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QUEST MEANS BUSINESS
Tensions Escalate in Crimea; Aid to Ukraine; Ukraine Economic Crisis; Dow Up; CitiGroup Restates Earnings Due to Fraud; IAG Returns to Profit
Aired February 28, 2014 - 16:00 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)
RICHARD QUEST, HOST: The market turned positive toward the end of the session, up around 50 points for the Dow Jones Industrials as the closing bell rings. It's been a very busy week, but now, hit the hammer, or at least bring a close to the end of proceedings. It is Friday, it's February the 28th.
Tonight, we'll tell you about the crisis between Ukraine and Russia. It's escalating. The interim president asks President Putin to stop aggression in Crimea.
Also tonight, IAG chief exec Willie Walsh tells me he's starting to see the fruits of his labor over Vueling, Iberia and British Airways.
(BEGIN VIDEO CLIP)
WILLIE WALSH, CEO, INTERNATIONAL AIRLINES GROUP: When they all pull together, it will be something fantastic.
(END VIDEO CLIP)
QUEST: You'll hear Willie Walsh in this program.
I'm Richard Quest. It may be Friday, but of course I mean business.
Good evening. An armed invasion in the Crimean peninsula. Ukraine's interim president, Oleksandr Turchynov says the Russian president, Vladimir Putin, must stop provoking a military conflict. He's accusing Russia of what he's calling "naked aggression."
In the past hour, we've heard reports that Russian aircraft carrying around 2,000 troops have landed in Crimea, which you can see there at the bottom of the screen, bottom of the map. We know that phone lines and Internet are down, according to Ukraine's largest telecoms company.
Also, we know the offices of regional television have been surrounded by men with guns. Armed men have been seen at two airports. Ukraine says Crimean airspace is closed, and yet Russian military vehicles have been spotted close to Simferopol Airport, heading towards the Crimean capital. The Russians say this is part of existing and scheduled military exercises.
The US secretary of state, John Kerry, says the United States is keeping a close eye on movements in the region.
(BEGIN VIDEO CLIP)
JOHN KERRY, US SECRETARY OF STATE: We believe, National Security Advisor Rice has made it very clear, and I've made it clear, that intervention would, in our judgment, be a very grave mistake. It would be completely contrary to Russian policies as stated now with respect to Libya, Syria, other places.
The question is whether or not what is happening now might be crossing a line in any way, and we're going to be very careful in making our judgments about that.
(END VIDEO CLIP)
QUEST: Our correspondent Diana Magnay is live for us tonight from Simferopol. She joins me. Diana, what is the situation? It seems -- if you parse it into its individual parts, it seems to be serious and deteriorating. Is that the gist of it on the ground?
DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: I think it is serious. It does appear to be deteriorating and that more facilities seem to be being taken over or at least patrolled and claimed by armed gunmen. But I think it is so inflammatory and dangerous that it's important to take these points that you mentioned point by point.
And first of all, and most importantly, I think, this report of 2,000 armed men arriving in Crimea, we have no confirmation of that. We've spoken to a top official in this new administration who says he believes it is just a rumor. So, that's very important to clarify.
Also, Russia says that their troops have not left their military bases around Sevastopol. Now, it is difficult to be sure that that is true, from what I have seen. I --
MAGNAY: -- Simferopol today, and there were armed men, they seemed to be highly organized, they were highly armed. They were not giving any indication as to where they came from, so even when you asked them, are you Russian, where are you from? No comment. No number plates on their cars, no military insignia.
But they were also, apparently, in Sevastopol. It is difficult to imagine that they are not either Russian military personnel themselves or in the pay of the Russians. We know that, for example, around the state TV that it was, according to the director general, 20 Russian marines who encircled that broadcasting facility, but at the orders of the government.
So, there are important nuances that we must make here in what is a very critical time in Crimea, which the world is watching, Richard.
QUEST: And ordinary people -- this is going to be played out at a geopolitical level, but ordinary people, as best one can tell, this is that part of Ukraine that is firmly or would be described as firmly in the Russian camp. Is that fair?
MAGNAY: Absolutely. The majority of people here are ethnic Russians. They speak only Russian, they don't speak Ukrainian. Many of them lived through the Soviet Union and still feel -- this whole area still feels quite Soviet in its mentality and its way of thinking.
And it -- socially, culturally, economically, they depend on Russia. They don't feel that the Maidan movement or that this new government represents their interests, and that is a very real concern for them. What you have seen in Ukraine has, in effect -- in Kiev, has in effect --
MAGNAY: -- sort of happened in the mirror opposite here, but in a very quick time. You've suddenly had the government that was ruling this regional administration removed, a pro-Russian administration put in, and forces taking control. The people don't quite know who they are, but are very much on the pro-Russian side, Richard.
