take a look as we go over to the library. It is fairly impressive because Turkey is now the 16th largest economy in the world and if you are looking at emerging markets to invest in, Turkey has been sucking in a lot of capital. Growing 8.9 percent last year. That makes it the fastest growing economy in Europe right now, at $740 billion, once again it is the world's 16th largest. Once the IMF's biggest borrower, Turkey will pay back the final $4.9 billion it owes by 2013.

There are a couple of problems on the horizon. There are some deficit worries. This I the current account deficit, at $60 billion and analysts say it could reach just over 8 percent of GDP this year. And we all know the story of Turkey's big ambition to get into the EU. It is a country of 74 million people. Mostly Muslim people, we should add. And a very fast growing market, but that has-because of its Muslim population we know has met resistance from Germany and France in terms of joining the EU. They have been in negotiations, believe it or not, since 1960 off and on.

So has Mr. Erdogan's party come up with the goods for the Turkish people this weekend. A short time ago I put that question to the economists Turker Hamzaoglu, from Bank of America Merrill Lynch Global Research. Let's take a listen.


TURKER HAMZAOGLU, MERRILL LYNCH GLOBAL RESEARCH: Yes, definitely. I mean, when they came into the office, 2002, if you just look at rough numbers GDP per capita has increased from $3,000, slightly higher than $3,000 per head, to about $10,000. So, yes they have succeeded.

DEFTERIOS: There is some dangers there, with the current account deficit and inflation. Enough of a big storm to really sway the elections or something that will have to be dealt with afterwards.

HAMZAOGLU: It has to be dealt afterwards, I mean, it is not the core issue for the elections but Turkey is, in a way, is a victim of its own success because in a way we are talking about the global liquidity. Looking for someplace for yield and growth. Turkey is the place and it is growing too fast. So, around 10 percent growth it has to slow down it is not sustainable.

DEFTERIOS: So how do you do that without throwing the baby out with the bathwater to sustain growth?

HAMZAOGLU: Well, I think, you know, until now the central bank was introducing this new monetary mix, unorthodox policies, and the government was not stepping on the breaks in terms of fiscal policy. The expectation is that after the elections we are going to go back to some orthodoxy, which is needed, you know, with higher interest rates, maybe a little bit tighter fiscal stance that is needed to slow down GDP growth, domestic dimension (ph) of GDP growth, which is going to tame the current account deficits.

DEFTERIOS: The central bank, as you suggested there, and the finance ministry took an unusual tact, keep the interest rates low and then you won't have that hot money coming into Turkey. But it seems to be backfiring, no?

HAMZAOGLU: Yes, I totally agree. I mean, like we are reaching a limit on that one. And that is why we are suggesting that after the elections, as early as July, they have to start increasing rates to normalize the monetary policy. But that monetary policy tightening is not alone enough. I mean, the policy overall accommodative, including the fiscal policy, the primary spending has to slow down. So after the elections government should scale down the expenditures as well.

DEFTERIOS: How popular is Prime Minister Erdogan? Can he get the number of seats to make a constitutional changes, the magic number being 330, to become president and change the constitution and shift powers his way?

HAMZAOGLU: Well, I think it is a very close call. I'm not a political analysts, but there are lots of polls out there. But the good thing, I believe the good thing is like just two days before the elections, we are discussing about some possible policies and outlook, rather than, you know, biting our fingernails about the elections. I think this is a very strong sign of some degree of maturity Turkey has reached in this democracy and the political system.

DEFTERIOS: Well, should you be concerned that the prime minister has become quite thin-skinned when it comes to international criticism of his policies right now. That some are suggesting he has become almost too powerful and that there is not a viable opposition. Should I really care as a business person investing in Turkey?

HAMZAOGLU: Well, I believe, you know, politics has its own agenda, objective functions; it works a different way. But from a business perspective I think, you know, these guys are not new in the office. They have been in power for such a long time. And I think there is a very, very, juicy carrot hanging out there, which is the investment grade. So they probably become more reasonable after the elections, because I think if that would be the case for his presidential hopeful that is something that will generate some (UNINTELLIGIBLE) indefinitely, investment grade Turkey.

