WEBVTT - EM Investors Are Very Worried About China: Van Eck’s Fine 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.600 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.800 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:27.240 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. We're 0:00:27.320 --> 0:00:29.200 very lucky right now to be joined by Eric Fine, 0:00:29.200 --> 0:00:33.080 portfolio manager and Emerging markets fixed income at Strategy at 0:00:33.240 --> 0:00:37.519 van Eck Global. He just returned from I MF meetings 0:00:37.560 --> 0:00:40.680 in Bali. He got back Sunday night. He's been going 0:00:40.720 --> 0:00:45.479 to these meetings for twenty years. This one, this one 0:00:45.560 --> 0:00:49.080 was different for you. How so um this Well, first, 0:00:49.120 --> 0:00:51.800 what's different is they're crowded, um, and there are a 0:00:51.840 --> 0:00:53.400 lot of people and it speaks to the amount of 0:00:53.400 --> 0:00:55.400 investment that's going into the e M and e M 0:00:55.480 --> 0:00:58.800 bonds and and that's a good thing. Um. But uh, 0:00:59.080 --> 0:01:01.560 I think the biggest thing is, uh, this is one 0:01:01.600 --> 0:01:04.080 of the most if not the most you know, uh 0:01:04.200 --> 0:01:06.440 worried meetings in the sense of, you know, I go 0:01:06.480 --> 0:01:08.240 to the meetings and then I spend time with the 0:01:08.240 --> 0:01:10.200 old timers afterwards and see you know you are you 0:01:10.280 --> 0:01:11.959 leaving here as more of a seller or more of 0:01:11.959 --> 0:01:13.760 a buyer because you have to have a bottom line 0:01:13.800 --> 0:01:16.479 on everything obviously, and uh um and and and and 0:01:16.560 --> 0:01:20.000 a seller, but uh much more concerned about China. That's 0:01:20.080 --> 0:01:22.280 really the thing China set up is. Though you could 0:01:22.319 --> 0:01:23.560 have said a lot of the things that are being 0:01:23.600 --> 0:01:25.880 said now a year ago, two years ago, five years ago, 0:01:26.400 --> 0:01:28.920 um um and uh and I think that's fair. The 0:01:28.920 --> 0:01:31.120 issue is when is it relevant? Wise it matter? And 0:01:31.160 --> 0:01:33.400 that's why I care. Is it now for reasons I 0:01:33.440 --> 0:01:36.360 can get into. But now it's elevated as a concern. Well, 0:01:36.360 --> 0:01:38.280 that's where I wanted to go. Is this matter of 0:01:38.360 --> 0:01:41.200 China's economy accelerating it slowdown? Or does this have to 0:01:41.200 --> 0:01:43.880 do with trade tensions with the US? Um? I think 0:01:44.120 --> 0:01:47.720 I think you can't disentangle the issues, um um, even 0:01:47.760 --> 0:01:51.480 though uh you know it's trade is a big jobs 0:01:51.640 --> 0:01:55.640 generator in uh in China and the current account uh 0:01:55.640 --> 0:02:00.840 surplus is declining and uh that's a that's an important 0:02:01.200 --> 0:02:03.480 uh as I said, poor generator jobs, which it's important 0:02:03.480 --> 0:02:06.520 generative confidence. Why do I say that the set up 0:02:06.600 --> 0:02:08.880 for China, I don't. I think China is a country 0:02:08.880 --> 0:02:11.560 that has for twenty years been disciplined by equity investors. 0:02:11.560 --> 0:02:15.320 What do equity investors want? Growth growth, growth, growth, growth growth. 0:02:15.800 --> 0:02:19.240 Bond investors are very different. They're happy with recessions, they 0:02:19.280 --> 0:02:22.519 welcome recessions. They worry about over leverage. Right, so they've 0:02:22.520 --> 0:02:25.440 gotten the growth. But with the growth, they've gotten the growth. 0:02:25.520 --> 0:02:28.080 With with with the growth came immense leverage. So the set up, 0:02:28.120 --> 0:02:30.680 the initial conditions are bad. They're not bad in the 0:02:30.720 --> 0:02:32.720 traditional sense of oh my gosh, they owe a lot 0:02:32.760 --> 0:02:35.079 of dollars and they don't have them. It's a very 0:02:35.080 --> 0:02:37.440 different setup, and that's why people have been calm, and 0:02:37.480 --> 0:02:39.480 that's also essentially why I think the market has been 0:02:39.520 --> 0:02:41.040 right to sort of say, you know, it's not really 0:02:41.400 --> 0:02:43.280 it's a problem, but not really a problem for today 0:02:43.280 --> 0:02:45.960 and not something here. The issue there is domestic claims. 