QUEST: Diana Magnay, thank you. Diana is reporting tonight for us from Simferopol in Crimea. And obviously when there's developments there, we'll return immediately. But a short time ago, Ukraine's ambassador to the United Nations appealed to the international community to step in.
(BEGIN VIDEO CLIP)
YURIV SERGEYEV, UKRAINIAN AMBASSADOR TO THE UNITED NATIONS: We asked the Security Council to consider the situation in Ukraine as seriously as it is, and to undertake the appropriate measures to assist us to stop -- the dangerous developments which are challenging the international peace, and challenging our territorial integrity.
(END VIDEO CLIP)
QUEST: Whoever and however it is finally resolved in the governmental side, the interim leadership is asking for $35 billion in aid to avoid bankruptcy. A team from the International Monetary Fund will visit Kiev next week and will assess the country's needs. The IMF's chief, Christine Lagarde, says so far, there's no need to panic.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: As I've said, next week is fact-finding, beginning of a dialogue, preliminary assessment, and discussion of the building blocks of what programs could be put in place in order to support Ukraine.
One thing that we discussed as well, which I'm concerned about, is the multiple numbers that I read here and there. I think it's highly premature to assess financial needs, numbers here, numbers there. We need to rely on facts. We need to rely on the situation as it is.
We do not see anything that is critical that is worth your panic at the moment, and we would certainly hope that authorities refrain from throwing lots of numbers, which are really meaningless until they have been assessed properly. Thank you very much.
(END VIDEO CLIP)
QUEST: Christine Lagarde. We're joined now by former chief economist at the IMF, Ken Rogoff, now, of course, professor of economics and public policy at Harvard University, and always helps us understand what is happening.
So, Ken, this is a real conundrum, isn't it? Because the core issue for the -- if you like, the West versus the Russians, the core issue for the Europeans, and the IMF to some extent, is how not to make the same mistake twice if they decide that they want to bring Ukraine into the European sphere.
KENNETH ROGOFF, PROFESSOR OF ECONOMICS AND PUBLIC POLICY, HARVARD UNIVERSITY: Well, it's a very difficult situation because, of course, they want to help Ukraine, they want to reach out to the new government. On the other hand, they have to respect the unpredictability of the Russian government here.
The Ukraine, Richard, was in bad shape before this. And now, it's likely really dire, in terms of the military uncertainty, the conflict, the disruption on top of what was already a very difficult economy. They have not really recovered in full from the financial crisis.
QUEST: Do you give credence or support to the idea that ultimately, besides any bailout money, some form of currency board, I think probably a currency peg is too strong, but some sort of currency corridor backed by a board that links it to either the dollar or the euro is the quickest and most efficient, effective way to stabilize the currency, and thus stabilize the economy?
ROGOFF: I'd be very leery of that in these kind of circumstances where there's so much uncertainty about where the government is. The IMF really was concerned about a lot of corruption in the previous government.
They speak in bureaucrat-ese, but very clearly say the books were opaque, not easy to read, and you come in and you come in and try to put backing for a currency board in such an opaque, non-transparent situation, I think it's premature.
I think, as the managing director of the IMF said, they need to go in and look at what's going on, because there are a lot of numbers being bandied about, and the situation has to stabilize.
QUEST: But I suppose when we look at the situation in Crimea tonight, and you look at the possibility of troops on the streets, when you then hear the managing director of the IMF and you hear Olli Rehn saying, well, we'll need time to think about it, we'll need time to see what the situation is, surely time is the one thing they haven't got.
So, what would you suggest or recommend economically that needs to be done almost yesterday to help the situation?
ROGOFF: Well, they need a big aid package. I think everyone realizes that. They also need to clean up their books, to deal with corruption. The IMF's been saying that again and again, you can't replace one set of actors with another.
I think it's fairly well-structured. I'm guessing they're being a little cautious because of the geopolitical situation. They -- there's a concern about how are the Russians going to feel? You'd rather they didn't push too far into the Ukraine, you'd rather they pulled back.
So, I'm guessing there's some tactics here in the broader geopolitical situation. They want to help, I don't think there's any doubt about that.
QUEST: Ken, I want you to stay with me for one second. One story I just wanted to get your take on while we carry on talking about it.
The US economy grew at a slower pace than we thought in the fourth quarter. GDP expanded at an annual rate of 2.4 percent, according to the second reading. It's revised down from an initial estimate of 3.2 percent in January. Quite a slowdown to the third quarter, when the economy was growing at an annual rate of 4 percent.
Back to Ken Rogoff. Ken, this number, is it worrying, or do we write this GDP number off on the grounds of weather and whatever other ancillary excuses there might be in the back of the cupboard?