DEFTERIOS: In 10 seconds, Turker, because we are short of time. The Arab uprisings, do they spill over and affect Turkey, from Syria, for example?

HAMZAOGLU: It does. It does affect, but I think it is at manageable levels. But also consolidating Turkey's power or lateral (ph) relations in the region.


DEFTERIOS: That again, Turker Hamzaoglu of Merrill Lynch Global Research.

Well, the conclusion of our series on cloud computing is just ahead. We ask if questions and concerns about privacy bring the cloud back down to earth?


DEFTERIOS: Now to the conclusion to our week-long series on cloud computing. Information has been saved in small data clouds for years, but now companies want more of our stuff to live in bigger clouds, with us getting it all through various mobile devices. What could limit this process? Safety or the customer fears that it is not safe. Jim Boulden went to the Open Mobile Summit in London this week ask a few experts what to expect.


JIM BOULDEN, CNN FINANCIAL CORRESPONDENT (voice over): The data we send to the cloud doesn't sit in space, of course, it lives in massive data centers, usually underground.

At this week's Open Mobile Summit some experts say we should also come down to earth when it come to the cloud hype.

CHRISTY WYATT, MOTOROLA MOBILITY: Consumers tend to feel more comfortable with the fact that their data is still on their PC. That they still have the ability to manage it; that they haven't given it to anybody else and they are not at risk of losing it and somebody else's cloud.

BOULDEN: Not everyone agrees, of course.

MIKE PUTNAM, TRIPADVISOR: You might be reading a book or a magazine, or listening to an album, you know, looking at photos. Having conversations with friends and you are moving between multiple screens. You know, you wake up and look at your phone. Sit down on the couch and look at your tablet. And really all of those things should be available everywhere. And I think that the recent announcements from Amazon, from Google, from Apple. They are all moving in that direction. And it just makes complete sense.

BOULDEN: But will consumers want to put all their digital eggs in one cloud? Or as some say, one digital locker?

WYATT: You know there is a lot of people proposing that you put a digital locker or a cloud service that where you would like, as a consumer, to aggregate all of your things. And I think it is too early to tell whether we will see any adoption of that.

BOULDEN: In Asia, the vast majority of consumers access digital content only from a mobile device, meaning much of their data is already stored in cloud. So, the key, for Steven Goh of social media community Mig 33 is finding a way for consumers there to pay for cloud services in some challenging markets.

STEVEN GOH, CEO, MIG 33: We monetize 150 countries. We actually collect cash out of places like Afghanistan, Somalia, Syria, Libya. And we think what is happening out there with the cloud is it is not just simply about consumers and sharing. It is actually about monetization as well. And I think that is really exciting.

BOULDEN: So what about security in the mobile cloud?

The CEO of free music site, We7, says consumers should be relaxed about that.

STEVE PURDHAM, CEO, WE7: I think it is confidence in that situation, like with credit cards and everything else. If people have the confidence then they will use all of the facilities of the cloud's potential lock up.

Consumers want convenience. And I think at the end of the day however that convenience is delivered to them will actually make them much more relaxed about where they part with their information.

BOULDEN: Many companies now hope more of us will pay to move even more of our life onto the cloud. And at events like this they hope will pay to access it through mobile devices. Jim Boulden, CNN, London.


DEFTERIOS: Coming up in about 30 minutes from now, royalty scandals and more. Sarah Ferguson, the Duchess of York opens up about her live, the royal wedding, and a new TV project that is debuting in the United States. That is on "PIERS MORGAN TONIGHT" right after QUEST MEANS BUSINESS. We'll be right back.


DEFTERIOS: Welcome back. I'm John Defterios and you are watching QUEST MEANS BUSINESS on this Friday.


DEFTERIOS: And for the first time, German health authorities have found the bacteria in produce. They traced it to sprouts found in a house in the western part of the country after two people there got sick.

There will be no Bahrain Grand Prix this year. Organizers abandoned their decision to reschedule the race for late October. Its original March date to kick off the F1 season was postponed, of course, due to unrest in the kingdom of Bahrain. The decision to reschedule was widely panned in racing circles because it crowded the schedule.

