analogy to i think we have our toe in the water right now. what we tried to do because technology transforms lives, the brazilian policies up until now have been want to try to attract investment and tried to spur are indeed activities in the country that they would think -- are indeed -- ripple effects across the could you. while that's good a lot of times they are more focused on just trying to pull the private sector in this post having the private sector solve a problem. about the technology to what technology does and can transform the want way anything that comes out of this visit it needs to have i think use of the word whenwhat we could do on july 1 to come it needs to be tangible. we do a lot of things will be sent out plans a part of the metrics, what are the next steps of those plans? i think on information technology it should transcend the entire agenda because in every one of the sectors that you of all mentioned, technology can transform and make things faster make things more

efficient, and i think that should be at the forefront of agenda. >> what would you like to see come out of this specifically? what are some of the signals that you'll be keeping an eye out for from a high-tech sector standpoint speak with first and foremost i agree with all the panelists of our who said it's a sign that this is happening, a good sign in terms of the least pay, stability of the relationship i think that's very important that we see a strong message of stability. i think the other thing around some tangible cooperation areas with specific metrics and next steps on what's going to happen. i think that needs to be at least published on timelines of windows next steps are going to happen. again, i am biased but i think technology should be a cross every one of those things. allowing broader access, you should be things around access

to cheaper broadband building out the highways, the digital highways in brazil. i think it's fundamental for anything that happens. education while brazilian education over last decade has improved, the average education of a brazilian has been fifth grade. and out in the eighth grade eighth grade depending on your metric. i think there's still a big big opportunity everything technology will improve in that. >> assistant secretary jacobson, going back before we dive deeper into the specifics of issues, could you elaborate on some of the with specific are some of the u.s. goals, we're going to cite a bunch of agreements to talk about what they might look like but what really in a broader sense what needs to be accomplished to move the relationship to the next level? is a new agreement or something more fundamental agency accomplished as part of this

visit? >> i think there's a couple of things. i do think presidential visits in and of themselves are they do two things, frankly. they are both symbolic and important as public demonstrations of a relationship and what it stands. so in this particular relationship i think a public demonstration of the relationship being healthy again between the two leaders is very important. the relationship can be incredibly busy and dynamic underneath, but if there is not an external perception that is healthy at the top that's a problem. and, unfortunately it has been that way since the postponement of the relationship despite the fact i think it has been getting better for months now. i think this visible kind of solidified that in the public mind, that this is a healthy

relationship moving forward. but i also think, as bureaucrats know, that presidential meetings are action forcing events. you get things done and you move forward on things there after to get up to july 1 question because of a visit on june 30. so the agreement that maybe you wouldn't have gotten done for another six months, you get done by this time, or you know, maybe you engage at a more aggressive pace on coming to some conclusions about how you going to work together on climate change. ahead of paris. i think in all of these areas this visit can help us accelerate the pace of our engagement. so i don't know that it is a quantifiable number of

agreements signed. it is a reflection of the breadth of the relationship certainly come and the reflection that kind of we are back. it is certainly a review for the public of what has been happening over the last few months as we have accelerated our dialogue of private sector is kind of back in touch with each other presenting recommendations to the leaders et cetera. and i hope a way of stimulating movement in both of our political lives to move this relationship forward where it may be stuck. you know, there was a mention by peter i think of our legislative branches which are both very lively and robust democracies, means that each of us has to take account of what we can do with our congresses. and we each have very engaged

congresses which means that we have to be able to go to our legislative branches and explain why this is good for our country and how we are going to be able to sell this. so presidential visits are incredibly important because they are part of the promotional pitch, if you will, to our own legislatures as to why this is in the interest of our countries to move ahead on things that maybe politically risky. so when we talk about big ideas or big movements in the relationship, i don't think we should underestimate the importance of these visits or the individual agreements or the political statements made as being critical to each leader when they then go to their legislators, their interest

