tv Charlie Rose PBS February 12, 2014 12:00am-1:01am PST
>> rose: welcome to the program, tonight we take a look at the global economy. first with larry fink, chairman & ceo of blackrock. they manage more than 4 trillion dollars. >> the world has many issues and i do believe 2014 is going to be a harrier market. we're going to have to expect more volatility like we've had. but i do believe the net outcome of 2014 will be higher markets am but for most of our investors in the world we should not pay attention to these inner movements because if you are focus on a objective, an outcome of 30 or 40 years, these little market gyrations should not impact your overall needs to protect your retirement and build an outcome that will give you the nest egg. >> rose: we continue with a focus on one country, louis
videgaray is minister of finance for mexico. >> we know mexico is bled by nature with an a bund dance of resources but we have not been able to shall did -- in terms of creating jobs an creating low cost energy for families and for companies there mexico, small, medium or large companies that is something that fortunate leigh we can change. >> the global economy from two perspectives, next. >> funding for charl yee rose is provided by the following:
captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> because longevity is a defining challenge of our age, it will affect our financial security, it will affect our tax bills, our job prospects in the future. in short, all of our future. and the future of our global
economy. >> rose: larry fink is here, chairman & ceo of blackrock, a financial services firm, oversees more than $4 trillion in assets. it is the biggest shareholder in half of the world's 30 largest companies. the home depot founder and philanthropist says larry fink resides at the hub of the wheel of american capitallism. he's also wage a public campaign to account for the financial well-being of america's future retirees. he says this challenge should be our number one national priority. i am pleased to have larry fink back at this table. welcome. >> charlie, good to be here. >> rose: are you like me, in that no matter where you go, my real name is charles, but it's charlie everywhere. and you can't escape it, larry is okay with you. >> i'm larry everywhere. no one is ever allowed to call me mr. fink, i'm just larry. >> rose: the only person who calls me charles is tom brokaw in reference to my mother, respect for my mother. let's just talk about the economy first. and the market. >> sure. >> rose: first the market. where are we in january. and what does it is a,
january, february. >> it really says nothing. >> rose: let's start there. >> it's a couple months of market action. we've had a tremendous rally since 2009. the markets have more than doubled. and in 2013 the markets were up over 30%. and so we enter 2014 way really elevated market. and the market needed a correction. so we had a correction. the problem is we had so many investors expecting the momentum of 2013 would just automatically carry through 2014, and it was just, these were just false expectations. and so we've had a nice correction. the greatest component of the correction has been in the emerging market world. wave had a -- 6% correction here in the united states in the equity markets. and we had a 6% increase in long treasury. so you add those 2 and we had a 12 pest correction in the valuation long
treasuries and equity markets. and in the last few days we've been, you know, the market drbs have turned. we've had rising equity markets. and we've had a little decline in the credit markets. we're okay. the world is just, the world has many issues. and i do believe 2014 is going to be a harrier market. we're going to have to expect more volatility like we've had. but i do believe the net outcome of 2014 will be higher markets. but you know, for most of our investors in the world, we should not pay attention to these inner movements. because you know, if you are focusing on a objective, an outcome of 30 or 40 years, these little market gyrations should not impact your overall needs to protect your retirement and build an outcome that will give you the nest egg that will-- . >> rose: we will come to retirement in just a moment. but in terms of-- are we
seeing any kind of shift from equities to bonds? >> we saw that in the fourth quarter. so people made such huge profits in equities that they rebalanced into fixed income. so we saw that behavior in the fourth quarter and a little bit in the first quarter. and much of it is a process. you are a large peng fund. and you have an allocation of 50% in equities and let's say 30% in alternatives and 20% innd boss. equities rallied so much, you needed to rebalance. and that's-- unless you wanted to keep your higher equity balance, you needed to do that rebalance. and we saw quite a bit of it in the fourth quarter. and this is why we weren't surprised that the market correction in equities. i think what is surprising everybody is how attitudes have changed towards china and the emerging world. as i said, developed markets more than doubled. the developing markets are down in the last few years. and so we've had a real