ROGOFF: Well, weather's been hitting this quarter, what's going on in 2014. But this was a revision at the end of 2013, before the weather really had started to hit. And so, it shows that the economy had been slowing down, some of what's going on is real.
On the other hand, it's hard to over-interpret these even quarter-to- quarter statistics. I don't think it undoes the story that the US is recovering, but it certainly tempers the enthusiasm.
QUEST: Tempering enthusiasm for us tonight, is Ken Rogoff in Massachusetts. Ken, good to see you. Have a good weekend.
ROGOFF: Thank you.
QUEST: Now, to the markets that have just closed, and gains across the board, up 49 points for the Dow, 16,321. The Dow and the S&P both made gains of 4 percent during February. There's a gain of 5 percent more the NASDAQ.
So, there's sort of an ease of January in the beginning of the year, if it hasn't exactly gone away, at least it's become a little disquieted with gains of 4 percent in the markets in the month coming to an end. Still to come on QUEST MEANS BUSINESS --
QUEST: -- CitiGroup discovers fraud at one of its Mexican subsidiaries and that fraud has a hefty price to pay. We'll have the details after the break.
QUEST: CitiGroup has been forced to revise its earnings downwards, and by a sizable amount, a quarter of a billion dollars. And the reason was fraudulent activity that was discovered at a Mexican subsidiary.
The bank takes a $235 million charge over an investment with a suspended Mexican oil company. It's an extraordinarily large amount of money.
In a memo sent to staff, the CitiGroup chief, Michael Corbat, slammed those who violated the bank's code of conducts. And he said -- and it was quite blunt the way he put it -- he said, "As much as I hate to say it, appears that even now, five years after a crisis in which the financial services industry shouldered its fair share of blame, there are some people who still don't get it."
CNN's Nick Parker is live for us tonight in Mexico City. Nick, what a -- I'm almost speechless, if that's -- some viewers would be delighted, but I'm almost speechless that this size of money could have been found fraudulently so soon after the crisis.
NICK PARKER, CNN INTERNATIONAL CORRESPONDENT: Richard, it's an absolutely huge amount of money, and certainly has caused a scandal here in Mexico, no question. The government just a few hours ago announcing that its actually taking control of this stricken company.
And the stricken company at the center of it all is a company called Oceanografia. They claim that they've been in the oil industry for something like 40 years, and they provide oil services to various clients, but really, their one big client was the state oil monopoly, PEMX, and they really relied on their business for a number of years.
Now, recently, PEMX went to Mexico's anti-corruption watchdog and said that they were concerned about some irregularities in some of their deals with this company. And just this month, the watchdog announced that they were banning Oceanografia for nearly two years from bidding on any government contracts.
And it was at this point that their creditor, Banamex, the subsidiary of CitiGroup here, and the second-largest bank in the country, began a major internal review into the company and found that they had processed some $400 million of false invoices from PEMX.
So, quite an extraordinary situation today. Speaking to reporters, the attorney general said he was going to try and get back some of that money.
(BEGIN VIDEO CLIP)
JESUS MURILLO KARAM, MEXICO ATTORNEY GENERAL (through translator): In effect, what we're looking to do is preserve firstly the source of employment. Secondly, to preserve the documents of the company, the accounting, the assets, the resources, the effective loan of the bank, and to repair some of the damage done.
We are also looking to protect the everyday operations of the company, which has a large number of workers.
(END VIDEO CLIP)
PARKER: Richard, no arrests or charges as yet, but they did stress they are trying to determine criminal liability.
QUEST: All right. So, the oil company -- the big Mexican oil company exists. The other company exists and has got real employees. The subsidiary exists, of CitiGroup. So, it leaves me a very simple question: where did the money go?
PARKER: Where did the money go indeed? Yes, that's really the crucial question. We don't really know how far back this has gone, and we don't know exactly what triggered that initial concern with PEMX. But what we do know is that they are trying to determine the criminal liability
They've established already to their satisfaction that there has been some criminal behavior going on, and I think that's going to be one of the most pressing things, is certainly the pressure that they're going to be experiencing to find where this money has, indeed, gone, and whether they can get it back.
QUEST: Nick Parker, our correspondent in Mexico City for us tonight. Nick, thank you, good night.
Still to come on QUEST MEANS BUSINESS, the parent company of British Airways and Iberia sees profits soaring. Willie Walsh, next, on QUEST MEANS BUSINESS.
QUEST: The owner of Iberia and British Airways is back in the profit. That's worth a bell.
QUEST: International Airlines Group, IAG, posted an operating profit of a billion dollars for 2013. And compare that to the $30 million operating loss in the previous.