The lingering efforts of Japan's catastrophic earthquake and tsunami are making life even tougher for Toyota. The car giant says it could lose more than $1.5 billion in profits in the current fiscal year. That's billion with a B, believe it or not. Toyota is still struggling to restore production to the level it was before Japan's disaster struck in March. Toyota could even lose its standing as the world's biggest car maker. On top of that, the strength of the yen is adding to the pressure on profits.

We go live now to the senior writer, Peter Valdes-Dapena, at our New York bureau to discuss the woes for Toyota.

Peter, it's extremely interesting, because Toyota can be very conservative in its projections.

But is it being overly conservative or the -- is the story really that bad?

PETER VALDES-DAPENA, CNNMONEY.COM SENIOR WRITER: Well, things are really pretty bad. I mean they've had the main part of this, as you mentioned, is a really big earthquake and tsunami that affected not just Toyota directly, but Toyota's suppliers. That caused problems for the factories not just in Japan, but also overseas, including here in the United States.

Also, obviously, the Japanese economy in general -- and this is their home market -- the Japanese economy in general is down, recovering, but it's going to take a long time before people are buying cars again, even when Toyota can produce them.

So it's affected them in a -- in a number of ways. And, yes, it's really got to be pretty bad.

DEFTERIOS: They're saying that they're not going to get to get full production back until November because of the parts system, the supply system is just not functioning correctly.

Again, conservative or will they come back and say, look, we have robot faster than we expected?

What's the -- kind of the industry buzz about Toyota's efforts to rebuild?

VALDES-DAPENA: Well, people are saying that Toyota and other manufacturers are coming back a little bit faster than anyone had really initially expected given the level of damage that was out there. Toyota may be being a little bit conservative on that -- on that front. And we'll see as they go on. They may surprise you themselves with how quickly they could get some of those factories back online. We'll just have to see.

DEFTERIOS: It's fascinating, because if you look at the production numbers, they have more in production, Toyota, than Nissan and Honda, and that was a sense of pride in Japan, as you know. And as the world's largest auto maker.

Do they going to -- are trying to shift that strategy now and transfer more and more to the United States or more into Europe?

What's the view?

VALDES-DAPENA: Well, some of the reports have been that they're starting think about moving some of that out of Japan. I've read reports saying that, you know, they're just considering this idea. Akio Toyota had said in the past to us here at CNNMoney pretty firmly, they want to keep themselves a Japan-based company and keep a lot of their production there in Japan.

You know, but when something like this happens, it makes you aware of -- of vulnerabilities and of the risks of doing that.

DEFTERIOS: Yes, up to the tune of maybe $1.5 billion.

Peter, thanks for the time.

Once again, Peter Valdes-Dapena joining us from CNNMoney in New York.

Well, the transformation of the economy is making some people in India very rich. A recent study said the number of Indians worth at least $5 million will treble by the year 2015, from 60,000 now to about 220,000.

As Pauline Chiou reports, it's creating a big demand for automobiles.


PAULINE CHIOU, CNN CORRESPONDENT (voice-over): Braking, crawling, negotiating wandering cows, super luxury cars are enduring India's bumpy, lane-less roads, as the nation's wealthy loosen their purse strings for iconic brands.

Ferrari is the latest to zoom in. Downplaying the road conditions, its imports hope to sell 100 cars in three years in India. The cheapest car will set you back nearly half a million dollars.

But money is no object for some buyers.

ASHISH CHORDIA, CHAIRMAN, SHREYANS GROUP: There is overwhelming demand for the brand. And there is enough members of society who can desire and have the ability to afford such a car and fulfill their dreams.

CHIOU: Analysts credit India's new generation, many from high flying families.

MURAD ALI BAIG, AUTO ANALYST: The rich old men are not interested in -- in these cars. But today, they are adult sons. And these adult sons have been to studied in London and New York and Massachusetts and MIT and Oxford and elsewhere. And they're not what they -- and then they don't have that -- the hang-ups their parents had. When you drive one of these things, you are not driving a car, you're making a statement.