change in attitude about the prospects of the developing world and the opportunities here in the developed world. >> and why do you think it's a good time to invest in the emerging markets? ness with the markets, if you look at the valuations of the companies within those countries, they're trading at relative to the potential growth rates, they're inexpensive. they're trading at actually lower p-e ratios than what is happening here in the united states. and we all have memories of what happened in 1998 when you had a whole revaluation. the issues you had in 1990 with mexico. this is a whole different world of emerging markets. the, let's talk about indonesia, so indonesia, growing economy, high gdp growth, the positive about indonesia, its debt to gdp is lower than most of europe. and so whereas europe continues to have very high debt issuance, these
emerging markets have growing and stronger balance sheets. and a faster gdp than most developing worlds. so much of this is a liquidity issue, money running in, money running out. but overall a long-term trend, indonesia is a good example of a strengthening economy and a strengthening balance sheet. so i dk --. >> when you say that are you thinking about looking at stock, at markets there and in investing in companies on a certain market there or just regardless, if you could find a way to invest in those companies that take advantage of the growth circumstances of the particular economy in the country are you talking about. >> you could do that through index funds, through etfs. you can could do that, through an emerging market index there are many ways of investing it, that you have liquidity but you have the exposure in those economies. >> is the essential quality of emerging markets that they have a developing, an emerging middle class with
enormous consumption power. >> unquestionably. that is going to be the big debate. can these economies translate itself from a export driven economy to a doms particular consumption economy. that is the big question we're asking ourselves today in china. so china, you know, china's economy went from the fifth largest economy to the second largest economy in 12, 15 years. and it was on the back of exports. and now has to translate its economy, and this is what the reforms that are about to happen in china is to make it a more consistent economies that's based on domestic consumption. >> and they also say they're going to allow more, more allowance for competition with companies owned by the state. >> we're seeing an increase in private companies going, they are going to reduce the influence or public companies or state run enterprises. the future of china is going
to be in the private enterprise. like alibaba an other companies like that. >> everybody tells me that public offer offering, that is a thing to watch. >> alibaba is equivalent of amazon, i mean, the laws in china are not as exacting as we have here. so alibaba is actually even playing a role of an investment firm. they're trying to sweep all the cash of all their enterprises and offer a money market return, you know, it's one of the fastest growing portals in the world. >> is jack ma behind all that or is he -- >> well, he's running the company, you know, so he's creating that atmosphere. he's creating like a c.e.o. should, he's creating the direction of the organization. >> rose: so when you look at that, your guess is about the slowing down of the chinese economy, below say 7% to -- >> so china has a big issue in front of itself.
we were all pretty influenced by the reform announcements this past november. >> rose: right. >> but the reforms are pretty onerous to accomplish. they're going from a policy oriented economy to a market oriented economy. first of all they have to create the metrics, how do you understand what a market economy is. so they have a lot of work in front of them to change this enormous economy towards a market driven economy. i think that is going to take time. you know, if you were a governor in some central province and you were accustomed to directing through policy mandates, building a bridge, building a school, building a factory to a point now where you are going to be guided by market needs, and if you don't have the metrics to making that determination, you are going to pause. and that's what you are seeing right now. so you are seeing a slowing economy at the moment. and that's disturbing the overall market. but you know, one thing
great about, as we watch china, at the don't care about a one-year movement. they're focusing over 10, 20 years. and i think we are going to have, as investors we need to be patient as that evolves. and we'll see how successful they are. i think it's too early to determine how successful they'll be. >> and the leadership, the thing they most want is stability and the thing they least, the thing they most fear about is the absence of stability and some kind of tension within the social fabric. and as they shift to as you suggested more of a market economy, they are the kinds of concerns about unemployment and all kinds of issues that come to the fore. >> absolutely. but this is not just a chinese issue. this is brazilian problem, an indian problem. i mean when we talk about the 99-1, i'm morphing into this, we talk about the 99-1 in this country, technology is changing the whole landscape about job and job creation. >> right. >> this is not just a developed economy problem.
