Brazil's World Cup Disaster; Brazilian Media Reaction; Brazil's Economy; US Markets Higher
RICHARD QUEST, HOST: A good day for the Dow, it's up more than 75 points. Still can't break 17,000 again. A group of serious-minded-looking men ringing the closing bell. And hopefully -- it's all over on Wednesday, the 9th of July. Tonight, defeat was just the beginning. Now, Brazil faces an economic hangover, and it might be related to the World Cup. Also, from scandal to redemption. The Vatican vows to overhaul its bank. And a blockbuster backlash. Moviegoers stay home, and we'll speak to the chief exec of IMAX to find out what went wrong. I'm Richard Quest in glorious Technicolor, where I mean business. Good evening. President Dilma Rousseff of Brazil says her country will bounce back even after the humiliation of Germany's 7-1 win over the host nation on Tuesday. Across Brazil, the post-mortem is underway. It's one of the biggest World Cup shocks ever. And tonight, we look into deeper underlying issues that Brazil is left to cope with. The government spent billions of dollars preparing for this World Cup. After last night's stunning knock-out, football fans are asking what went so badly wrong, and it was left to the president to answer some pertinent questions.</s>CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: There were so many demonstrations before this World Cup started, and all of a sudden, during the World Cup, people were ecstatic. People said that it was the best World Cup, there were so many goals. Do you think that this defeat will shape the national mood?</s>DILMA ROUSSEFF, PRESIDENT OF BRAZIL (through translator): Well, I do not believe that, because we have gone through the experience of staging the World Cup. We have resilience, and all of these supporters that have come here, we know all too well that this has been a World Cup that has gone in peace with a great sense of joy. There is one hallmark and feature about football. It is made of victories and defeats. That's part and parcel of the game, and being able to overcome defeat, I think, is the feature and hallmark of a major national team and of a great country.</s>AMANPOUR: Did you ever dream in your wildest nightmares that this would be the result of the semifinal?</s>ROUSSEFF (through translator): No. In honesty, in all honesty, no. Truly never. My nightmares never got so bad, Christiane. They never went that far. As a supporter, of course, I am deeply sorry, because I share the same sorrow of all supporters. But I also know that we are a country that has one very peculiar feature: we rise to the challenge in the face of adversity. We are able to overcome.</s>QUEST: Now, the response to the game from Brazil's daily papers, well, come and have a look. The words at the super screen were suitably apocalyptic. The Rio "Lance!" used words like "indignation," "anger," "pain," "frustration," "irritation," "shame," "disappointment." And that was only some of them. Look at the other ones. The other papers invited readers to add their own comments, and like many others, "Metro's" front cover is simply blackened out in mourning for what happened. As for "Agazeta," it goes with the faces of the fans, and the headline that simply says -- doesn't need to over that, in any language, it says "Massacre." Now, we'll talk in a moment about how that dramatic defeat could play out in the Brazilian economy. Because let's be honest, the country's problems are running much deeper than just losing a football match. This phrase, "massacre," is merely symptomatic, some would say emblematic of what's been happening in the economy. First of all, you have the issues of fiscal and monetary policy that are unbalanced. The public sector is crowding out private investment, and as a result, many say there needs to be some serious cutbacks in public sector jobs, that will eventually cut pensions and bring down, if you like, the cost of interest rates. Too much is being spent on wages, pensions, and public services, so education and health and the crucial services are suffering. But Brazil succeeded in reducing poverty. So, there's your dilemma here: income's gone up, the middle class has expanded, but the other side of it is difficult, too. There is a lack of infrastructure in the country. Brazil's notorious for travel inefficiency. Some promised infrastructure projects haven't done much, such as the renovation of Sao Paulo's airport. And of course, inflation remains high, productivity weak, the central bank is warning that this will carry on for the next two years. Put all these problems together, just take a look at them, and you think, well, how -- what's the relationship between these problems and yesterday's defeat. Geoffrey Dennis of UBS is head of emerging markets. He's written extensively about Brazil's economic problems, the World Cup, and its possible repercussions. Geoffrey, good to see you sir, thank you for joining us.</s>GEOFFREY DENNIS, HEAD OF EMERGING MARKET STRATEGY, UBS: Thank you.</s>QUEST: It was more than -- what this World Cup defeat and the collapse in the psyche, what did it show?</s>DENNIS: Well, the issue with the World Cup defeat, indeed, any result that Brazil had got would get in the World Cup has a tremendous political connotation because of the elections that are coming up at the beginning of October. So, the elections are three months after the World Cup ends. Dilma Rousseff, the president, is up for reelection. And given all that laundry list of woes that the Brazilian economy is facing, Dilma is not popular, her approval rating has declined. And of course, the concern is --</s>QUEST: Right.