So, what's behind it? You've got to look at the various individual parts of the company. British Airways, for example, British Airways itself had a much better performance, posting a billion-dollar profit in its own. It was the first full year of added slots from BMI. It introduced the 787 and the A380, and BA did better premiums on long haul. It got more money.
But also -- and that's the plus side. But also, the losses are getting smaller at the Iberia subsidiary. The restructuring continues. Things have improved quite dramatically at Iberia. It's still losing money, but not as much, and capacity on those loss-making Latin routes has gone.
And then Vueling, the low-cost carrier based out of Spain, based in Barcelona, posted almost a quarter of a billion dollars in profit. IAG took it over last year, took it over completely, and that made a huge increase to capacity as well.
So, all three spokes, if you like, wheels, cogs of the company are starting to move in synchronicity, as I put to the IAG chief Willie Walsh, and suggested if these results were a school report, well, it might be glowing.
WALSH: There are lots of different parts to it, obviously, with the three different airlines performing at different levels. But yes, I think that's a fair assessment. I'm very pleased with them.
I'm particularly pleased because of the contrast to last year. So, being able to deliver an 800 million-euro turnaround in profitability at an operating level, I think, is very pleasing.
QUEST: I'm still not sure how you did it, as I look into the numbers, because your yield didn't go up. So, you didn't make more money on the seats that you sold, you just seem to have sold more of them.
WALSH: Yes, and I think what you've got to be careful of is it's not like-for-like, because last year, we didn't have Vueling in the base, and this year we do. So, it was a number of factors. We have a contribution from Vueling, the low-cost airline based in Barcelona. We have an improved financial performance, profitability, from British Airways on the back of more premium travel, for example.
And then in Iberia, it has been a significant reduction in revenue, but an even greater reduction in costs, so the losses in Iberia have been reduced. So, different things, and it's the combination of all of those different factors that have led to this result.
QUEST: Which does lead me to assume that if you manage to get all three parts of this machine working together --
WALSH: It's not if, it's when. Yes.
QUEST: Well, let's stick with my if for the moment.
QUEST: If you manage to get them all working together, you have got a cash machine here, basically, if you manage to get them. Because what we're seeing in these results is that individually, they are starting to improve.
WALSH: Yes. And that's the beautify of IAG. What we have done is we've created an entity that allows us to focus the three different main airlines -- we've got a couple of other small airlines, as you know, one out of London City, one out of Paris.
But the three main airlines focus in different areas, do what's right for them, rather than applying the same rules, same solution to all of the airlines. And that's why we can have three very different airlines performing in different markets in a different way, and when they all pull together, it will be something fantastic.
QUEST: So, what do you do next? You -- all right. You've still got to get Iberia right.
QUEST: It's on the right track, it's still got some way to go. How far on the Iberia restructuring would you say you are, 20 percent, 50 percent, 70 percent?
WALSH: We're ahead of where I thought we would be. I would say it's probably 50, 60 percent. So, we're making good progress. We've got work to finish in relation to the -- what we've called a mediator's plan, so there is restructuring that is ongoing that needs to be finished.
Next step is finalizing agreement with our trade unions on further restructuring, and we've made excellent progress there. And then, it's about implementing that second stage of restructuring.
QUEST: Let's talk about what you're going to buy next.
QUEST: Are you looking?
WALSH: We're always looking, but honestly, there's nothing there at the moment. I think this is about fixing Iberia, which is really doing well, and continuing to make progress in British Airways, and then Vueling is a growth vehicle in its own right. Vueling's got to add about 30 percent capacity in 2014 versus 2013, 30 percent.
QUEST: You like Vueling, don't you?
WALSH: Yes, I do, I love it, yes. It's just great. Great culture, great people, great attitude, fantastic core space. They've got a great product, and yes, I like everything about them. Because they challenge all of the traditional thinking, and they succeed in doing that.
QUEST: Are you going to do a deal with Qatar? Are you going to try and get closer to Qatar within the One World Alliance? There's possibility for great opportunities between BA and Qatar.
WALSH: Yes, I think there's a lot in common, they're a fantastic brand. As you know, I've great respect for Akbar Al Baker, he's done a fantastic job with Qatar. We have done some work on the cargo side of the business, which is very important to us and I think will work very well for Qatar, and we do look to see if there's opportunities for us to cooperate further.
QUEST: Are you looking for revenue sharing on any routes with them?
WALSH: I think it's a -- it is an opportunity for us. We have a joint business with Japan Airlines to Japan -- from Europe to Japan, with American Airlines across the trans-Atlantic and into Mexico, as well, with Iberia.
QUEST: But could you see bringing Qatar into the JV or to cross the Atlantic?
WALSH: No, I don't think so, not at this stage. But I think there are opportunities for us to work more closely together.