CHIOU: A sentiment that lawyer R.K. Anand knows well. He's been a car enthusiast for decades, but it was prodding from someone close to him that made him buy a Bentley.

R.K. ANAND, BENTLEY OWNER: My son Zerby (ph) came to buy this car for me, the four wheel drive (ph). So that's why I bought it. And I, after buying it, I find that it's a very good car.

CHIOU: Industry experts estimate that sales of super premium cars grew about 50 percent last year, notwithstanding the tiny number of deliveries. Strong demand also keeps a gray market going. In a government yard in New Delhi, dozens of these dust-covered high end vehicles are sitting in custody. They were impounded recently after investigators cracked an alleged smuggling racket. The buyers, authorities say, were rich clients wanting to evade hefty duties.

Auto makers are optimistic across a range of segments. But competition is growing in the niche elite market and those who have picked upscale cars would love to see more room on India's cramped road.

ANAND: We have to be very, very careful when you drive the car. That's the reason that you drive slow, so that, you know, you may not hit the people, but the people may like -- the people may hit you. That's the only thing, you know, you feel uneasy when you drive the car.

CHIOU: A trillion dollar spending is in the pipeline to overhaul India's infrastructure this decade. For now, though, it's a cautious drive for the connoisseurs of luxury.

Pauline Chiou, CNN, Hong Kong.


DEFTERIOS: That's the millionaires.

How about the billionaires of India these days?

Coming up, "Sesame Street" is teaching kids how to save.


UNIDENTIFIED MALE: You know, I -- I have three jars that I keep at home. I have a jar for saving.


UNIDENTIFIED MALE: A -- a jar for spending --


UNIDENTIFIED MALE: And a jar for sharing.


UNIDENTIFIED MALE: And that really works well for me.



DEFTERIOS: Welcome back.

You're watching QUEST MEANS BUSINESS on this Friday.

I'm John Defterios in for Richard Quest.

Let's take a look at what's cooking in the U.S. financial markets.

A fairly turbulent day, mostly on the down side.

Let's take a look at the updated numbers, down 1.16 percent. As you can see here, with this drop of 141 points, we have surrendered 12000 -- 11982.

Alison Kosik was telling me earlier in the program today that it's a general malaise setting in and some concerns about whether the QE2 funding is going to remain in the second half of 2011.

This fall despite the fact that oil prices have been dropping throughout the day, as much as 3 percent, finishing closer to down to 2.5 percent on word that Saudi Arabia plans to boost its output from about 8.3 million barrels a day to up to 10 million barrels a day in the second half of 2011, despite all the disputes within OPEC.

Well, among the life lessons that all children must eventually learn is to how to handle money. If you'd love to give your youngsters a gentle push in that right direction, have them tune into "Sesame Street," Big Bird, Elmo and The Cookie Monster have teamed up with the U.S. bank, PNC, in Pittsburgh to teach children how to save. Even some moms and dads could benefit from what they have to say.



ELMO: Oh, man.

Peewee, mama's not sure if she can get enough money to buy this stupendous ball.

UNIDENTIFIED MALE: Oh, sure you can, Elmo. You just have to save.

ELMO: Save what?


BETH KOBLINER, PERSONAL FINANCE COMMENTATOR: "Sesame Street," in partnership with PNC Bank, decided to put together this show to really teach children the fundamentals of money. And it's not about how four quarters equal a dollar. You know that, though, right?

UNIDENTIFIED CHILD: Well, no, four quarters do equal a dollar.

KOBLINER: They do, without a doubt.

UNIDENTIFIED CHILD: Yes, I do know that.

KOBLINER: Yes, you know that. But the show really isn't just about that, it's about what can you do with that dollar and how do you make those choices and decisions, because grownups, as you know, have trouble with money and --

UNIDENTIFIED CHILD: Everybody has trouble with money.

KOBLINER: Everybody has trouble with money.


KOBLINER: And it's -- it's very difficult, really, when you think about it, for -- for grown-ups to understand money. So I'm asked a lot if I can't get my finances in order, how can I ever explain it to my kids.

Do you -- do you feel that way?

UNIDENTIFIED CHILD: Yes, well, I do not have any kids, but --

KOBLINER: I know, because you are a kid.




