tv Bloomberg Business Week Bloomberg August 13, 2017 8:00am-9:00am EDT
♪ oliver: welcome to bloomberg businessweek, i'm oliver renick in new york. some of the most dynamic cities across the globe and how they are addressing unique challenges. we will also look at moscow's massive renewal program and how refugees are flowing into the amazon. all that ahead on bloomberg businessweek. ♪
oliver: we are here with editor-in-chief megan murphy to talk about the special focus on cities and this week's is this week. i love it and you guys love it. there is so much great work here. why the focus on cities? megan: cities are a microcosm of the demographic changes that are happening. we see this entrenchment at the national political level and not just in the u.s., but in countries around the world, cities are becoming the petri dish for innovation, the driving force of this re-urbanization for many areas. or coming back to dilapidated areas. connected megacities, you see that in various areas. these hotbeds of innovation. also some of the biggest challenges that we are confronting environmentally as well. we want to dive deeper look at these ideas and look at the success stories and some places that are struggling to deal with
change and use this issue to bring that out. oliver: i will play devil's advocate because cities will always be progressive hotbeds -- the place where ideas and forward thinking is or is it more so now with globalization? more so now and focus because we are talking about infrastructure with new world leaders taking the helm? what is it about the current? it?t the now-ness of megan: i think we would say that being a mayor, you have to get things done. if it doesn't work you won't get reelected. the infrastructure isn't there in a city you will get tossed out. that is different than a national level where policies work. we have been talking about infrastructure bill in america for decades and haven't seen anything.
with a mayor and in cities, it is a different story. people have to get it done. it is unfortunately now the targets of terrorist activity, london, paris, on the frontlines of so many issues and they have to be solution oriented. you cannot afford to let your city not keep up or not respond or not be dynamic. that is different than the calcification we see on a national and political level. oliver: my favorite quote to that, i think it was a mayor you interviewed, said that "problems on a national level take a couple years to manifest themselves, problems on a city level and a mayor's level manifest themselves within months." megan: within a day in some cases. whether it is a trend or crisis. it is fascinating. it is always pretty much the same issues. traffic, congestion, sustainability, development, jobs -- how i my empowering my city to attract high-paying jobs? upscaling people and making sure repairs work. you are always going to see the very wealthy and very poor and they smash up against each other all the time. part of being a successful city is a technology matt and making it a livable place for all. oliver: talking about those
ideas, one of the cities you profile is moscow. there is a big effort to modernize their infrastructure and move their city in a progressive direction well there is still a coulter that is very much not following those western progressive values. how do you approach looking at moscow is a city? megan: there are really two means. they think of it as 1980's -- bread lines and dilapidated buildings. and huge housing buildings which are empty.
the second view, is corruption. everyone is backhanded, there are big armored range rovers driving the streets and it is unsafe and everywhere you go someone is looking for a handout. there is no real visible city life in the city. neither of those are true. we wanted to look at the moscow of today. under the mayor of moscow today, it has taken a forward look at revitalizing sustainability and livability of the city. as well as the problem of traffic. oliver: it was a personal look at the city. >> the story came out of the writer's own experience of going back to moscow after not being
there for several years. she lived there during various periods of her life and her husband is russian so she is familiar with the city. she went back recently. she was blown away by how much it seemed -- it was comparable to being in london or manhattan. everyone was on wi-fi, the parks were beautiful and green, there was an incredible lavishing of detail on historical buildings. that had been in the past, quite ruthlessly torn down. oliver: this is an interesting story. i was thinking about the city and the world cup, a lot of people i know are interested in going. this is a city that feels a lot different than what your average american pictures moscow and a post soviet breakup visual image that comes to their mind. >> right. i think the population themselves, i think they are surprised. they have just had this moscow
urban for him which is a gathering supported by the city of urban planners from all over the world. architects, food culture people, to discuss the future of big cities. vladimir putin himself, he said that we need to be -- in order to be competitive you have to have a competitive mega-city. if people don't want to live in your city, you cannot compete. oliver: it is a conscious decision by russia to let us make moscow something that will draw people in a make a conscious effort to change it? >> yes. the talk of the city is how everything is being torn up, the sidewalks are being widen, bike lanes introduced, there are new
beautiful park benches everywhere, historically accurate trees lining boulevards so they look like they did in the 1800s. these elaborate street festivals. that people actually come -- tourists are coming in because it is less expensive to stay there than it has been in the past but they're also doing this so people who don't live in moscow but our russian, come to the city. oliver: turning this into a cover image was the job of our photo editor. i love this week's focus which is on cities. how did you choose through the different stories and articles, an image to represent everything? >> we looked for covers from all the photos we had. we knew with a subject like this you want to lead with great photography. we needed something that would