0:02:46.040 --> 0:02:49.200 The most acute phase of EM crisis, in my experience, 0:02:49.360 --> 0:02:53.280 is when locals lose confidence and all the money M zero, 0:02:53.320 --> 0:02:55.160 the money in your pocket, M want a short term 0:02:55.160 --> 0:02:57.440 claim like a demand deposit or M two, something like 0:02:57.600 --> 0:03:01.120 include savings accounts UM. When that when people start closing 0:03:01.160 --> 0:03:03.880 that and saying I want the dollars. I want the reserves. 0:03:04.040 --> 0:03:06.440 And that ratio in China is basically the worst in 0:03:06.480 --> 0:03:09.160 the world. Um, the amount of domestic claims on dollars 0:03:09.320 --> 0:03:11.680 and you know what you're getting for a tenure bond 0:03:11.720 --> 0:03:14.000 in China and the local currency three and a half 0:03:14.000 --> 0:03:17.440 percent in a tenure Do I need to say anything else? Right? 0:03:17.480 --> 0:03:20.000 That's the issue. And oh if the argumacy, Oh they 0:03:20.000 --> 0:03:22.000 can hike interest rates, high interest rates, what is that 0:03:22.040 --> 0:03:24.680 going to do to growth? Right? And and if the 0:03:24.720 --> 0:03:26.760 growth gets hit, this is an economy that depends on 0:03:26.960 --> 0:03:30.280 significant investment, almost half of GDPs and investment. So those, 0:03:30.360 --> 0:03:32.320 I think are the issues that are coming to the fore. 0:03:32.360 --> 0:03:36.920 But they're coming. The trigger is, as you're suggesting, is trade. Um. 0:03:37.120 --> 0:03:40.280 But this broadening of this tense of the relationship with China, 0:03:40.360 --> 0:03:42.760 or the tense points on to beyond trade, I think 0:03:42.840 --> 0:03:46.120 is is settling it in people's minds. And there and 0:03:46.120 --> 0:03:48.720 and uh, it's a new big risk. When you talk 0:03:48.800 --> 0:03:51.880 about a new big risk. There is a headline in 0:03:52.000 --> 0:03:56.760 the South China Morning Post several weeks ago six trillion 0:03:56.920 --> 0:04:03.640 dollar debt bubble which Chinese local authorities have built up. 0:04:05.240 --> 0:04:09.560 Go ahead, you know everything unwind that without a lot 0:04:09.600 --> 0:04:13.880 of pain. Yeah. Look, I I and and today's announcement 0:04:13.960 --> 0:04:15.720 is more sort of new products, right, more and more 0:04:15.720 --> 0:04:18.680 and more leverage. And I was struck by how more 0:04:18.800 --> 0:04:23.240 leverage and stimulation is seems to be. My sense is 0:04:23.279 --> 0:04:26.920 that it's viewed as a legitimate policy option. More stimulation, 0:04:27.360 --> 0:04:30.520 stimulating and then having your currency weakend is not stimulating, right, 0:04:30.560 --> 0:04:33.280 that that's that's spinning your wheels, right, and trying to 0:04:33.279 --> 0:04:35.880 get out of something. Um. Every time we've looked at 0:04:35.920 --> 0:04:39.880 the Chinese financial system um um. And when we seem 0:04:39.920 --> 0:04:42.240 that we feel like we get a handle on it, um, 0:04:42.320 --> 0:04:45.480 some new balance sheet with leverage comes up, and so 0:04:45.520 --> 0:04:49.120 that's a real problem. The one thing that we've consistently said, though, 0:04:49.120 --> 0:04:51.880 and that is probably still the case, is the Chinese 0:04:51.920 --> 0:04:55.599 authorities are extremely impressive when you bring up these problems. 0:04:55.640 --> 0:04:58.200 If you brought up that problem, they are not denying it. 0:04:58.480 --> 0:05:00.880 That's the other thing that characterizes free crisis. They know 0:05:00.960 --> 0:05:03.520 these they have tools to do. They come up with 0:05:03.520 --> 0:05:06.320 tools to deal with it. Um. It's just that what 0:05:06.400 --> 0:05:09.440 they need to do might be bigger than what they've fought. 