it's a developing economy issue too. so even in india i visited one of the largest manufacturing companies in india. and the co was telling me in their factory, they once had 10,000 employees. today they have 1200 employees. and they have 30% more output. and this is -- >> technology, enabled gains in productivity. >> one thing that we don't understand really is the transformation in agriculture. technology is changing agriculture as fast as it is changing the manufacturing of electronic goods. we're creating combines today that have, you know, eyes that could visualize the quality and the freshness of the fruit. and so you have combines now picking fruit and vegetables. you don't need human labors any more. so think about the chin china-india-brazil equation. in all of those countries you still have many people leaving the rural environment of the agrarrian
environment, moving to the city. and we're seeing more job displacement in agriculture worldwide than anyplace. at the same time, we're seeing this technology change even in the factory work, the cities, the biggest issue and this is my black swan if there is an issue some day s are we going to create sufficient jobs in china, brazils, this movement out of the agrar-- a grahnian areas into the cities, the factories, is there enough global gdp. and even in india, going from 10,000 jobs to 1200 jobs in this one specific factory. this whole issue of technology and how it's changing the landscape. it is impacting every country. and it has less of an impact in a country like the united states or europe or japan because we have an aging economy. we don't have that migration of the rural area like they are experiencing. so this social issue that you talked about related to china is a serious issue. it's going to be the key issue for all these
countries as they try to navigate their economies and try to bring their economies forward. they have this incredible social pressure of people moving out of the rural areas and seeking work in the cities. and can we create enough jobs in the cities, can we create enough global gdp to satisfy those job needs. >> do you think worldwide and maybe you've been speaking about it in part, that the idea of somehow the 99 and 1%, is going to be a growing issue? >> in every country. >> and income inequality becomes a growing issue. >> in every country i visit. and i will be 20 countries in the last four months. every leadership that i talk to is worried about job creation and the growing gap between those who have capital, and those who don't. and when you have rising equity markets, those who have capital were able to be, you know, were benefitted by that.
>> rose: rewarded. >> and those who did not are being left behind. and that is being aggravated by this whole transformation of technology. >> rose: right. let me turn quickly to how you see the u.s.-- the economic growth in terms of growth in gdp, just where you see. because you manage so much money. 3 to 4% for 2014? >> i would say 2 and 3/4 to 3 and a quarter. so it's better than last year. but i don't think it's going to be as strong as 4. it could get to three and a half. but i am going to be targeting between three and three and a quarter if i had to be pushing a number. i just think we have-- we still have many things to overcome. i think the weakness in europe is going to be-- is going to continue. and maybe it has positive gdp of 2/10. so we are just not going to benefit by a lot of trade overseas. but we're the envy of the world right now. the energy revolution that
we have in this country. it's finally being recognized in europe. and this is one of my big themes that europe is just being left behind because of the cost of energy. blackrock is just going to be building a new data center in upstate new york. hydroelectric, it's green. and it's going to be approximately 3 cents a kilo watt. >> why did you choose update-- upstate new york? >> we worked with the state. we were looking for something that would be socially acceptable so, because you know data centers are heavily energy use. obviously it's quite inexpensive. so in new york city it's about 22 cents. so versus new york city, 3 cents is as low as you could find in the united states. we have a status center in state of washington with that same type of costs that's on the columbia river. my point is if i open that data center in germany, and
germany is, you know, really moving towards more green and less reliant on nuclear and they have not agreed on any forms of fracking, so electricity costs in germany are extremely costly. so 3 cents in the united states, 46 cents in germany. >> wow. >> rose: . >> and so when you think about natural gas, although natural gas has moved from 3.50 to approximately 5 dollars btu here in the united states, it's 12 to 12:50 in europe so we're 40% the cost of europe. so we have huge benefits. and we are seeing many companies moving jobs into the united states. but those factories that once had a thousand people in the united states may have 200. so getting back to this whole technology boom, we just are not creating as many jobs, even as we develop more and more factories. >> rose: same with the united states. i looked at my notes because i wanted to remember this.
you talked about three things, one is energy, two is the amount of cash corporations have. and three is that the banking community has, because of regulations, is stronger than it's ever been. those are the three things you cite in terms of the u.s. economy and its future. >> the beauty of the united states that we don't give ourselves enough credit. when we discover we have a problem, we generally are a very cathartic nation. >> let's fix this. >> we fixed it so in 2009 secretary quitener proposed the bank stress test. we aggressively over a four month period of time raised $80 billion of new common capital for these banks. in europe teed, they're on the third stress test and this is to you being run by the ecb. so we are so much further along. our banks are looking to put money to work. and europe the banks are still deleveraging as we speak. and in the united states, as