encapsulate the whole idea which is about the future of cities and gets that cities will be more important over the next 25 years. more population will move there. we wanted something that had a human element, a strong urban element, and that was recognizably a great world city. oliver: you have red square in the background but you have a symbolic imagery as well which is scaffolding in the foreground. it represents the future in the development but also the familiarity of the city we know. >> in a way, this is classical with a strong foreground, middle ground, and background. it has more depth than some covers. it also helps tell the story. again how we relate to cities. so how we are going to do
moving forward. oliver: it's peace to the power of a good photograph when the editorial team has to combine an edit and put cool graphics on the cover, this is a photo that tells a story. >> this photographer, lives in america but is russian by birth and has spent a great deal of time there. she shot this on film and she was going back to look at a city that she knew well and specifically see the changes that the story was talking about. oliver: up next, russia braces for permanent sanctions from the u.s. as venezuela spirals even more out of control, u.s. oil confronts a $10 million debt and stop this is "bloomberg businessweek." ♪
♪ >> welcome back to "bloomberg businessweek." i'm oliver renick. you can find us online at bloomberg.com and the mobile app. exclusively on the mobile app, russia is being prepared to be walled off from foreign capital and technology for the foreseeable future. >> we were trying to look at how the sanctions are different than before. the reality is, the measures are the same pretty much, they have tightened them slightly but the real important development here is that the president no longer has the authority to remove the sanctions without congress approval. what that means is any hope russia had that these punitive measures against it would be temporary has evaporated. the reality has sunken now in moscow that they are looking at years or possibly decades. >> does this essentially adjust the point of the potential shift in relationships between the u.s. and moscow that people speculated could potential he happen or to the sanctions put that to rest or is there still potential here for a potential reset of how washington, d.c. deals with moscow? >> i would argue no, the sanctions bill has buried those hopes. hopes which were strong after donald trump's election that the government in russia thought that after the terrible
relationship they had with the obama administration, we all know why that happened. the russian intervention in ukraine. donald trump was seen as a great help for turning a new page in relations with what had happened since his election. we have seen the reverse. things have gotten worse. oliver: walk us through the potential effects of the sanctions. we know there is a direct focus here on energy. tell us about how the sanctions could affect the russian economy -- this is a moment where they are trying to come out of a serious slump in terms of economic activity? >> the sanctions at one point threatened to impact pipeline projects involving outside countries. european countries. that will probably not happen because the language was softened. those measures would only happen
in consultation with allies. europe has a major energy dependence on russia. the worst-case scenario has not happened. nevertheless, the sanctions keep in place very tight restrictions on financing for major state-owned banks and they also restrict transfer of energy technology. it stops russia from getting the technology it needs to develop difficult reserves offshore, shale, arctic reserves. they were the major relationship between exxon mobil and the state oil company, which is headed by a close associate of vladimir putin, that stopped in 2014. it will not restart. oliver: i want to bring in
numbers. russian officials had previously estimated the cost of sanctions at $30 billion in 2014 and 2015. the international monetary fund estimated the curves could accumulate losses as much as 9% of gdp in the median term. what opportunity is there for russia to make that up elsewhere or is this going to be an economic hit that they have to deal with? what is the potential recourse that they can take? >> russia has to hope that oil prices go up. sanctions -- there is not much they can do about that. that is going to act as a continuing break on investment. this is a problem, for foreign businesses looking to whether to put money into russia, obviously they will still be investing but it will be below what it used to be. unless -- they failed to do over so many years, it is essentially dependent on raw materials. oliver: in the economic sector, u.s. oil producers are growing more wary about potential all out in venezuela. >> venezuela has the world's biggest oil reserves so it is a major player in the industry. for the u.s., it is the third
biggest outside supplier of crude, one of every 10 barrels we imported last year came from venezuela. $10 billion worth. it is a major factor in the u.s. oil industry. especially for refiners on the gulf coast. you talk about valero energy and chevron, pbf, phillips 66, their major facilities that depend on that for a large part of supply and it will be a big headache for them if we see sanctions on venezuelan crude. oliver: what is been going on with the exporting of crude oil and the overall oil trade with venezuela since things have blown up? >> production has gone down in the u.s. -- we are at a quarter century low in terms of imports. still a large portion but it has been trending down. they are producing less oil because of the economic crisis down there. united states importers have been turning to other sources slowly to try and hedge their bets.