0:05:09.520 --> 0:05:11.360 So you know, you've got to give them the benefit 0:05:11.360 --> 0:05:14.360 of the doubt. But these issues are are are come 0:05:14.440 --> 0:05:17.599 up and they're real, and so far the government's had 0:05:17.640 --> 0:05:20.000 the credibility to say, look, don't worry about it, We're 0:05:20.000 --> 0:05:21.800 doing something. So I want to go back to those 0:05:21.880 --> 0:05:23.880 I m F meetings that you had with the old 0:05:23.880 --> 0:05:27.600 time ers, as you said, how much are they considering 0:05:28.000 --> 0:05:31.640 that a possible disruption in China? How much of an 0:05:31.680 --> 0:05:33.360 impact would that have on the rest of the emerging 0:05:33.400 --> 0:05:36.960 markets complex in which countries would get hit the hardest? 0:05:37.080 --> 0:05:39.080 And are they staying away from as a result of 0:05:39.120 --> 0:05:44.840 this uncertainty. Short answer, profound impact and all right, um now, yeah, 0:05:44.880 --> 0:05:47.960 but but I don't think that means run for the hills, right, 0:05:48.080 --> 0:05:50.080 Argentina has already been through a lot. Right, you can 0:05:50.080 --> 0:05:53.120 find short dated bonds with high yields where right or 0:05:53.120 --> 0:05:55.039 wrong in the world. If they mature and they pay 0:05:55.080 --> 0:05:58.000 their care, you're going to be fine. So kudos to you, 0:05:58.000 --> 0:05:59.960 because when you came in here you basically called the 0:06:00.000 --> 0:06:02.680 bottom of the Argentinian bonds sell offs to carry on. 0:06:02.920 --> 0:06:05.040 Thanks thanks, notice So, but there are there are a 0:06:05.080 --> 0:06:07.279 lot of countries that are being stressed out by tougher 0:06:07.279 --> 0:06:11.599 financial conditions and the trade trade conflict UM and UH UM. 0:06:11.720 --> 0:06:14.599 And so one one straightforward answer is there's you know, 0:06:14.640 --> 0:06:17.320 there's there's some cheap things to do in UH in 0:06:17.320 --> 0:06:20.240 in emerging markets, UM and and and those are those 0:06:20.279 --> 0:06:23.680 of them. But China has been opening for forty years. UM. 0:06:23.680 --> 0:06:25.960 For the last forty maybe the thirty plus years, you've 0:06:25.960 --> 0:06:31.680 had declining inflation and inflation expectations and rising trade. UM, 0:06:31.720 --> 0:06:34.560 they've been related, right. I mean, it's, you know, the 0:06:34.560 --> 0:06:39.560 the economic logic of globalization, optimizing global outcomes and reducing 0:06:39.560 --> 0:06:43.440 inflation and is correct. UM doesn't mean it's right, but 0:06:43.560 --> 0:06:47.240 it's it's certainly correct UM and UM. I think that's 0:06:47.240 --> 0:06:49.800 at risk this thirty year trend. Thanks very much for 0:06:49.880 --> 0:06:52.080 being with us, and we look forward to having you 0:06:52.440 --> 0:06:55.440 in the future. Eric Fine lots to talk about portfolio 0:06:55.520 --> 0:07:00.440 manager emerging markets fixed income strategy for van eck Loobal. 0:07:03.360 --> 0:07:06.479 For much of this week, the news in Washington, d 0:07:06.560 --> 0:07:09.760 C was dominated by Saudi Arabia and US relations and 0:07:09.800 --> 0:07:13.440 what would happen now that there was a disappearance that 0:07:13.560 --> 0:07:16.840 resulted in the most likely death of a journalist who 0:07:16.840 --> 0:07:19.080 worked for the Washington Post. But is that the big 0:07:19.120 --> 0:07:21.559 takeaway from this week? Marty Schanker joins US now chief 0:07:21.560 --> 0:07:25.120 content officer for Bloomberg News. Definitely, Uh, the news out 0:07:25.120 --> 0:07:27.080 of Washington, d C. Is moving so quickly that you 0:07:27.120 --> 0:07:30.240 blink you miss it. How much lasting power will the 0:07:30.280 --> 0:07:34.119 Saudi Arabia US story have going forward or will people 0:07:34.160 --> 0:07:36.720 just sort of forget about this doesn't have legs. It 0:07:36.760 --> 0:07:39.960 definitely does have legs, and uh, you know, it continues 0:07:40.040 --> 0:07:44.440 even today. There's somewhat of a lull. It's a it's 0:07:44.040 --> 0:07:47.360 the Sabbath in the region, in the Mid East, so 0:07:47.440 --> 0:07:51.400 there isn't a lot of news. But in the the 0:07:51.560 --> 0:07:54.600 issue as it relates to Donald Trump's response is still 0:07:54.760 --> 0:07:58.680 very top of mind. Um in the politics of Washington. 