we said, we need more loans. >> rose: and with respect to monetary policy, does anything remain to be done or is that not going to be a factor as you see tapering? >> chairwoman yellin spoke today that she's going to carry on the policies that chairman bernanke. she reinforces this concept of low-interest rates for a long period of time. and she reaffirmed the need to reduce the bond purchases and continue with the tapering. the one thing that people forget, and we talk about the tapering. and everything gets concerned about what does this mean. we went from u.s. federal deficits of a trillion dollars or more, to a deficits that are going to be around 600 billion this year. so the treasury borrowing for the last few years have fallen considerably. and so when you think about the federal reserve buying, going from 80 billion dollars per month purchases,
if they don't start tapering rapidly they're going to be buying everything that is ever issued. so when we think about taper, we should think about taper in the context of what is being issued. so this is why i have been a believer that we should be even more aggressive in tapering. >> rose: okay. i'm going to go finally to retirement. something you care deeply about and think the country needs to think about. washington, fiscal policy. does any sense of optimism there? >> no. >> rose: it's just the way it has been. >> i have spent quite a bit of time there. i have eternal hope that we find ways of coming to grips with immigration reform. >> rose: right. >> we need to really address our fiscal positions. and they're just no ability for the men and women on both parties to come together and do was's right for america. >> rose: i had the finance minister from mexico here
and he's going to be on the same program with you tonight. and they came in, they got the three parties to a he grew. and i thought this will not happen. >> what president pena neata did alongside his finance minister and the central bank is really one of the more inspiring moments. and this is why we are so bullish on mexico. i happen to he so the finance minister yesterday too. and we are very constructive in mexico. we think mexico is another reason why we're constructive on the u.s. the reforms that president pena nieto has done is going to-- if the reforms are executed properly, mexico will become a jauinger naught in energy. and so when you think about north america, canada, the u.s. and mexico, we are going to be the energy giants. >> rose: what is the issue bre tirement? what does the country need to know. what do retire see-- retirees need to know. >> this is one thing i spent
a lot of time in washington to talk about. we need to educate everybody that we have a blessing in front of us. and that blessing is longer life. and we need to make sure the blessing of longer life is achieved with dignity now that we can afford longer life. we spend so much time focusing on good health, focusing on exercise and eating the right things, and so we are going to live longer. and when people think about the averages of long life, people forget to talk about well, many men and women pass in their teens and their 250s and 30s and so statistically if you were a couple in good health at 60 years old, one of the two is going to live to 92 today. so you have -- >> 50% of 60-year-olds will live to 90. >> yes. >> wow. >> and so they need to think about what the financial demands of that are, the reality. >> so the whole issue, getting back to jobs. we have seen huge amount of job creation. but the job creation is really for the men and women
over 50. and so why, because they realize that they didn't save enough. >> so they have to go get a job. >> so thee need to be working longer. >> that is a big issue now, a big social issue between the young trying to seek jobs and elderly staying on longer. but the reality is, with a potential of a third of your life left, you had better be prepared financialically. and though is why we have been spending so much time trying to educate people. let's make longevity a blessing. let's think about what are your needs. how much money do you need to live with the dignity that you're looking for. >> and so what does that mean? well, it means you need to be prepared earlier. you need to start putting money away earlier for retirement. >> rose: right. >> and it also means that you probably have to start thinking about having a more dynamic life in your 60s. it probably means that we all should stop thinking about retiring at 62 or 65, because you do have a very productive life in front of
you. and so it's a combination of being prepared for retirement, making sure that retirement is done in a way where you are prepared, where you can have retirement with that dignity. and it requires a lot of preparation, a lot of preparedness in terms of towards savings. and this is why we applauded president obama when he announced the my ra proposal. and although it's a very modest amount, it reinforces this need that we have to get prepared for retirement. even in the corporate defined contribution plans, only about 50% of americans participate. and so many americans today are not being, getting prepared for retirement. >> and you're saying the first step you have to have is the recognition, how you do it may be the secretary step but you've got to recognize. you've got to have a plan.