oliver: going to the story and the numbers you were talking about, 270 million barrels, $10 billion, i was surprised of some of these numbers and how big they are. especially given the energy independence that the u.s. has been trying to achieve with shale. why is it just about the exporters, even though the u.s. has been producing its own oil, these importers and refiners say, that does not change much for us because we are still bringing in oil -- how does that dynamic still at this point where $10 billion is coming in? >> these refineries on the gulf coast have been built to take the thick, high density oil from venezuela and other countries.
they were calibrated over decades, well before we saw the u.s. oil boom -- to take foreign oil because the u.s. didn't supply enough for a long time. they can't really handle right now, or be much less efficient, to take crude of a lighter variety. oliver: did actually gets down to the difference in terms of the actual material and crude that is coming in. >> right. oil is not just oil. there are different grades and varieties. these gulf coast refineries have evolved to take venezuela and other heavy crude. oliver: i imagine that if you are a refiner and you are used to getting a certain import number, high numbers from venezuela, you have to think about the potential downside if the turmoil doesn't come to a conclusion. what have these companies been doing, valero, and major u.s. refiners, to hedge or have they? >> they've been taking less and less venezuelan crude.
to a certain extent, they have no choice. venezuelan production has been dropping. there are other adult -- other alternatives, from canada or other places, that could work for these refineries so they have been moving. venezuela is still a big supplier. they've also been lobbying in washington to say, sanctions may not be the best answer. venezuela would still be able to sell crude in other parts of the world and you would have this effect in the u.s. -- they are pressuring you trump administration to be cautious about its next steps. oliver: up next why president trump is looking quite unprepared to deal with special counsel robert mueller. this is bloomberg businessweek. ♪
♪ oliver: welcome back to bloomberg businessweek. i'm oliver renick. you can catch us on the radio at sirius xm radio. and london, and asia. in the politics section, as president trump fails to put together a legal team, we talk more. >> right now their legal team is still in flux. in some ways a bit unfocused compared to robert mueller who has now hired up his 16th lawyer. jump's legal team is trying to get centered, bringing on a couple of washington veteran lawyers. seeming to lack one key resource that they may need to face off against bob mueller. that is a private law firm.
oliver: when you look at the list of folks on robert mueller's team, it is extensive. folks on the other side defending trump and his team, it seems lopsided. why do the white house and those under investigation, why they not undergone assembling a team quicker? >> turning to personal counsel, he turns to his personal law firm -- which is more about bankruptcy and litigation. it was quickly clear that mark casowitz was not working well with the trump administration and he was sidelined. they've reached out to a number of high-powered firms such as sullivan & cromwell, but were rebuffed in part due to conflicts or a sense that the president doesn't want to listen to legal counsel. which could be a reputational risk for the law firm.
does criminal defense work as well as congressional investigations. he is very experienced. the face of the team at the moment is jay sekulow, a christian rights lawyer. and the third individual, just came on last week and that is ty cobb. he also hails from a longtime washington firm, and is well experienced in congressional investigations. investigations. he did a lot of corporate work in private practice. he had to leave his law firm in order to take the position. oliver: up next the tangled web of limited liability companies for president trump. a refugee crisis in the amazon. this is bloomberg businessweek. ♪
♪ oliver: welcome back to "bloomberg businessweek." still ahead, the amazonian port city that has become a haven for indigenous refugees from venezuela. we will talk to mayors about how they are tackling issues from poverty to pollution. how clones may be involved in the 2020 olympics. still ahead on "bloomberg businessweek." ♪
oliver: we are back with "bloomberg businessweek" editor-in-chief megan murphy. one of the stories that is interesting is a look at limited liability companies. why did you focus on this? megan: we have been focusing on the president administration's tax issues and the way he structures has sprawling business organization. as hard as we push to get more transparency, as the president has moved to separate himself, not from his family, but from the business, we really want to see how that is working? how he is paying his taxes? how the structures operate. this is a small glimpse. this is a small piece of the pie but it is important. it explains how we have seen limited transparency on the president's tax forms. we can almost put together through various statements and limited information, we can likely conclude that he is using a structure -- channeling profits from his businesses through a web of llc's.