0:07:59.120 --> 0:08:02.760 Whether or not at actually resonates into the mid term 0:08:02.880 --> 0:08:07.240 elections is another question. Why because I think that mid 0:08:07.400 --> 0:08:12.760 term Why Why is it resonating so strongly politically? Because 0:08:13.480 --> 0:08:17.360 it in some ways, and I think the news channels 0:08:17.600 --> 0:08:23.160 reflect this. It speaks to Donald Trump's unconventional way of 0:08:23.200 --> 0:08:27.600 conducting foreign policy and the transactional nature of his presidency. 0:08:28.720 --> 0:08:31.240 You know, immediately people have gone to the whole issue 0:08:31.320 --> 0:08:34.160 of what kind of business relationship does Donald Trump have? 0:08:35.160 --> 0:08:38.920 Why isn't there a sense of complete outrage. Why aren't 0:08:38.960 --> 0:08:44.480 we taking very concrete steps to sever our close relationship 0:08:44.520 --> 0:08:48.640 with Saudi Arabia? And in Donald Trump's defense, it is 0:08:48.640 --> 0:08:54.439 a much It is a very complicated issue. And many 0:08:54.480 --> 0:08:58.559 people have commented on the fact that, uh, because o 0:08:58.720 --> 0:09:02.800 Ji's death, will try magic hundreds of thousands of people 0:09:02.840 --> 0:09:04.880 being killed in Yemen, and no one says a word 0:09:04.920 --> 0:09:08.040 about that. Indeed, And just to kind of add a 0:09:08.080 --> 0:09:12.160 little bit more to the story, there was a report 0:09:12.280 --> 0:09:17.040 that Secretary of State Mike Pompeo initially did hear the 0:09:17.120 --> 0:09:21.440 audio that the Turkish government claims they have, when in fact, 0:09:21.520 --> 0:09:25.319 a State Department spokeswoman came out yesterday and said noe 0:09:25.640 --> 0:09:30.080 had neither heard the audio nor the transcript. So my 0:09:30.200 --> 0:09:34.079 question then is what do you think Secretary of State 0:09:34.120 --> 0:09:39.280 Mike Pompeo was doing in Saudi Arabia and is there 0:09:39.320 --> 0:09:45.640 a potential for conversations about succession planning in Saudi Arabia. Well, 0:09:45.720 --> 0:09:49.360 I can't speculate about what mom Mike Pompeo was thinking, 0:09:49.400 --> 0:09:54.120 but clearly all the participants in this controversy are trying 0:09:54.120 --> 0:09:58.480 to figure a way out um that includes Donald Trump, 0:09:58.520 --> 0:10:04.280 that includes this the Saudi government UM in a way 0:10:04.320 --> 0:10:08.280 that provides some accountability for what happened in the in 0:10:08.400 --> 0:10:13.959 the Saudi embassy and Anchora, while still having repercussions. And 0:10:14.360 --> 0:10:18.000 Donald Trump did hint at that that there would be 0:10:18.080 --> 0:10:21.320 severe consequences if it was determined that there was a 0:10:21.440 --> 0:10:25.800 murder uh in some way connected to the Saudi government. 0:10:26.679 --> 0:10:31.200 But it is true that the Saudi the Saudis are 0:10:31.320 --> 0:10:34.800 critically important to the strategic interests of the United States, 0:10:35.360 --> 0:10:38.840 and you have to balance that against you know, this 0:10:39.080 --> 0:10:43.800 obviously outrageous action, UM, and they're all trying to figure 0:10:43.760 --> 0:10:47.040 a way out. So let's talk about the political fallout. 0:10:47.160 --> 0:10:51.200 There definitely has been vocal criticism from fellow Republicans in 0:10:51.240 --> 0:10:55.760 the Senate and elsewhere. There are reports that Nicki Haley 0:10:55.880 --> 0:10:59.000 may have resigned from the u N Post as a 0:10:59.040 --> 0:11:01.160 result of this. Is there any truth to that? Well, 0:11:01.160 --> 0:11:05.400 we're you know, that is the big question. No one, 0:11:06.520 --> 0:11:09.439 as far as I can tell, have definitively said why 0:11:09.520 --> 0:11:12.120 Nikki Halley decided to resign and why she decided to 0:11:12.120 --> 0:11:17.680 resign now, UM. None other than Steve Bannon, who's not 0:11:18.720 --> 0:11:22.600 should not be underestimated in terms political acumen, said that 0:11:22.640 --> 0:11:28.160 this was a horrible thing to do, terrible timing, you know, 0:11:28.440 --> 0:11:31.320 like less than a month before mid terms. She was 0:11:31.360 --> 0:11:33.920 at the Al Smith dinner last night and actually joked 0:11:33.960 --> 0:11:37.240 a little