groups, their stakeholders, whatever you want to call them, as it's time to move forward on something that i realize you may not be 100% comfortable with because i have a commitment to do x. i think it is what we're looking for out of this visit is an affirmation from both sides to move ahead quickly on some very important areas of cooperation. and the other thing is i think an affirmation of the two of us working together on global issues. we haven't touched on that quite as much. but with some difficulty around the world we need the capability that brazil brings to the table entity working with them elsewhere. >> this idea i think, i fully agree with the idea come in terms of to follow up this

meeting, it's very important, from both sides that many from the brazil side the that connections is very important. but this brings us to the idea but admission should include the bureaucracies. key elements in bureaucracy in both countries into political site. i would say this coalition should involve civil society business communities, some areas of the bureaucracy from both sides and some areas of the political establishment in both countries. i think this challenge before us right now is, i would say we all the stakeholders but we can connect these dots. just the top level meetings when i create an environment. but trying to put together this

kind of business community or bureaucracies that are much engaged in this positive agenda i think this is a critical element to check if we have a new chapter for a new part to one thing that has been lacking in the u.s. but the relationship is having a real coalition among multiple sectors and, frankly, a lot of other countries that are incredibly important. spent i think it's really important to stress that this visit, when depression to get together, it's a strong signal. but if you look not at a snapshot at any given moment in our relationship let's look at the movie. the movie tells a different story. it more complex narrative and it shows a relationship that is growing in complexity. and as it grows in complexity it becomes even more important for the leaders of the countries to get together and to have a

good, high level dialogue. it's more difficult because now it's not only picking up the low-hanging fruit. now we have to make an effort that's much more difficult sometimes has to do with legislation the legislative branch and civil society in order to move things forward if you want to make things move forward and advance in this relation when it is already very complex entities in the case of brazil and u.s. >> now it is more started to climb up the apple tree a little bit. when the option was presented to president rousseff about coming to washington or the option of an official visit to which she's doing in 10 days or a state visit further down the road, why is she choosing to visit washington now? and from the brazilian government perspective what are

you hoping are some of the result to come out of this visit speak with why she can now? because she wants to come as fast as possible. that schedule would not allow for her to have a state visit this year, but we are seeing these visits a special business not just a working visit. an official visit with lots of elements that shows it will have -- the importance of the american government is attached to this visit is well known come and we appreciate that very much. so we will see when she comes that by the signals and the chapters -- gestures are included in this visit some very important visits and to be very strong signal. i will make it into the details of the program itself but what i

can tell you is that the brazilian government and president rousseff herself is very much satisfied with the visit and the preparations for the visit. >> steve, they want to jump in? >> one of the easiest ways of driving action is committing to the next stage for the next checkpoint. if presidential visits are used how we use our executive office visits to our country they are checkpoint and appoint we've got report out on what you just did they not have time to wait for the last time the conversations official happened at the top tonight, we can't let that happen again. i would be an amazing outcome from a private sector point of view, to put the right level of urgency on all parties and all of the folks involved like you said, to get things done. >> roberta, let's do a little bit more on the substance of what might come out to visit and, of course what can be said as a preview. you mentioned a couple of

issues. we talked about science, technology, health, education which also mentioned defense cooperation, climate change and collaboration on regional issues and global issues of food security am of the global issues and haiti among the regional issues. and hugo also further in depth there's been a lot of talk about climate change being a marquee aggregate that may come out of this. at this point what can you say about what that agreement could potentially look like? is that going to be kind of the bedrock, kind of foundation that is going to come out of this agreement? this visit to if you could talk a little bit more about coming to beyond just u.s.-brazil, what are some of the areas of cooperation fromcooperation the u.s. perspective that we're looking at brazil to better partner with us on regional global issues? >> it's a fair question, jason i'm afraid i may disappoint you in the answer. i think like benoni i tend to

like to make some of this to my president to announce on the 30th. president get a little testy when we preview their issues. which is not to say that we are not talking about the areas of we're going to be discussing. and i would not say although i do think that this administration the obama administration places a very great importance on moving towards the climate conference in paris in the fall and trying to work with brazil on that. it's really hard to say that that is somehow the centerpiece of his because there is so much a great deal of diversity in what we going to be talking about in this visit. i am both to say there's a particular piece that is the thing, that of robert of whether we succeed or fail.