KOBLINER: -- but --


KOBLINER: You understand.


UNIDENTIFIED CHILD: So if Elmo gets to earn money, Elmo could work?

JIM RORH, CEO, PNC BANK: We've had a relationship with "Sesame Street" for almost 10 years now. We're on the in the education business, we're a bank. And so we went to partners and put together a board of directors of people who are involved in the early childhood education area. And "Sesame Street" is clearly -- clearly the -- a prime one. And it's been a terrific program. We committed $100 million to enhance early childhood centers across our footprint.

And so the new program is for me, for you and for later. And we're going to hand out over a million of these kids.

UNIDENTIFIED CHILD: You know, I -- I have three jars that I keep at home. I have a jar for savings.


UNIDENTIFIED CHILD: A -- a jar for spending.

KOBLINER: Exactly.

UNIDENTIFIED CHILD: And a jar for sharing.


UNIDENTIFIED CHILD: And that really works well for me.

KOBLINER: Right. And who taught you that?


KOBLINER: Yes. So we -- we've been -- we're talking about those issues. We're also talking about choices, how --

UNIDENTIFIED CHILD: She's a very smart lady.

KOBLINER: Oh, you're very smart, too. You're a great learner. And I think kids of all ages, ages three to five, can really learn from the initiative which is available on


KOBLINER: And it's -- I think it's very helpful for people to -- to realize that, you know, they can learn, actually, from their children, which I think has been very interesting in this whole process.

UNIDENTIFIED CHILD: Oh, I really need some children.


DEFTERIOS: Is it too late for us all to take notes on that or not?

The first major hurricane of the season is churning in the Eastern Pacific.

Meteorologist Pedram Javaheri is at the CNN International Weather Center with all the details -- Pedram.

PEDRAM JAVAHERI, CNN METEOROLOGIST: Yes, John. A storm system here, of course, getting very strong in the past several hours, in the past 24 hours. This went in from category one status to a category four status. And a very impressive storm in its heyday there. It's still sitting at category four, with winds over 210 kilometers per hour. But a very symmetrical storm system. All quadrants of this storm very impressive and I just want to share with you high resolution images here coming in courtesy of NOAA to show you the eye of the storm, the eye wall very dense. A very thick eye wall. And then you zoom out to show you the scale of a category four storm. You can see the outer bands of this, again, the higher towering cumulonimbus clouds, the outer thunderstorms here ahead of this storm system.

And now this storm, we just analyzed it. There's some data indicating that this is what is known as an annular hurricane -- very rare in the Eastern Pacific Basin there, about 3 percent of all Eastern Pacific storms are categorized as that. And, basically what that means, that as the eye wall is very thick and dense and also it being a storm that's highly symmetrical, very resistant to falling apart when they enter. Cooler sea surface temperatures also could interact better with wind sheer that typically tear these storms apart.

Then, again, the long range track does bring this storm down to a category three later on tonight and eventually to a category two by Sunday on into Monday. But what we're looking at is the storm is going to remain mainly a mariner hazard. So no concerns there.

And, John, there is another storm off the coast of West India, but this one going to close in land across Northwest India here over the weekend and heavy rainfall expected associated with this storm.

So we'll certainly keep a track on these features.

DEFTERIOS: That's pretty amazing stuff.

Pedram, thanks very much for that.

And have a nice weekend.

JAVAHERI: Likewise.

DEFTERIOS: Pedram Javaheri in the CNN Weather Center in Atlanta.

Well, next week, a programming reminder. I'll be reporting live from Russia for CNN's coverage of the St. Petersburg International Economic Forum. We'll bring you interviews with world leaders, CEOs and more. It starts on Wednesday on QUEST MEANS BUSINESS and across CNN programming.

And that's QUEST MEANS BUSINESS for this hour.

I'm John Defterios in London.

"MARKETPLACE AFRICA" is just ahead.



I'm Robyn Curnow here in Johannesburg.

Now, having a hot cup of coffee is part of many of our daily routines. But in Uganda, which is one of the largest producers of coffee in Africa, people don't drink a lot of it. Farmers also say they don't see enough profits.