bit about it. Um, but it could have 0:11:37.240 --> 0:11:39.760 been a factor. But then there are you know, multiple 0:11:39.840 --> 0:11:42.560 things that could also. There was also a report that 0:11:42.640 --> 0:11:46.560 it was Kavanaugh, which she denied. Anyway, she has her 0:11:46.600 --> 0:11:51.200 reasons and maybe ultimately we'll find them out. So let's 0:11:51.280 --> 0:11:53.480 shift gears a little bit because we are heading into 0:11:53.520 --> 0:11:57.120 the midterm elections and I'm just wondering how important it 0:11:57.200 --> 0:11:59.200 is to sort of watch what comes out of President 0:11:59.240 --> 0:12:02.360 Trump's Twitter feed to figure out his agenda over the 0:12:02.400 --> 0:12:05.200 next couple of months or next couple of weeks ahead 0:12:05.200 --> 0:12:06.920 of the midterm elections. Right, and we've already got a 0:12:06.960 --> 0:12:11.120 lot of discussion about UH, immigration and the and the margin. 0:12:11.800 --> 0:12:14.080 What should we pay attention to him? Well, I think 0:12:14.120 --> 0:12:16.520 if you looked at his uh, if you listen to 0:12:16.600 --> 0:12:19.400 his rally speech last night, he sort of outlined what 0:12:19.480 --> 0:12:22.840 his strategy is for the mid terms, it's you know 0:12:22.920 --> 0:12:26.960 that the economy is great, We're going for safe boarders. 0:12:27.240 --> 0:12:30.280 I think he used the slogan that the Democrats are 0:12:30.360 --> 0:12:33.880 mobs and the Republicans are about jobs, and that's pretty 0:12:33.880 --> 0:12:38.000 effective argument whether it and there are there is polling 0:12:38.040 --> 0:12:41.959 that shows that, you know, there is a narrowing of 0:12:42.000 --> 0:12:46.240 this race, that the blue tide is actually could be 0:12:46.360 --> 0:12:49.400 questioned um, and that the poll numbers are moving in 0:12:49.440 --> 0:12:53.800 the GOP's direction. So that kind of messaging may quite 0:12:53.960 --> 0:12:57.079 maybe quite effective. As we run down to the final 0:12:57.160 --> 0:13:00.000 days of the Smith term campaign, just a little bit 0:13:00.080 --> 0:13:05.000 more on Saudi Arabia, Marty is it uh? Is it 0:13:05.040 --> 0:13:11.640 a situation where business interests are colliding with strategic interests? Actually, 0:13:11.679 --> 0:13:15.959 I would say that they're similar their blind uh and 0:13:16.000 --> 0:13:20.600 we and others have written stories while the headline people 0:13:20.640 --> 0:13:24.360 like Jamie Diamond about out of the investor conference next week, 0:13:25.200 --> 0:13:30.160 a lot of the underlings are going to be in 0:13:30.200 --> 0:13:34.679 the region and attending that conference because there are such 0:13:34.760 --> 0:13:40.559 financial there is such financial importance to the Saudi Arabia 0:13:41.000 --> 0:13:46.440 UM wealth that no one can afford to kind of ostracized. 0:13:46.520 --> 0:13:52.240 So there are deep historical financial connections that will underpin 0:13:52.360 --> 0:13:57.360 that relationship, just as there are deep political uh strategic 0:13:57.400 --> 0:14:01.199 relationships on the government side that will continue that relationship. 0:14:01.640 --> 0:14:03.880 Thanks very much for being with us, Always a pleasure 0:14:04.000 --> 0:14:07.040 Marty Schenker. He is our chief content officer here at 0:14:07.080 --> 0:14:11.080 the Bloomberg News. Much appreciated talking about Saudi Arabia and 0:14:11.240 --> 0:14:16.319 US relations in light of the disappearance and alleged murder 0:14:16.360 --> 0:14:21.480 of the Jamal Kashogi, a contributing journalist to The Washington Post. 0:14:24.760 --> 0:14:29.280 It's time to talk about Brazil and Brazil's largest airline group. 