QUEST: That's Willie Walsh talking to me earlier today, the chief exec of IAG.
And when we come back, police say they've broken apart a network of criminals who were engaged in investment fraud on an international scale. We'll have the story of the real wolves of Wall Street, or beasts of the boiler room in a moment. It's QUEST MEANS BUSINESS from London tonight.
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" from London in just a moment. This is CNN, and on this network the news always comes first. Ukraine's acting president has called on Russia to stop its naked aggression in Crimea. The country's ambassador to the United Nations has said Russian troops in Crimea have blocked Ukrainian security forces including its border guards and police. Yuriy Sergeyev has also accused Russia of violating Ukraine's territorial borders by moving transport planes and helicopters into the country.
Meanwhile, Ukraine's ousted president Viktor Yanukovych says he wants to return home and that he's still the leader of the country. He gave a news conference from a location in Russia earlier in the day. (Inaudible) Yanukovych has yet to meet Russian president Vladimir Putin.
Chinese authorizes say they've rescued almost 400 babies after cracking down on a (far-flung) group of so-called baby selling networks. More than 1,000 people were arrested in the operation which involved 27 provinces and cities across China. Thousands of documents are being released in the United States right now that shed more light on Bill Clinton's presidency. Some of the topics include the administration's response to al-Qaeda before the September the 11th terror attack and the healthcare debate.
Police have made hundreds of arrests in what they're calling an international ring of fraudsters suspected of selling worthless investments to unsuspecting victims. It's a boiler room bust up. Atika Shubert has this report.
LEONARDO DICAPRIO, ACTOR: My killers. My killers will not take no for an answer.
ATIKA SHUBERT, CNN CORRESPONDENT BASED IN LONDON: The Wolf of Wall Street captured it on screen, the relentless sales pitch to vulnerable investors, the extravagant spending on cars, drugs and women. But this is no Hollywood movie. British and Spanish police arrested more than 100 people for running at least 16 so-called boiler room operations, most of them in Spain, investment scams pushing the hard sell on victims. Everything from fake shares to fraudulent carbon credits, wine and land investments that simply did not exist - raking in millions of dollars.
STEPHEN HEAD, COMMANDER, CITY OF LONDON POLICE: This is fraud. This is stealing from people, but it's stealing from people on an unprecedented scale. We've got at least 850 victims that we've identified already in the United Kingdom. There are bound to be many, many more.
SHUBERT: In the raids police ceased, gold Rolex watches, an Aston Martin and a Ferrari, among other luxury items. The victims, many of them British retirees looking for a safe place to park their savings. One victim took their own life after losing everything. Hundreds more are now struggling to make ends meet.
UNIDENTIFIED VICTIM: We were in a comfortable position, and then we've come where we're absolutely broke. You know, broke.
SHUBERT: This victim described the intense pressure to invest. They said you got a house, he said, "Can't you mortgage your house, can't you? - you know, he says, "All we want is $22,000," he said, "and that's easy to get and then you'll double your money - straightway.
SHUBERT: Britain's National Crime Agency says the scale of the network was unprecedented. The two-year investigation nabbed both the mastermind behind the network and callers working in the boiler rooms.
HEAD: What we've look at here is the heart of an international web of criminals operating on that global scale. What we also see, though, are people who are working in these boiler rooms. Some of them are university graduates, some of them are very bright, intelligent people. But they're actually - they're not the upper echelons, they have no conscience.
SHUBERT: These arrests are a stark reminder that the tactics seen on the Wolf of Wall Street are very real. Atika Shubert, CNN London.
QUEST: Now, just to bring you up to date - we are expecting in the next ten minutes President Obama to make a statement on the situation in Ukraine, and the President will obviously be speaking from the White House. There you see the preparations being made. We don't know whether he's going to take questions, we don't know how long or anything (inaudible). It's about - it's meant to happen in just ten minutes from now. We'll have obviously a minute or so warning before we go to it. We will bring it to you obviously, you need fret not about that, assuming it's running on time. So, the President in ten minutes from now on the situation in the Ukraine.
M.T. Gox - Mt. Gox - M.T. Gox - whichever way you want to call it. Well, whichever way you put it, it's officially filed for bankruptcy. It was one of the world's largest Bitcoin exchanges until it went offline on Monday. Now Japanese media's reporting that M.T. Gox has more than $60 million of debt - hundreds of millions of dollars' worth of Bitcoins are missing. The chief exec's apologized for the losses. Bankruptcy lawyers say he'll soon be on his way out.
MARK KARPELES, CEO, MT. GOX: We are working on it and, anyway, in the meantime, we are sorry for the trouble caused by this."