>> and this is why, whether you are a republican or democrat when i go to washington, we need to educate on this whole issue. and then if you, once people start recognizing i'm going to live longer and maybe i want to work longer, then you possibly have a very good debate related to entitlements. it's very hard to take anything away. but you if you-- people-- you could create a whole glide path today. so if are you 20 years old and you are educated towards that you are going to live to 90. because 20-year-olds today aren't going to live in the 09s. moving entitlements one way or another may not be that impactful. obviously for those men and women 50 getting close to retirement, you can't change anything but there are glide path things you could do. so it creates a whole conversation. and you know, as a lifelong democrat i believe we need to have that conversation. and we need to talk to the men and women in this country and not treat them like children, treat them like educated people about the need to start being
prepared. we have health care protection today but we have no retirement protection. so what i am frightened of is many of these men and women will have to live with their children. so they better like their children. >> rose: it's a responsibility not only of the executive branch of the government. and congressal branch of the government but also the responsibility of the private sector. and the responsibility of the media. >> well, it certainly is a real responsibility with companies to help their population understand that issue. and it is the media's need also to construct in vain these issues. as i said, we don't have public support for those men and women who don't have adequate needs to live their remaining life in dignity. we need to have a wholesome conversation about that and then have them think about the need for preparedness towards retirement. >> thank you for coming. i know i have kept you longer than i should, next time we will talk about
stock holder activism. >> thank you. >> thank you, charlie. >> larry fink from blackrock, back in a moment, stay with you us. >> president pena has been talking about creating a-- which is a special force underneath very structure that will conduct what the military is currently doing. and that is also a big ticket item in the budget which we need to be addressed. >> rose: louis videgaray is the finance minister of mexico since the election of president pena nieto in 2012. the mexican economy has remained resilient during a turbulent time for emerging markets. meanwhile drug-related violence continues to affect parts of the country. the government has started cooperating with vigilante groups in an effort to fight drug cartels. later this month president obama will be attending the north american leaders summit in mexico. this year marks the 20th anniversary of nafta, the free-trade agreement between the u.s., canada and mexico. i am pleased to have louis
videgaray at this table, welcome. >> thank you, it is an honor to be here, thank you. >> rose: you told me a wonderful story which i share even though it is a little flattering to me. when you were at m.i.t. working on your ph.d, that our show on pbs was a companion for dinner because you were living at that time alone in a very small apartment. and it brought a little bit of the world. >> that is correct. charlie, thank you now for that because you were a great companion for those lonely years back at m.i.t.. >> rose: thank you. >> particularly in the winter. >> rose: yes, in-- indeed. you have had an interesting life from an academic to an investment banking. to now someone said the president has four important advisors, you, you, you and you. and you went to him, in the state of mexico, and worked with him there. tell me about his and your vision to be mutions you could wlingz chabt yoour xz thar guling -- thank you again, i think this is a
time for mexico to move ahead. and to change and to address the changes that for many years were not addressed. 2013s with a remarkable year. remarkable year in terms of free forums that the congress approved. and that stems out of the commitment of president pena nieto has to changing things in a way that will improve the quality of living. and for mexicans. for many years, mexico was known as a stable economy. as an open economy, very open to trade and to financial flows. but with a little, with little growth. >> about 2%, over 20 years. >> 30 years. the average growth of mexico has been only 2.4%. that is very low for an emerging economy. that is not what you expect of an economy in the fundamentals mexico has. >> you believe it can get to 5% over how long a time.
>> we think that the potential growth rate for mexico should be around 5% over the next decade or two. and that reform agenda that the president is pushing as congress has approved last year, is exactly designed for that purpose. to increase our growth potential, to the key jobs, better paying jobs and that the regions are now more competitive throughout the whole country. if you look at our energy reform, telecommunications reform, financial reform, all these reforms have come a theme which is increased productivity. and therefore increased growth. >> and growth is really the key thing here for you. >> absolutely. >> in terms of what you want to create there. >> for many years we've known that mexico has been blessed by nature having a bund ant energy resources. but the reality is we have not been able to seize that opportunity in terms of creating jobs and creating a low cost energy for families
and for companies in mexico. small, medium or large companies. and that's something that unfortunately-- fortunately we can change. we cannot change nature but we can change our laws and the politics around energy. and this has been a very bold step. you are absolutely right. many people thought that it was something that wasn't changeable t was part of mexico's essence, to have this restrictions on energy. but now the mexican congress has approved a reform that will basically allow for two things. to have private investors come in, both international and domestic private investors, to come in into the oil & gas secretary are and into the electricity sector. to compete and to invest. and also allow for competition. which is critical. it makes our state-owned company will remain a very significant player. will remain a wholly owned company by the state.