0:14:29.800 --> 0:14:34.840 Well in English, it's called Goal Intelligent Airlines. It carries 0:14:34.880 --> 0:14:37.720 more than thirty three million passengers each year on more 0:14:37.720 --> 0:14:42.080 than seven daily flights more than sixty destinations. The chief 0:14:42.120 --> 0:14:45.120 financial officer is Richard Larkin. He joins us here in 0:14:45.160 --> 0:14:48.480 our Bloomberg Interactive Broker's studios. Richard Lark, thank you very 0:14:48.560 --> 0:14:51.320 much for being here. Thank you a good morning. Start 0:14:51.360 --> 0:14:54.320 by just describing for people that may not be familiar 0:14:54.760 --> 0:14:59.120 with your airline how it came to be and how 0:14:59.160 --> 0:15:04.800 it has come to really be the premier airline in Brazil. Yeah, 0:15:04.840 --> 0:15:07.840 we started in two thousand one, which is about one 0:15:07.920 --> 0:15:12.400 year after we had uh deregulation in Brazil UH. And 0:15:12.480 --> 0:15:17.320 we started with a traditional low cost carrier based on 0:15:17.400 --> 0:15:19.440 a single fleet type, which for US was the Boing 0:15:19.440 --> 0:15:24.880 seven thirty seven high operating efficiency, high utilization, and we 0:15:24.920 --> 0:15:28.280 started with four aircraft in two thousand one, and a 0:15:28.280 --> 0:15:32.320 combination of the cost advantage of the company plus the 0:15:32.640 --> 0:15:35.480 fair dynamic allowed us to over a ten year period, 0:15:36.600 --> 0:15:40.280 UH become the largest airline in Brazil. That was also 0:15:40.360 --> 0:15:42.880 helped by two acquisitions that we did. And over the 0:15:42.920 --> 0:15:45.680 last couple of years we've we've been investing heavily in 0:15:45.760 --> 0:15:51.360 our product, UH technology and the onboard customer experience, which 0:15:51.400 --> 0:15:55.240 has allowed us today to become the number one business 0:15:55.280 --> 0:15:59.400 airline in Brazil. All right, so let's fast forward to now. 0:15:59.520 --> 0:16:02.880 We have a situation where the Brazilian economy has been 0:16:03.080 --> 0:16:06.320 mired in a deep recession, the worse in its history. UH. 0:16:06.560 --> 0:16:08.440 Things are starting to look up a little bit, at 0:16:08.480 --> 0:16:11.200 least when you look at bond and stock markets, possibly 0:16:11.280 --> 0:16:13.840 because of the candidate Bosonaro that looks like the front 0:16:13.880 --> 0:16:17.400 runner who has a much more conservative view towards cutting 0:16:17.600 --> 0:16:21.400 the deficit and rearranging some of the pension the pensions. 0:16:21.640 --> 0:16:24.360 I'm just wondering, from your perspective, how much will this 0:16:24.520 --> 0:16:28.720 give a boost to your company should this go through 0:16:29.320 --> 0:16:33.000 and there is some measure of reform that gets enacted 0:16:33.000 --> 0:16:36.800 on the governmental level. Yeah, Obviously we can't predict the 0:16:36.840 --> 0:16:40.280 outcome of the elections, but assuming UH we see that, UH, 0:16:40.320 --> 0:16:43.160 you know, we see well adjust to the outcome. UH, 0:16:43.360 --> 0:16:47.600 you know, we see UM. A lot of components in 0:16:48.000 --> 0:16:50.440 bolson Oars platform are very clear in terms of the 0:16:50.440 --> 0:16:52.560 impact that they're going to have on our sectors, such as, 0:16:53.680 --> 0:16:58.040 in addition to the reforms you mentioned, you know, pension 0:16:58.640 --> 0:17:02.560 tax reform, we're also UH in his platform seeing some 0:17:02.600 --> 0:17:04.800 things will be positive for the airline sectors, such as 0:17:05.280 --> 0:17:09.879 increasing airport privalizations. We have a dire need for improvement 0:17:09.880 --> 0:17:14.199 and infrastructure and airports and airspace in Brazil, and a 0:17:14.240 --> 0:17:16.639 general liberalization of a lot of the other regulations that 0:17:16.680 --> 0:17:23.160 affect our sectors, such as bilateral agreements UH on international 0:17:23.200 --> 0:17:28.080 travel for on capital rules UM and UH. We also 0:17:28.200 --> 0:17:31.280 think that UM the policies are gonna have a positive 0:17:31.280 --> 0:17:34.080 impact on demand, particularly in the corporate space and within 0:17:34.119 --> 0:17:37.959 that particularly the agro UH, the agro sector in Brazil, 0:17:38.080 --> 0:17:41.359 which is a big portion of our air travel base. Also, 0:17:42.040 --> 0:17:46.360 just to get specific on goal for a moment, ratings upgrade, 0:17:46.400 --> 0:17:51.720 when it comes to your credit tender offers, redemptions, improved 0:17:51.920 --> 0:17:57.879 cash liquidity. This is all giving you greater financial flexibility, 0:17:58.600 --> 0:18:02.199 any idea what