</s>DENNIS: -- that this extraordinary defeat will actually make her problems worse and will reduce her approval rating further.</s>QUEST: Right. Because the thinking was if they won, it might have gone one way in the election, now they've lost. But it wasn't just the loss, it was the tremendous nature --</s>DENNIS: Yes.</s>QUEST: -- of the loss. So, does that loss make it more or less likely that Rousseff gets reelected, do you believe?</s>DENNIS: I think at the margin, it makes it less likely that she'll be reelected. However, even if that seems strange today in the hangover of that, as you say, extraordinary defeat yesterday, within three months' time, the defeat in the World Cup may not have much real effect on the election. So, I think bottom line is she's probably still going to win, but I guess the chances have been reduced somewhat.</s>QUEST: On that issue, the -- what the defeat showed, of course, is in many ways a fundamental, perhaps, insecurity, a lack of confidence, not just by the team, but that when you strip away what may say is the Brazilian economic growth, the miracle, underlying it, the litany of economic woes we've gone through are much more serious than perhaps had been led to believe.</s>DENNIS: No, I certainly don't think the defeat yesterday makes them more serious particularly. They're very serious anyway. And I think that obviously a bad result for Brazil in the World Cup was going to make people focus on those a little bit more. I think the real difficulty Brazil has been facing in the very immediate past is that Brazil made tremendous gains as a result of the commodity boom in the previous economic cycle. It was a massive beneficiary of the globalization of the global economy, of the emergence of China, if you like. And now that that commodity super cycle has ended pretty much, and China is slowing down, Brazil's really got to fall back on its -- more of its own --</s>QUEST: Right.</s>DENNIS: -- domestic momentum for growth, and that is what is lacking at the moment.</s>QUEST: Geoffrey, thank you. I very much enjoyed reading the note this morning from UBS. I appreciate you joining us tonight on the program. You can hear the full interview with President Rousseff and her efforts to reform Brazil's economy. It's on Thursday night's edition of "Amanpour," where she'll be discussing the reelection campaign of the Brazilian president and a moving account of the torture the Brazilian president experienced at the hands of the previous ruling junta. It's Christiane's exclusive interview, and it is on Thursday at 7:00, 8:00 in Berlin. So, investors have been scrutinizing the Fed minutes. If I take a look at these numbers here, up 78, nearly 17,000. Alison Kosik is with us. What -- first of all, what did the Fed say?</s>ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Well, first of all, the Fed said that bond-buying program looks like it's going to really most likely wind down in October. And what did that tell investors? Why did the market end sharply higher? Because it shows the economy really is improving if the Fed is looking to pull the plug on that stimulus program that's been years in the making.</s>QUEST: Right, but once the bond buying is over, or at least the tapering has begun -- sorry, sullied that. Once the tapering has finished, they are still extremely accommodative on a wide variety of other measures.</s>KOSIK: Of course. And also, this is all dependent upon how the jobs market does. Right now, it's gaining momentum. It depends on where inflation is. You've got to get to that 2 percent marker where -- or at least close to that, where the Fed wants it. It's only going to pull the plug on the program if that momentum continues. October's a long ways away.</s>QUEST: The market, 17,000. Now, you and I have talked many times on the issue of whether or not it's a psychological barrier. It got there, it fell back, it couldn't get back up there again.</s>KOSIK: Oh, well, but not today, but tomorrow's another day.</s>QUEST: Ooh, you're an optimist!</s>KOSIK: And we saw the market certainly turn sharply higher after investors started processing what the Fed said in its minutes.</s>QUEST: Yes, look at that. You can see it absolutely, spot on.</s>KOSIK: Exactly.</s>QUEST: That's where the minutes come out.</s>KOSIK: That's where the thinking was happening, between that --</s>QUEST: That's the thinking.</s>KOSIK: Yes.</s>QUEST: That's the thinking. That's where the minutes come out, and whoosh! Like a rocket, off she goes.</s>KOSIK: Because -- you know what? What they said in June was overall positive. There were concerns, there were concerns about complacency in the market, number -- the first thing that comes to mind is complacency meaning investors may be taking too many risks. That is worrying the Fed.</s>QUEST: Has the Fed worked out what they're going to do on that last month? There's a last month, isn't there, where there's something like $15 billion?</s>KOSIK: $15 billion.</s>QUEST: There's $15 billion, and are they going to do a 15 in one go, or are they --</s>KOSIK: Well, that's hard -- from what we can see from the minutes, it is 15 in one go, and that's it, we're pulling the spigot.</s>QUEST: Pull the spigot, turn off the fuse --</s>KOSIK: Yes.</s>QUEST: -- head out the door.</s>KOSIK: Exactly.</s>QUEST: Lovely to see you, Alison. Thank you. Still on QUEST MEANS BUSINESS, a shakeup at the Vatican. The pope sets his in-house bank on a new path aiming to steer clear of the scandal.