AKIO SHINOMIYA, LAWYER, YODOYABASHI AND YAMAGAMI LPC, VIA TRANSLATOR: In principle, we do not believe that by having the CEO remain in his position that it's possible to regain trust. As such, by having him depart, we hope to look for new sponsors at the appropriate time.
QUEST: Now, this controversy has dealt a major blow to confidence in Bitcoin. Since the beginning of February, Bitcoins have lost nearly a third of their value. Today they were trading at $573 down, with more than $800 in February. The Bitcoin Foundation's executive director says Bitcoins themselves - well, it will not be brought down by the failure of one exchange. Jon Matonis told CNN's Jim Boulden that Bitcoin's resilient. And yet it is still experimental.
JON MATONIS, EXECUTIVE DIRECTOR, BITCOIN FOUNDATION: Well, M.T. Gox originally last Sunday resigned their board seat from the foundation, and right now they are cooperating with the investigation as far as we know.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: And your statement is that one bad apple does not mean that Bitcoin is in trouble, it's just that you're a young company and this is a problem that you're going to deal with.
MATONIS: Exactly. There's no single point of failure in Bitcoin, so it's not even possible for one single company or point to bring down the Bitcoin (inaudible) system. Bitcoin is massively resilient, its anti- fragile system, and it will - it will indeed recover from this. The other point is that the exchanges that are still in existence and operating will tend to be stronger because of his.
BOULDEN: But doesn't it show a frailty in the system itself because it's such a young idea that you can have someone like this make such bad publicity so quickly?
MATONIS: Well, I think that's inevitable in any young industry. Bitcoin is still beta, it's still experimental even though it's only - even though it's five years old and very successful. It still is considered experiment. The big takeaway from this episode though is that Gox represents the exact opposite of too big to fail capitalism. They were not rescued, they didn't come in with a government bailout. Taxpayers didn't bail this out. If this had been a traditional financial institution, the losses would probably be papered over with taxpayer money. And we didn't see that in this case.
BOULDEN: But when you say it's beta, that makes me think it's not worth somebody risking their future on Bitcoins.
MATONIS: I would agree with you on that. I don't think that people should treat is as non-experimental. You should only invest and trade what you can afford to lose in the Bitcoin currency and we've always said that.
BOULDEN: When we see stories about drug dealers using Bitcoin or M.T. Gox, does that make it harder for you to sell that line to a show like this?
MATONIS: I don't think so. I think people have mostly gotten past that. People are aware that most of the money laundering and terrorist financing crimes are done in euros and dollars, not really in Bitcoin. Any young currency or any medium of exchange is subject to abuse and Bitcoin in that regard is no different from the dollar or the euro. It's more similar to paper cash.
BOULDEN: So, you're saying it's beta, not safe yet but how quickly will it move out of beta and be something where you think people would want to get involved with beyond the money they're able to lose.
MATONIS: I would say in about three to five years -
MATONIS: -- we will start seeing user-friendly apps which make - which really will complete the transition to mainstream. It should be as easy to download and use Bitcoin apps as it is to download something like Skype.
BOULDEN: Don't you think governments are going to get involved - and it's non-governmental but they're going to regulate it, where Congress is going to regulate it - someone's going to step in?
MATONIS: There will - there will be regulation. And it's not regulation of the Bitcoin -- capital B -- larger network. It's the regulation of the exchange end points
MATONIS: So when you're getting in and out of Bitcoin into (Inaudible) or from (Inaudible) national currencies, that - those - are the end points that'll be regulated.
BOULDEN: And you're happy with that obviously?
MATONIS: Well, I mean it's not that I'm happy with it -
MATONIS: -- it's just that it's - it's
BOULDEN: It's going to happen.
MATONIS: -- it's a point where you probably will see the most regulation because it's the only thing that can be regulated within (ph) Bitcoin.
QUEST: The question of Bitcoin. Now, in a moment, the calls for change for growing louder after our "Freedom Project" special report on the Ivory Coast. Tonight, you'll hear the country's prime minister. "Cocoa- nomics" continues on CNN.
QUEST: On last night's program, we showed you "Cocoa-nomics," our "Freedom Project" special on poverty and child labor in Ivory Coast's cocoa farms. Since then, hundreds of you have tweeted us using the hashtag #cocoanomics, many of you inspired to make change. (Inaudible) says, "Impressed by Cocoa-nomics I wrote to several chocolate producers inquiring why their chocolate isn't certified." Good point. Another tweeted us to say "Cocoa producing countries should form organizations like OPEC to fix the price of cocoa." I'm not quite sure about that, that raises a whole range of cartel issues and it's - but it's a valid point - at least it's a point worth making. Akmad (ph) Saad says, "As a supply chain professional myself, I feel that chocolate companies should process and produce chocolate in Africa #cocoanomics." That's one of the major issues - the production and the value-added nature of it.