you're gonna do with the money. Well, 0:18:02.320 --> 0:18:05.120 in the short term, we're continuing deleveraging over the next 0:18:05.119 --> 0:18:08.720 two years. UH. We expected delever by another two billion eyes, 0:18:08.800 --> 0:18:13.160 which is uh, you know, call it five six million dollars. UH, 0:18:13.200 --> 0:18:16.840 and that that's the main focus of this this additional 0:18:17.400 --> 0:18:21.600 cash flower generating. In the short term is continued deleveraging. UH. 0:18:21.680 --> 0:18:24.600 We were upgraded back to a single B, but our 0:18:24.600 --> 0:18:26.800 our target is to get back to double B minus 0:18:26.880 --> 0:18:30.240 entity within the next two years. I'm curious about the 0:18:30.359 --> 0:18:34.480 mix of your travelers. How much is domestic versus international 0:18:34.800 --> 0:18:38.240 and how has that shifted. Yeah, today we're about eighty 0:18:38.320 --> 0:18:43.600 five percent domestic international. We have been globalizing our business 0:18:43.600 --> 0:18:46.960 constantly over the over the years, pretty much since our founding. 0:18:46.960 --> 0:18:50.840 Today we have over ninety code shares and interlines. You know, 0:18:50.880 --> 0:18:53.040 we sell tickets in over a hundred forty countries around 0:18:53.040 --> 0:18:55.960 the world. And in fact, one of the reasons that 0:18:56.040 --> 0:18:58.840 we're up in New York today is we're UH talking 0:18:58.880 --> 0:19:03.040 about our our direct service that we're adding to Miami 0:19:03.040 --> 0:19:07.320 and Orlando. In two weeks we launch uh service, and 0:19:07.520 --> 0:19:11.600 that's gonna allow us to expand our non Brazilian o 0:19:11.680 --> 0:19:14.080 in these non Brazilian revenues from the current fifteen to 0:19:14.119 --> 0:19:16.679 around over the next three or five years. So how 0:19:16.720 --> 0:19:20.560 does the backdrop of increased trade tensions and tariffs, etcetera 0:19:20.640 --> 0:19:22.640 affect your business if at all, especially as you try 0:19:22.640 --> 0:19:26.560 to globalize. Well, we we have a platform that has 0:19:26.600 --> 0:19:29.240 been developed over a period of time based on a 0:19:29.280 --> 0:19:32.240 lot of global partnerships. Uh. You know, Uh, we have 0:19:32.280 --> 0:19:36.760 a very strong relationship with Delta Airlines, with Air France KLM, 0:19:36.880 --> 0:19:41.760 and UH what really drives these flows is the demand. Uh. 0:19:42.560 --> 0:19:45.520 On the Brazilian side of the equation. For example, we 0:19:45.560 --> 0:19:48.840 take our what we're adding service to to South Florida. 0:19:48.920 --> 0:19:51.080 Part of it is leisure, but there's a very large 0:19:51.560 --> 0:19:54.600 uh small business uh component in South Florida. A lot 0:19:54.640 --> 0:19:58.359 of Brazilians have small businesses there, and we don't see 0:19:58.400 --> 0:20:01.760 that very much affected by anything on the trade side. Obviously, 0:20:01.880 --> 0:20:05.280 it is affected by on the currency side, which affects 0:20:05.280 --> 0:20:08.960 purchasing power, which affects our business. Uh, but we're expecting 0:20:08.960 --> 0:20:11.760 improvements on that. Well, that's where I was gonna go. 0:20:11.840 --> 0:20:14.960 Was the idea that if you have a devaluing currency, 0:20:15.040 --> 0:20:17.879 that makes it just that much more challenging to buy 0:20:17.960 --> 0:20:22.320 the twenty Boeing seven three seven Max aircraft. Tell us 0:20:22.359 --> 0:20:25.240 about why you decided on the seven three seven Max 0:20:25.280 --> 0:20:29.280 and how that's going to change the operating efficiency of 0:20:29.280 --> 0:20:33.560 the company. Yeah, the main reason is the fuel economy. 