but now payments will have to become a more competitive company because it will face a competition. and the competition will favor mexican families, mexican citizens by allowing better services, better quality of products and more importantly, a cost effective supply of energy. >> rose: is the keystone pipeline important as an example of cooperation between canada and the united states. >> north america has a great importance. i think north america can be the most exciting region in the world's economy. it can be very competitive region. and one of the reasons for that is energy. because we are in a-- we have the settup the natural resources for that. and-- . >> rose: and shale oil copping onstream. >> absolutely. and the mexican reform can foster that from the south. and any efforts that we do to improve our coordination and insurance the supply of
cost-effective energy for production in north america is good. so the keystone pipeline is part of it. but it's not the whole story. we are also building pipe-lines from the u.s. into mexico. and now with our energy reform, we should be able to create create a very competitive platform. i think north america, now that we are 20th anniversary of nafta has become a manufacturing powerhouse. that is exporting to the world. but now the energy opportunity can create an even better company if necessary for the three countries, part of this region. >> is mexico now like the third or fourth largest exporter of cars in the world. >> mexico is the fourth largest exporter of cars but we are also the first exporter of flat screen tvs. the fifth exporter of computers. >> rose: are you making all of those things or simply making some of the composite,
some of the constituent parts of those things and sending away to be assembled in say the united states. >> no, we are doing the finished goods. it is interesting that mexican exports to the world have an average of 30% u.s. content. so that means that every export, every mexican export to the rest of the world is also an export from the u.s., of u.s. content. so mexico has become an important part of the supply chain. and a value-added supply chain. where you see leaving cutting edge technology being develop approximated in mexico by our manufacturing. and working closely together with north american producers. what is interesting is that north american integration is happening, regardless if its liked or not by our governments. it has more to do with market forces than whatever happens in washington or mexico city. and the most perhaps bright
example of that is our joint manufacturing capacity. now it's difficult to talk about the mexican manufacturing industry or the u.s. manufacturing industry. it's the north american manufacturing platform. >> rose: and do you find yourself now, i mean with talented, educated workers, not going to the united states or somewhere, or to asia, are now staying in mexico. >> every year we have more engineers graduating from school. in mexico than we have in bavaria, germany. the talent and the skills of the mexican workforce is a key factor enabling what we were able to produce and export. and that is a source of competitiveness. we, now net migration into the united states from mexico is zero. it used to be a large
positive number. we have net migration of mexicans coming into the united states. now the number is zero. that means that migration is not what is driving-- what is driving our integration. it's other things. it's supply chains, it's trade, it's even financial blows. so it's a different time. and we need technology, the trend, and to seize the opportunities created by this integration. >> rose: when president obama comes in i think the end of february. >> next week. >> rose: next week, middle of february, when he comes next week, what does mexico want to hear and want from the american president and policies that might affect mexico? >> we have a very strong and fluid relationship with the u.s. government. president obama was in mexico back in may. we had to visit from joe biden, also later in the year. and we have a lot of
conversations ongoing with the u.s. government. the secretary of commerce spent the week here in the u.s., spent the week in mexico last week. i speak regularly with jack lou, the secretary of the treasury. so these meetings is not about setting priorities or getting to know each other. this is about getting work done. >> rose: so what will make it a successful meeting. >> to follow up on the priorities and the tasks that we have set up since the beginning. let me tell you about one. border infrastructure. seems-- since nafta was enacted. >> rose: 20 years ago. >> 20 years agoing trade between mexico and the u.s. has multiplied by seven fold, increase. but the infrastructure at the border has not increased significantly. so now we're getting long waits. we're getting queues for border crossing, not only people but products.
that is not something that will help the competitiveness of the region as a whole. so we need to invest more, invest more in the border. have more expedite, of course secure border crossings. and for that we need capital investments and technology. and that is something that as governments we need to address jointly. so we have a working group, focused on that. and this would be a good time to followup and to evaluate how successful we are being at least on this front. >> rose: how would you like to see immigration policies change in the united states. >> well, of course, immigration reform is something that would be a good thing for, we think first of all for the u.s., and second for the many mexicans that live in the u.s. but it is a u.s. issue. it is something that the u.s. should resolve by itself. we understand it's a complex process. and we think it's good-- it can be good for the u.s. on a-- basis but also on an economic basis. >> rose: but are you insulted when everybody talks about strengthening
border enforcement? >> no, i mean, it's about enforcing laws. and it's natural that the u.s. has increased security concerns, particularly after 9/11. and we understand that, and acknowledge that. but i think it's more important that immigration reform in the states can have an impact for the competitiveness of the u.s. itself. there's a lot of labor, skilled, that could be in the states on a legal basis, be more productive and add more value to the u.s. economy. so it makes sense not only on a fairness basis, but also on an economic sensement but as i said, it's a u.s. issue. and it is something that the u.s. will solve. >> return totecs, first renorm energy, second reform telecommunications.
there has been essentially a monopoly there. and you intend to change that. >> if you think what can make a difference for a company, to be productive or not, to be competitive, these days it is the access to information technology, to the internet to telecommunications in general. and in mexico, we have do not have the competition to -- >> so what the essence of the reforms that was passed last year is to introduce more competition and to do it straight from the constitution. so that we have now a fully independent regulatory authority that has the power to enact specific actions, to foster competition. that authority is already in place. and it's starting to work. and we are quite optimistic that they will enact measures to foster competition. and there is some secondary
reservations still pending. and we're working with congress for that to happen in this first session of the year, april 30th. so the landscape for competition in telecommunications is quickly changing. and their-- should be a turning point. >> rose: so what will this do to carlos slims holdings? >> this is not about a particular person. this is about a consumer. this is about allowing all companies, including telemention to compete. right now competition is relatively limited. that is acknowledged basically by all. and we all all companies to be successful but in a competitive environment. >> rose: there is also the u.s. economy growth. what influence does it have on mexico? >> we export 81% of our goods.