In the Ivory Coast, the government wants the country's farmers to get more from the cocoa industry in exactly that way - value added. If farmers are to get more for their cocoa, somewhere down the line, consumers could have to pay more. It's hard to argue with that. I asked the country's prime minister Daniel Duncan whether consumers should pay more so farmers get a better deal.
DANIEL DUNCAN, PRIME MINISTER, IVORY COAST: There is a difference between the wish and reality, but if you process more of it locally - and that's the position of the government - to process more cocoa locally - to have more added value locally. And that's our policy. We have - now we process about 30 percent of the cocoa locally, and the aim is we wish (ph) at least 50 percent within two or three years. You know that (Inaudible) in the late 90s and early 70s was a kind of showcase for the (inaudible) and unfortunately we went through a difficult period as you know after the last elections, and we went through some turmoil but the situation have improved now.
QUEST: Can you do it? Can you push forward the reforms necessary both in cocoa and in the economy and at the same time, prevent the country from falling into dispute, open warfare again? Can you do it?
DUNCAN: Well, we can do it. You know, I was prime minister here in this country from 1993 to 1999, for six years. We have only at the beginning 25,000 mobile phone here in the country. You know how many we have here now? Twenty billion (ph). Yes, that's it - you know, that's a target. And if you've done it, you have quite a - 90 percent of the population have mobile phone here in this country. That's a deep change. So we're here to work hard on it, but our aim is to have double digit growth by 2014. OK, we want to turn this country into a major market by 2020.
QUEST: That puts it into perspective. Remember you can find out more about how to make a difference, go into our website cnn.com/freedom with links to charities and groups dealing with these everyday issues. Ninety percent of the people in Ivory Coast have mobile phones the prime minister says, and most of them don't or haven't tried chocolate, at least the ones we spoke to and you saw last night. That really puts it into perspective.
Let me remind you President Barack Obama is to make a statement on the situation in Ukraine in just a few moments. We'll bring it to you live. We'll take a break. If the President starts speaking during the break, fret ye not, we'll be right with it.
QUEST: This week we've been given a glimpse at the gadgets you and I want over the course of the next year. Whether it's the latest wearable devices, the superfast mobile phones, everything unveiled at the Mobile World Congress in Barcelona. It's where the biggest names shared their vision of the future of technology and Jim Boulden was there.
BOULDEN: So now that World Mobile Congress 2014 is well and truly finished, we wanted to look back and look forward. I'm joined by Dylan Reynolds, he's executive producer of CNN.com. What stood you for you the most this week?
DYLAN REYNOLDS, EXECUTIVE PRODUCER, CNN.COM INTERNATIONAL: Well I've been really impressed by the amount of wearables on display here. It's the first time we've really been able to get to grips with these devices and to see their potential, particularly when it comes to health and fitness.
BOULDEN: And there's certainly a lot of photos on Instagram.
REYNOLDS: And very colorful ones too showing that the designers are also thinking about style as well as function now.
BOULDEN: And of course if you look at Twitter, you can't help but see a lot of Tweets about Mark Zuckerberg's keynote speech on Monday night.
REYNOLDS: Exactly. So, the mobile operators are facing a real challenge from the likes of Facebook. Now, Zuckerberg was invited here to give the keynote address, and it really is him who's holding the - calling the shots now.
BOULDEN: And we see a tweet here with a mural someone drew of Zuckerberg while he was here speaking.
REYNOLDS: Right. One of our bloggers saying that he's the new overlord of voice.
BOULDEN: And to look forward, there's a blog on CNN.com about what to do next year.
REYNOLDS: Sure. The advice from one of our bloggers is nothing can prepare you for the scale of Mobile Congress. Some 85,000 people here this year. If you are going to come, make sure you book your hotel years early he says. An exaggeration perhaps, but you know the venue is quite a way in the distance over there, so you might want to try and book a hotel on this side of the city. And finally, he says, make sure you do come back next year.
BOULDEN: Indeed, I hope I will as well. Jim Boulden , CNN Barcelona.
QUEST: Now the weather forecast. Jenny Harrison is at the World Weather Center of course this evening as the weekend is upon us, Ms. Harrison.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: It is, Richard. Indeed, yes, and of course what does that mean in terms of the weather? Well I can tell you - it's your usual mixed bag, particularly across in Europe. The last few hours another system of course has been coming in from the northwest. What you will notice because the area of low pressure is taking a rather more southerly route - (same front) France, northern areas of Spain and southern France as well. Some very strong winds here and also of course the rain is coming in with that storm system. So as I go through the weekend, another storm system as I say coming in again behind that one across the northwest. And also very unsettled through much of the central Med pushing on towards the southeast, mostly of course coming down there in the form of rain. But we have had some snow again the last few hours, particularly through these high elevations. But you can see the circulation around that area of low pressure. So, it is certainly taking a much more southerly route, this system anyway, than the last.