0:20:33.600 --> 0:20:35.800 The seven thirty seven Max eight, which is the model 0:20:35.840 --> 0:20:38.000 war operating we are have already have three operating in 0:20:38.000 --> 0:20:40.960 the fleet. UH is already achieving for us a fifteen 0:20:41.040 --> 0:20:44.600 percent fuel economy and about a third of our costs 0:20:44.680 --> 0:20:47.639 are our jet fuel. That hasn't a significant impact on 0:20:47.640 --> 0:20:50.560 our margins. So that's been the main driver UH to 0:20:50.640 --> 0:20:54.399 have that absolute cost reduction. Secondarily, you know, Brazil is 0:20:54.440 --> 0:20:58.280 a very dynamic competitive market and our competitors are also 0:20:58.320 --> 0:21:02.720 investing in in proved aircraft on the airbow side of 0:21:02.760 --> 0:21:05.359 the equation. We're the only Boeing operator in Brazil. But 0:21:05.400 --> 0:21:10.280 the second reason is the larger, slightly larger configuration of 0:21:10.280 --> 0:21:13.560 the Max. UH will be configured with a hundred and 0:21:13.600 --> 0:21:16.680 eighties six seats as opposed to our current hundred seventy seven. 0:21:17.080 --> 0:21:20.880 That gives us a greater revenue productivity. But the final reason, 0:21:20.920 --> 0:21:24.359 which is important, which is facilitating these flights that were 0:21:24.440 --> 0:21:27.000 launching in two weeks to mamor Orlando. Is the additional 0:21:27.160 --> 0:21:31.480 range of about uh kilometers on the max that allows 0:21:31.560 --> 0:21:34.840 us to do direct flights to Miami Orlando. Richard Lark, 0:21:34.920 --> 0:21:36.480 thank you so much for being with us. Thank you, 0:21:36.760 --> 0:21:40.040 Richard Larcas, chief financial officer of Goal Airlines based in 0:21:40.119 --> 0:21:42.600 South Howlo, Brazil, but joining us here in our eleven 0:21:42.600 --> 0:21:49.560 three oh studios. Among all stocks, Procter and Gamble really 0:21:49.600 --> 0:21:52.880 stands out posting a game today that is the biggest 0:21:52.880 --> 0:21:58.040 since October two thousand and eight, more than eight percent climb. Well, 0:21:58.119 --> 0:22:01.800 they beat earnings, they posted great expectations. Joining us now 0:22:01.880 --> 0:22:05.800 to talk about this, Sarah how Zach Bloomberg Opinion, consumer calumnists, Sarah, 0:22:05.840 --> 0:22:07.639 come on in here. Is this just that we like 0:22:07.720 --> 0:22:10.199 to buy really expensive creams and we just keep on 0:22:10.280 --> 0:22:13.000 buying them and Procter and Gamble cashed in on that. 0:22:13.840 --> 0:22:16.159 So that's certainly a part of it. Beauty was a 0:22:16.160 --> 0:22:19.480 particularly strong division with seven percent organic sales growth in 0:22:19.520 --> 0:22:22.080 the quarter, and they definitely have been having success with 0:22:22.119 --> 0:22:25.640 their premium lines within Beauty, so s K two, which 0:22:25.680 --> 0:22:28.440 has very high price tags, has been leading the growth 0:22:28.440 --> 0:22:31.120 in that division for some time now. But that said, 0:22:31.520 --> 0:22:34.119 that's not the whole picture. They really had strength in 0:22:34.160 --> 0:22:36.720 their uh they grew sales and their grooming division, their 0:22:36.720 --> 0:22:40.479 healthcare division, their fabric divisions. So um a broad based 0:22:41.480 --> 0:22:44.600 series of categories fueling this gain this quarter. Sara, this 0:22:44.680 --> 0:22:49.400 has to do also with organic sales growth, correct, it does. 0:22:49.440 --> 0:22:52.600 So organic sales growth, what they mean with that number 0:22:52.680 --> 0:22:57.000 is sort of excluding M and A activity and currency fluctuations, 0:22:57.040 --> 0:23:00.520 and so that's a closely watched metric for the particular 0:23:00.560 --> 0:23:04.000 company given its global reach. But if you're talking about organics, UM, 0:23:04.000 --> 0:23:06.040 that is definitely an area that they're focused on in 0:23:06.119 --> 0:23:09.639 naturals um, understanding that the consumer is kind of moving 0:23:09.680 --> 0:23:12.679 in this direction and considering that more of a priority. So, 0:23:12.760 --> 0:23:14.720 for example, in the diaper's division, they now have this 0:23:15.080 --> 0:23:17.520 Pampers natural lines that's supposed to be made in a 0:23:17.520 --> 0:23:20.560 more sustainable way, and that helps drive growth in the quarter. 0:23:20.800 --> 0:23:24.320 I love this sort of organic growth versus organics. And 0:23:24.320 --> 0:23:27.119 then I have to wonder, what is organic face cream? 0:23:27.160 --> 0:23:29.000 I mean, how is that organic? I don't I just 0:23:29.480 --> 0:23:32.200 boggles of mind. I do want to ask you, though, Sarah. 0:23:32.400 --> 0:23:34.560