we should be clear that this is far from unusual. anyone who has an ownership stake in the kind of business organization that the president has would almost always structure it like this. what is important for ordinary americans to know, and voters to know, is how people with access to wealth and advisers can use the structures to minimize tax liability. how the system is stacked against them. oliver: you used the example of the hotel in chicago.
a huge building and a huge list of ownership companies. i like the larger topic here. the president's doing this because he has the ability to. not whether it is illegal but whether it should be back case in which wealthy americans can find these loopholes and exploit them to the extent that they do. a lot of that comes with a very specific tax that they are able to avoid. megan: the net investment income tax and the use of it through s corps. what is so fascinating is that donald trump and republican and democratic presidents alike have talked about simplifying the tax system. because the system is so complex that you can use partnerships, whether it is an llc, you can use an s corporation which entity thatrough companies have used for years to
avoid two taxes. the tax you pay, self-employed for medicare, as well as the net investment income tax which is tax on the wealthy which is designed to be on investment income. by setting up an s corp and paying your profits off on the business you can avoid the net investment income tax on the income you get as much as the investment income you get from your ownership stake in that. it is a complex provision of the tax code. it is been around a while. what is fascinating is that president trump along with others have proposed scrapping the net investment income tax as a holdover from obama. the sheer complexity of the tax code lends itself to creating structures. that is the bigger point. whether we should have a tax code that incentivize is such complexity, that benefits the wealthiest americans. oliver: the more complex, the more opaque. let's shift years.
wonderful about a story. the future section now focusing on a city. manaus in brazil. megan: right at the heart of brazil's tropical forest. a city that for the time has been a center of immigration and trade and a diaspora of people and is now attracting the indigenous people of northeastern venezuela who had the lifestyle for 9000 years of hunting and gathering and fishing, largely out of canoes in the orinoco delta. they are now moving with the extreme political economic disruption and violence, to this brazilian city. this is a beautiful tale of the hope that can bring and the extreme challenges they face.
oliver: i love it, a combination of politics, people, markets, a fantastic story. we talked to david biller in brazil. >> it is equidistant tween the atlantic and pacific oceans. it is in the middle of the amazon. there is no real road, everything is done by the water. you see that on the waterfront, you have something like 40,000 ships docking every month. the big ferries that take people to the jungle, launches to smaller cities, and also fishing boats. you can get transatlantic cruise ships going up the amazon river to manaus. it is the start of the amazon river. oliver: tell us about the indigenous people -- where are they moving to? >> first of all, as democracy implodes in venezuela, you have people going everywhere. you have, you know, elites going to miami, middle-class people
aires a flight to buenes or santiago --or buenos aires. and some are going to brazil. these indigenous people have lived in the orinoco delta for millennia or it over the past couple of decades -- these people came to depend on modern civilization. they would come to nearby cities of 100,000 people max to get medical care and consumer goods. they got government aid during chavez' time and became ingrained in modern society even though they were living in the delta in a hostile environment in huts. doing everything on canoes and living off of fishing and foraging. then, since they have come to depend on modern civilization, when venezuela started collapsing, they started traveling further away to get consumer goods, medical care. some of them are winding up in brazil and some are winding up in a city of 2 million people in brazil. it is a bizarre existence especially for people who speak a language that is completely
isolated on earth. and still maintain a lifestyle. as they have since forever and a day. oliver: now that existence for them has become even more strained, as you mentioned, the breakdown of democracy in venezuela. the chaos that has taken hold in the country, these people have to go somewhere else to get necessities. basic, daily things that everyone else doesn't think about. now they have to move into a different region. how is the brazilian port in manaus handling the influx of people? how many are coming? >> there are thousands of venezuelans but the indigenous
people specifically, it is about 500. manaus has risen to the challenge. the interesting thing about manaus, it used to be back in the mid-1800s, a backwater of 3000 people. then there was the rubber boom and tens of thousands of migrants came in, many of them brazilian climate refugees from the drought in the northeast or people looking for more opportunities. oliver: up next, the trouble and solutions for the growing number of supersized cities. plus we talk with the most powerful mayors on the planet. ♪