Nkepile Mabuse now has the story.


MICHAEL KIJJAMBU, COFFEE ROASTER: Ugandan farmers, we are not happy. The coffee farmers, we are not happy.


Because we are still colonized by the multinationals.

NKEPILE MABUSE, CNN CORRESPONDENT (voice-over): From farmer to roaster, Ugandans want change.

KIJJAMBU: It doesn't make sense that the coffee grows here, transported green and then roasted somewhere, creates jobs there and develop a culture elsewhere.

MABUSE: Uganda is Africa's second largest coffee producer. More than 90 percent of its beans are exported, with very little processed or consumed here. Commodities trader, Birju Patel, says the East African country is world renowned for its robust beans, found in most Italian and French coffees.

BIRJU PATEL, COMMITTEES TRADER: The importance with Uganda is they produce a premium blend of robusta. It is the preferred blend. It is for a higher grade. And it is what roasters want when they are blending a cup of coffee.

MABUSE: So this is ready to be picked, is it?

HASSAN KAKOOZA, COFFEE FARMER: Yes, this one is ready to be picked.

MABUSE (voice-over): Hassan Kakooza tells me he's been a coffee farmer for 16 years and has little to show for it. He says he earns just under $2 for a kilogram of fresh beans, while the same quantity fetches nearly $70 when it's ready to be served. He's joined a group of local farmers who want to be part of the process from beginning to end, adding more value to their resource and earning more from it.

KIJJAMBU: We are aiming to see that we get -- that we get the machines so that we start roasting our coffee right from here.

MABUSE (on camera): But those machines need money.

KIJJAMBU: Of course.

MABUSE: Where are you going to get that money?

KIJJAMBU: We are -- we are working with the government.

MABUSE (voice-over): In its most recent budget plan, the government said it would work with the country's banks to make up to $37.5 million of low interest loans available to farmers by next year.

Meanwhile, Uganda is looking to expand to new markets, with the government investing $300,000 to roast, package and sell Ugandan coffee in Beijing. But local roaster, Michael Kijjambu believes the government's Chinese venture is misguided.

KIJJAMBU: They thought a billion people, they are going to sell a billion tubs. They didn't think about what it takes to turn that billion people into coffee drinkers.

MABUSE: He believes more energy and money should be spent growing the market at home. Domestic consumption is currently estimated at less than 5 percent of annual production.

(on camera): While the government here tries to convince a tea loving nation to savor African coffee, local players are trying to get more Ugandans to actually start drinking their own product.

(voice-over): Kijjambu started this coffee shop to encourage a culture of coffee drinking.

KIJJAMBU: People still think that coffee is not for them. For them, it's just to grow the coffee, export it for somebody else to drink.

MABUSE: That's not the only challenge the industry faces.

KIJJAMBU: Of course, the infrastructure, moving the coffee from the - - from the farms to the market, is still a big, big challenge, you know. Like in the wet season, trucks can't move, OK. And then, also, if you look at the investment in agriculture, it's still very, very minimal.

MABUSE: Hassan is under no illusions. He says it will take more investment, ingenuity and hard work to go from planting a cash crop to reaping real economic rewards.

Nkepile Mabuse, CNN, Uganda.


CURNOW: Let's take a closer look at Uganda's coffee industry.

Now, over the past year, the country has exported more than 150,000 tons of coffee. That's worth more than $300 million. And Uganda itself was only registered about 12 coffee roasters processing just a fraction of the country's crop.

Up next, adding education into the equation -- how lessons in the classroom could boost economic growth on the continent.


CURNOW: As Africa looks for ways to sustain its economic growth, a new survey says to look no further than the classroom. Former British Prime Minister Gordon Brown is behind the initiative for pushing to put education at the top of the development agenda.

Nkepile Mabuse caught up with him on a recent trip to Johannesburg.


MABUSE: Where do you think are the biggest problems when it comes to educating children with access to education --


MABUSE: -- on the continent?

BROWN: -- there has been some enormous progress made. If you go from Ethiopia to Tanzania, you see countries that previously were way behind have now shot ahead by their investment in education. So there's some great success stories.