Now, we haven't had a huge amount of very heavy rain in the last few days across much of the U.K., but even so, this is still what it looks like down on the ground in Somerset. We have still got, as you can see, several feet of water over a huge area. This is Burrowbridge in the U.K., and as I say, it is Somerset which is still, would you believe, under warnings for two severe flood warnings as we continue through the weekend. On Saturday and Sunday, they'll still not drop because there is so much water down there, the rivers are so full, that of course any rain on top means that that threat is still very real indeed.
The rain is coming in. That first system heads through and then guess what? Another one as we head towards the latter part of the weekend. This one actually coming through with some rather heavy amounts of rain built into it a well. The winds are fairly brisk and in fact we could see some winds at around 70 kilometers an hour. Again, at the latter of this timeframe. So, again, as we're getting into Sunday night into Monday morning. So not a great weekend ahead. Very unsettled through much of the central and southeast Med - more snow here too along that line of the Alps. So, how does that fare when it comes to you traveling if you're certainly flying out somewhere, perhaps on Saturday. Well, in fact, this has just changed over from what was snow just an hour ago to rather heavy rain, but that's Saturday into Sunday night. But at least it's not as bad as a snow that was feared earlier.
As for your weekend plans wherever you are, wherever you're heading to, London, Paris and Madrid here you can see in all three cases fairly unsettled. Just Madrid perhaps the worst in terms of no real sunshine for you but not a cold weekend - 17 Celsius for you on Sunday. And then we head across to Copenhagen, Frankfurt and Milan, and again, the best weather probably for both days is going to be Copenhagen as you can see more there in the way of sunshine. But we've certainly got some rather heavy clouds pushing into northern and central of Italy and then across into New York, Sao Paulo, Buenos Aires. Again, look at this - in most cases we've got the chance of some showers and certainly some heavy amounts of cloud. But you can see here Saturday and Sunday in Sao Paulo, the temperatures in Buenos Aires very nice indeed. So if you're heading - have a good weekend when you get there. Richard.
QUEST: And thank you very much. Jenny Harrison, the world weather for the weekend. Now, when we come back, she's famed with playing a character obsessed with shoes. Now the actress Sarah Jessica Parker has unveiled her own shoe line for an upscale fashion retailer. Sex and the City teamed up with her long-time friend the chief exec of the high-end shoe brand Manolo Blahnik. Maggie Lake sat down with the pair - the shoes - before the launch.
MAGGIE LAKE, BUSINESS ANCHOR AND CORRESPONDENT FOR CNN INTERNATIONAL: It's a case of life inspired by art. Actress Sarah Jessica Parker, who rose to superstar status with the wildly-popular TV series Sex and the City, has stepped out of the role of fashion-obsessed Carrie Bradshaw -
SARAH JESSICA PARKER AS CARRIE BRADSHAW, ACTRESS/SHOE DESIGNER: Manolo Blahnik. Mary Jane thought these were an urban shoe myth.
LAKE: -- and into the role of real-life shoe designer.
PARKER: I have always felt that there was this group of ten million women that I found the honor bound to in some way that had committed to me for a number of years, and that I wouldn't be having this opportunity if it weren't for the dedication of sort of the diligence with which they committed to that show, Amazon) and the character I played who loves shoes.
LAKE: Parker's love affair with Manolo Blahnik made those shoes a household name on the small screen. Now, she's teaming up with CEO George Malkemus to design this collection of Italian-made shoes. Fellow fashionistas will dish out between $195 to $500 for a pair.
PARKER: How pretty this would be for your teal.
LAKE: Though no stranger to the red carpet, Parker wanted her shoes to be a marriage of fashion and functionality.
PARKER: How comfortable is that going to be under the ball of my foot because we have spent so many years and hours of our lives, you know -- right or wrong - running around in shoes we know - you know, we know how a t-strap feels, we know how we wish a t-strap would feel. We know how a bigger stacked heel feels too, so how do we get that feeling when we're going to ask what - you know - when we want physically on a silhouette (inaudible).
LAKE: It's a risky venture. Hundreds of brands are vying for a tiny slice of a global footwear market worth nearly $200 billion. But Parker and Malkemus believe women want more out of the relationship with shoes.
GEORGE MALKEMUS, DESIGNER: It's about designing a line that basically a woman can wear - the "Carries" that she has on today, and basically that name means a great deal to a lot of women in the world, but also know that in a - two years she can pull it out of her closet into a lunch -
QUEST: Let's join the Russian ambassador to the United Nations talking on Ukraine.