us online at businessweek.com and our mobile app. how governments are planning for the end of the century when 80% of people will live in cities. here is peter coy. >> in general people are not rapidly changing where they live. that is very different in the global landscape, manila, nairobi, that are still seeing massive migration from rural areas into the city. it is putting enormous strain on cities. oliver: is this something that has always been the case for emerging areas for developing countries -- people from the rural areas seek out the opportunity that comes with urban areas. or is this happening now because of stronger economic growth or something new? >> the u.s. was something that was once a developing country and we saw it here. the difference i think, and i talked to ed glaeser about this,
what is happening in these megacities, karachi, their urbanizing from a much poorer level. the u.s. had a successful agriculture economy, and sets of workers on the farms essentially, then they saw opportunities in the cities. these countries are not having that. they are coming from a position of subsistence agriculture in many cases. they are desperate -- they go to the city looking for opportunity. oliver: so this is a case -- for example, new york, this is a city early on, even though a lot of people came, there was infrastructure and an industrialization process to support that. is it now in these other cities,
the southern cities, is it more about the economy not being able to keep up with the number of people coming in? >> it is partly the speed of the transition. if you take people in a bit at a time you can build out the infrastructure to handle them. if they come in wave after wave you can't do it. i'm trying not to be negative in this piece because there are things that can be done and i focus on a couple of small cities that most people have never heard of north of -- in the north part of columbia, where the mayors have come up with a clever idea in cooperation with others in urbanization projects, the idea is to say that we know the people are coming, we know that our cities are going to grow beyond where they are now. let's plan for it now.
they are actually acquiring rights-of-way to roads when out in the countryside where no one lives, just to mark them out. they are planting rows of trees. oliver: early-stage urban planning? or is it about the ease of getting people in and out? >> it is planning for that growth. when people are moving their they won't camp out where you need to have a road. once people are there, it is just about impossible to move them to make room for a nice road. therefore you have poor transportation, therefore people can't get to work and on and on. oliver: in a special city section, mayors across the globe talk with us about how they are tackling unique challenges in each of their hometowns. >> there seems to be this trend recently where you're seeing mayors weighing in on issues that used to be thought of as international or national issues.
you see them talking about climate change, refugee crisis, inequality. big macro issues. the mayors used to be thought of as more folks who got make -- who make sure the the garbage got picked up on time. give increasingly see them weighing in. we want to find mayors who have done that and who dealing with the stuff in an immediate way. oliver: let's start in paris. tell us what you focused on here. i liked that it was climate oriented. >> she has been as much as any other mayor on the forefront of this idea that mayors should be talking about this stuff. mayors can get together and be an international, political force.
we asked her why she thinks this is happening. her point is that cities is where this is happening. this issue of inequality is most acute, many of the winners of globalization live there in paris, london, new york, san francisco, but you have the people being displaced by globalization ending up there. you have to deal with both ends of the crisis at once. it makes it a media. oliver: that is a good point. for them this is, when you talk about in particular, she brings up looking at climate -- this is an important part of the paris climate accord. something that didn't go as planned everywhere. is this something that she talked about or dressed? -- or addressed? >> she did. talking about what she plans to do right there in paris about emissions. she is trying to partner with investors to speed up the
transformation of paris' taxi fleet to more electric and hybrid vehicles and she is also trying to pressure the national government to allow her more leeway to deal. oliver: let's flip over and move south. cape town, south africa. the energy element there. you hit several points with the mayor, patricia, one of them as renewable energy. what are they doing? >> she is basically decided to try to do this on a local level because south africa has signed the paris accord. she felt that the national government wasn't really following through and was hindering her ability to have cape town do its part. by for bidding her from switching energy providers. there is a national monopoly utility there and she wanted to switch to a more renewable mix. she was not able to make that happen by meeting with the relevant minister so she is taking it to court. to try to make it happen.