we export them to the u.s. so. >> rose: where do the other 19 go, spread evenly or -- >> some goes to canada, some to europe, only 4% to asia. that means that we're very much linked to the u.s. economy. and this is a good thing right now because the prospects for growth in the u.s. look much better than they did just a few years ago. so our fate, our growth rate is very much linked to the u.s. economy. so now that we're seeing this improvement, this is obviously also good prospects for mexico. >> rose: so we have a new fed chairman here, janet yellin who i assume you do know or will know. and therefore the question has to do with monetary policy here and tapering and how the fed makes a judgement as to how much he has to stimulate the u.s. economy. what do you think of that? >> for mexico, tapering is a symptom of something very good. because tapering means that monitor policy is going back to normal in the u.s. and that's because the
economy is growing again. so as assign that the u.s. economy is recovering, tapering is a very good sipe for mexico. of course tape tering is also a challenge. it creates volatility in the markets. it creates an environment of higher interest rates. but we will always take growth, even if it comes along with a tapering. it's important for emerging markets including mexico that the tapering happens in an environment of certainty. that means that the markets understand what the tapering is going to be like. and over the past few months i think they federal reserve has done a good job explaining the tape aring and adding some certainty to what the tapering will look like. it's not absolute certainty, it can always change, but now the markets understand that much better. and volatility is not such a threat right now. remember that when you have a small movements in u.s. markets, those amplify in
emerging markets. so for us volatility is always a concern. so the better the understanding of market has of the tapering, the u.s. monetary policy, that is something good for markets. >> rose: are you the finance minister of mexico. you feel good about the u.s. economy? >> its recovery looks good. there seems to be some slack remaining in the labor markets. >> rose: exactly, the job reports are not as much as they would like for them to be. >> so that's why monetary policy, particularly short imd of the interest rate curve, the federal funds rate, we like to remain quite low for near future. but it's certainly a much better trend than it was. if you look at the balance sheets of companies, families. and even the government, it looks much better now. >> rose: if you look at the brick countries, brazil, russia, india, china. >> yup. >> rose: how is mexico's economy doing in comparison to those brick countries
which some of my mexican friends were always up set they were not part of that. >> well, i think the key difference is that the fundamentals for stability and growth in the mexican economy look probably better than in any of those countries. it's always hard to compare such a large economy as china with mexico. the order of magnitude is totally different. >> rose: and russia has an economy dominated by one thing, energy. >> exactly. and of course india is also huge. so it's always difficult to compare. but looking at mexico, and other emerging markets, our felts look better and i will give you two examples. one, the current exchange account deficit, that is very important for developing currency fluctiations, it is only 1% of gdp whereas in other countries like indonesia or brazil, it's much larger. and that's one of the reasons why analysts believe that mexico is in a better position. also, our debt to gdp ratio,
public debt, or government debt, that's only 38% gdp. that's almost a third of what we have here in the u.s.. >> rose: we're about 75. >> it's i'm sorry it is a third, in many countries in europe. it-- so the fundamentals of the mexican economy look good. and of course now with the reforms in place, the prospects for growth look better. so mexico, a lot of work needs to be done, implementation is a challenge but the prospects are looking better. >> the key word is implementation, that is the challenge to see if you can implement this. >> absolutely. >> rose: a top challenge too. >> yes, it is a challenge. in some cases, we still need secondary legislation that is also the case as we just spoke about. in the telecom reform. in others, education or the financial reform, in those
we just need to get it done. and there is a priority for the president and the government. we think that there is a fan tas dick-- . >> rose: are you pretty much in agreement with the kind of-- with the indication from basal 3, aren't you. >> we were one of the first countries to fully implement basal 3ment and now at the beginning of this area, just a month ago, we elevated basal 3 standds into law. so they have been into law. that makes our banking system one of the most robust systems in the world, the capitalization rate in mexican banks is stnger than in the u.s. or europe. that is also the same strength as the mexican economy. >> rose: does mexico look at fafta, 20 years of nafta and say a huge success? >> we think it's been successful. it has changed a lot of the
economic structure in the country. sop josses were lost, many others were created. and the jobs that were created are jobs in sustainable more competitive industries. so we think this has been a good success. >> there is also this, the war on drugs. we have had the stories recently-of-beheadings. we have had stories of vigilante groups as they're called. in association with police attacking the drug cartels in some places 234 mexico. where do you stand and how is your policy different from the previous president? >> well, first of all, security is a priority for president fredrica pena nieto, it is a complex problem that mexico faces and that it needs to have a consistent strategy. the trends are favorable, already. the overall homicide rate
since the administering started is down 16%. from the people's administration. and there are some cities where violence reached a peak. cities like see dad juarez, are now much more secure than they were just years ago. there are encouraging trends but we have challenges in specific regions of the country, specifically the state of michewa kprrx an. there a challenge, the president took some bold at thes to address that. first of all substituting all local police forces. those were substituted by federal forces coming from out of state. he sent a special commissioner with authority to have leadership of all federal offices in the state. and also announced an unpresumed amount of public resources devoted the state not only for security but economic development.