The disappointment is Nigeria, because Nigeria is a large country with oil well, and yet there's still eight million children not at school and there are problems in the regional sort of educational decisions that -- that are being made. But --

MABUSE: Like what?

BROWN: That girls are not given the prominence that they deserve for education in some parts of Nigeria. And it's -- it's the culture as well as the financial challenge that's got -- that's got to be met.

Then you can go to some other countries, then you've got conflict ridden countries. And, of course, the difficulties of educating children in areas where there has been or is conflict, you know, in health, we have Medicins Sans Frontieres. We have the Red Cross. They will go into areas to give health and to provide health care and treatment in a conflict zone.

But education should continue despite the fact that there's a conflict on. And perhaps we've got to think of new ways where the world community will accept that even if there is a conflict, we've got to keep schools moving forward.

MABUSE: Do you hold richer nations accountable for not fulfilling the promise that they made in 2000, basically to make sure that all of the world's children are educated by -- are given basic education by 2015?

BROWN: I think -- it's that's right. Four -- 40 million children have been the additional number of children educated. So there has been success. But the results of this terrible figure, nearly 70 million children who are not at school today, and most of them in Africa, of course, the majority girls. Our real problem is that if we don't solve, we make people think that promises that are made are not kept. Promises are made in a casual way rather than made in a serious way. And I think a promise made to children, as Nelson Mandela himself has said, is a particularly sacred promise that have got to be observe. It's got to be honored. It's got to be implemented.

And that's why there is so much urgency in this report. We've got four years to go to 2015. We can choose to go backward by not taking the action that we proposed in this report, because, perhaps, there will be 75 million children not at school in 2015 if things continue in the trends they're on. Or, we can take the action we propose and we're looking at the financing of it, as well as the importance of it.

So we need a million more teachers. We need the classrooms built. We need the education materials. We need to make a leap of technology in Africa so that the Internet, so that the mobile phones, so that computers can become accessible and the education materials on these new technologies, these new platforms, if you like, become available to children. And instead of waiting for the old education materials to arrive, we go straight to the new ones.

MABUSE: 1.8 million teachers are needed, you estimate in -- in your research. Many poor countries would complain that, you know, our teachers are being poached by Western nations. Our good teachers.

BROWN: That's why we're talking about how we could actually have a Teach the World initiative. The truth is that there a lot of great teachers in the West and their services could be of use, also. But in the long run, we need to train up teachers, so we put a lot of emphasis on teacher training and how we can use distance learning, how we can use the Internet to make it possible for people to get access to training courses in a way that's not been possible before without having the expense of travel or the expense of accommodation to -- to learn at a particular college or -- or minimizing that in favor of having the balanced approach, of having home learning as well as college learning.

So we make a number of proposals on that. And a lot of them are about how some of the technology companies can be brought into this process and really make it very, very cheap for people to get the education materials that you need for teacher training, as well.

MABUSE: The quality of education is also an important issue, isn't it?

BROWN: It definitely is.

MABUSE: Let's talk about South Africa, for example, where a huge chunk of the national budget is actually spent on education. But it's not necessarily good edu -- a good quality education.

BROWN: Yes, I've just been at a school today which I think is incredibly impressive in its achievements. But they themselves say that they -- that they're wanting to make sure that all the teachers have qualifications. So that's -- that's a very important thing. Motivation is really important. The qualifications are important, as well.

We don't have the best of technology. And so that is going to come over a period of time and that would make a difference.

But this is a good school that's making progress. And I think where you have good teachers and good head teachers and where you have the facility to get the best education material, we can see progress made over a -- over a period of time, and I hope quite quickly.


CURNOW: Former British Prime Minister Gordon Brown there.

Do head over to our Facebook page, where you can join the conversation about his education initiative.

Now, here's what's trending this week.


Beverage Boost

Coca-Cola has invested $10 million to set up a new bottling plant in Somaliland, a breakaway state from Somalia. The facility is among the first manufacturing investments in Somaliland.

Remember, you can catch all of our stories and interviews online at

For now, though, I'm Robyn Curnow saying good-bye from Brontatain (ph), Johannesburg.