♪ >> from new york city, i'm jonathan ferro, this is bloomberg real yield. leverage has been building up over the last year or so. >> we are seeing a bond bubble because it yields are at multi-year loads. >> even as the fed describes it they are behind the curve. >> the cyclical trend is getting longer in the tooth. ♪ oliver: welcome back to bloomberg businessweek. i'm oliver renick, you can catch us on the radio, sirius xm and on stations around the world. in the business section, why european soccer clubs see american audiences as a way to reach a billion dollars in revenue. >> the european clubs, the famous ones, manchester united,
manchester city, barcelona, all these clubs are coming into the u.s. they see it as a principal growth market. we have a vibrant sports market here but for soccer it has not built up in the way it has for football or basketball. oliver: soccer is a huge sport around the world. there is no sport that is as ubiquitous. here, americans, we are about our own. it seems there is a growing support for soccer. maybe it is tied to globalization. there is still a lot of room to grow. >> most estimates say there is a hundred million soccer fans in the u.s. which is double the population of spain. a club like barcelona, which is popular around the world, they are saturated in spain. there is not many more spanish fans barcelona can get. that isu.s., a place
soccerairly young in its americansa lot of don't have a favorite team yet. they love stars and barcelona is the biggest star in the game. they have lionel messi. things like that are pushing these european teams to the u.s. oliver: it seems like it is about population size and the number of people because as you point out, when you look at a country like spain, maybe everyone is crazy about soccer but at a certain point you can bring in new fans. so it is about finding those elsewhere. what will be the recipe for success? what do they want to do? putting big names in front of u.s. audiences? >> that is the question. you have seen different teams take different tactics. manchester city, their owners,
they bought an mls franchise in the u.s. you've seen the german team, they are big on digital and social media. oliver: they were a pioneer of bringing that into the u.s. >> they were the first club to have an office in new york. that is their calling card. you see the italian team, which is owned by an american businessman, they train here in florida every year. they bring the club over and give fans in florida a chance to see them live and get autographs. the whole thing. have different entry points for different clubs. barcelona is trying to sign a women's team, they would be the first european club to have a women's team which would play in the traditional red and blue jerseys and carry the barcelona name. there are different opinions on the best way to approach the american fan. one thing everyone agrees on is there is a massive growth opportunity. oliver: staying focused on sports but in the technology section, clones, specifically horse clones are making their mark on the racetrack. >> the first horses cloned were in 2003. in the past decade, the practice has taken off in the world of polo racing and polo horses.
the trend may becoming to horseracing and other events. because the olympics are on board. oliver: that is what took me by surprise. sort of the degree. the scale to which this is now happening. most people are aware the technology is there but this idea that this is becoming a big business -- tell us about how this has the potential to affect an interesting part of the market which is gambling and betting and horseracing? how did you get into the story? >> it starts at the level of the track. the individual racetrack like in california where seabiscuit became a star in the 1930's, does a wager of $16 million a -- $660 million s yst.
million a year. oliver: that's a healthy business. >> right. the business of horse breeding and training for these races is a multibillion dollar one. in any given year. the difference with horseracing and polo, and the united states, horseracing is very tightly controlled, breeding standards are tightly controlled. the u.s. quarterhorse association, the u.s. trotting organization, they all say that artificial insemination is not up to classical standards. oliver: when you think about a horse race, it may not be as widely followed a sport as nfl or basketball, but it is also very dedicated and tradition based. the audience is enthusiastic. it is a time-honored tradition. you described in the story, the way the people dress at a race. the whole culture behind it. it doesn't strike me as the type of culture that is going to be
eager to bring in cloning and very sort of modern technology -- or are they? >> in california, the jockeys and trainers, we talked to, were not excited about it. but their industry will have less direct control over the global industries than they used to. because of the rulemaking body, the international equestrian federation, which tells the olympic committee what to do -- they have said that they don't care at all whether the horses you're racing with is a clone or not. only recently did they require to disclose whether a horse was a clone or not. it seems likely it will be in the olympics.
emily: i am emily chang. this is the best of bloomberg technology where we bring you the best in the week of technology. coming up, disney plans to roll out its own streaming service. the c.e.o. joins us to talk about the way forward for the house of mouse. a male engineer from google is manifest went viral. the fallout from in 10-page rant that hit reset on hill i son