so it is a challenge, the state of michowacan but the president is acting boldly. and it will continue to be a process. and it's part of a process of strengthening the rule of law. the rule of law is critically important, not only for security but also for economic development. >> and also the state of judiciary and the state of the police in terms of corruption. >> rose: there are some things that we need to know structurallally, other than the operational day-to-day aspects of security. there are changes that the president is addressing. first of all, we need to change our criminal law system from a written system to an oral system. that means having public transparent trials instead of the ones that i have just written and are more prone to corruption that we have in the past. the attorney general last month was to become independent after reform, separate from the political
process. and also the creation of a new police force, for territorial control, the specific regions of the country. and disappearing municipal police forces which are the weakest links in security and the most vulnerable to organized crime. so 26 out of 32 states in mexico have already agreed on eliminating the local police forces and substituted by a unified state police. so this changes structural or constitutional changes in our security environment, they're not expected to have an immediate effect but are expected to have a long-term effect on security in the rule of law. >> i hear two things coming from this conversation. number one is that you would like to see more integration with the united states. two, that you would like to make sure that the reform that you implemented, that you have passed is implemented as soon as
possible. >> that is correct. >> and thirdly, some sense of the image of mexico, which is an important thing. if you have a story to tell, you want to make sure that that is the stories that's heard, not another story. >> that is correct. the past few years, the only things you've heard about mexico was security problems and shootings and killings. and mexico has never been like that. and now what you are hearing about mexico is that it's a country that is changing. you are hearing about reforms. you hear about political agreements enabling things to get through congress and get reforms done. so that's the image of mexico and that is the mexico that we have to convey abroad. and there's a lot of interest and enthusiasm about what is going on. and we want to attract capital, attract investment that creates jobs. for the good of all mexicans. >> the success of this administration, i mean coming to-- means a return
of the the preparty to control, to the executive role in mexico. but one of the things that americans, i'm sure, would look on with great sort of sense, how did they do that, would be something that's called a pact from mexico, where you got the three political parties, to coop railings -- -- cooperate. >> that was an unprecedented -- >> something we can't imagine. >> for me we all knew that reforms were needed in mexico. but we were just unable to agree upon getting those done. and finally last year, through an agreement, a broad agreement with the three main political forces, president pena was able to push these reforms and get them done. >> how did he do it? >> it was paced-- based on agreement. based on sitting and spending many, many hours talking to-- talking to the leadership of all three political parties, of the three main political parties. and setting up a common
agenda. the education reform, the telecommunication reform, financial reform, many of these reforms where are part of this agreement. and it's based on the realities, in democracy. it's going to be only through agreements in congress. you will only be able to push change. so the main priority since he was elected was to create the agreements and the environment for income-- to get the changes done and it's been a success so far. >> rose: thank you for coming. >> charlie, thank you. >> rose: a pleasure to see you. >> a pleasure to see you again. >> rose: thank you very much. >> thank you for joining us. see you next time. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org
this is "nightly business report" with tyler mathisen and susie gharib. brought to you in part by -- >> the street.com. founded by jim cramer, the street.com is an independent source for stock market analysis. cramer's action alerts plus service is home to his multimillion dollar portfolio. you can learn more at the street.com/nbr. surgeon the street. stocks have their best four-day streak in almost two yeaas the fed chief puts investors in a buying mood. moving forward, the house votes to extend the nation's borrowing limit without the political drama of last year. can investors breathe a sigh of relief? food stocks fried. con-agra and dean foods warn of tough times ahead sending shares