i think that's not just not the way we measure this visit that in some respects it's more a question of we've got 10 or 15 things, all of them very important and in a way it is the breath of his that is the measure of how important. i also think that has benoni said, the fact that there is a part of this visit that we will talk about the economic and trade relationship, which in some respects has been a difficult part of the relationship over the years, is a very important part of this visit, that there is an ability to talk about that you know work together on trade facilitation agreement those things that maybe wasn't always the case. so picking one and saying it's kind of the bedrock is what i think not quite possible. i do think on sort of the regional and global issues there's a number of things that

are clearly going to be under discussion. there's no doubt that every meeting we've had either regionally or with individual countries that are particularly important such as brazil lately have touched on the issues in venezuela. i just don't think any of us can escape that these days. i think that is also true on haiti as we approach the election, and it's got to be true giving each of our countries critical roles in haiti. i think that the leaders will discuss haiti and how they see things going forward. i can i think our ability to partner with brazil in other places as the president looks forward to the peacekeeping summit that he will hold in the fall at the u.n. general assembly, and brazil obviously critical role as leader of the

nation in haiti is another area that will be discussed. >> want to do things mention in the paper is eliminate trade barriers and talking about the service factor as welcome moving beyond goods and really one of the areas that we view as ripe for growth, not only in brazil domestically and also u.s.-brazil, service sector. i know we can't preview too much of the visit but do you see some potential for movements on facilitating better trade and services? >> you know, i think we, the u.s., have been in a position of being ready to talk about greater engagement on trade issues for a while now. so i think that it's certainly something of interest to us but it's a question of taking the issue at the pace of our

brazilian college. i'm not sure i can get into it much further than that. >> benoni? >> just to add something about the result of the visit how the bureaucracy looking ahead you know that president rousseff has just sent to congress, brazilian congress, to important agreements in the statute area. one of them defense cooperation agreement, a kind of framework agreement. it appears not to be that crucial, you know, if you're not someone who is studying the matter and history of the relationship. but this agreement is very important. the last time we had such kind of agreement was up to 1977. it was integrated from the '50s during the cold war, and 77 we denounced as a group of.

it was a brazilian dictatorship at the time and since then we have not had any agreement in the defense area. now we have an agreement that has just been sent to the congress because of this visit, and because we think it's very important and it sends a strong signal from the brazilian side i that we want to improve our relations and defense, and cooperation in this area and moving forward also to great new partnerships. with regard to the global issue of climate change, this is also a priority for the brazilian government for president rousseff. and this is something that we can work together to move the global agenda forward. this is because brazil and the u.s. have done a lot in this area. it's not that we just announced

targets and we didn't do anything. it's easy to announce targets. the difficult part is to comply. and we over complied, both the u.s. and brazil. so we are in a position to lead this movement. of course, we have to respect the differences but the are a lot of agreements and i'm really confident that brazil and the u.s. can we work together for good outcome in paris spent there's been some signals from the brazilian government roberta, about the trade facilitation, right, and we're looking at what are the signals from our brazilian friends? there's been some signals about maybe some type of kind of new thinking coming from brazil on trade issues. do you see potential for moving forward on some of these kind of eliminating some of the trade barriers between the two countries?

>> our minister of the government came to the u.s., his first visit to a foreign country, in february. and it's really a priority for us. the united states is our second trade partner and our first, the first destination of our manufactured goods. so it's really important for us. but i think there is an emphasis now on trade to eliminate non-tariff barriers to trade with trade facilitation to are some studies in brazil that show if we move fast in this area we can come the short run the trade down 10% or even more than that. so it's something that will have consequences in the short run. if you engage in more comprehensive kind of negotiations you know that's where long-term.

i think that we have to create momentum in this relation and the trade facilitation and he is a new area and also with that apart from trade facilitation, the regulatory -- another area we are working on to try to move things forward. and both areas can have a positive impact. so that's the main emphasis right now. >> steve, you are all about metrics. >> have to be. >> you have to be. i would ask you from the private sector perspective, business-to-business engagement i think is so critical for the bilateral relations. so different from the u.s. relationship with a lot of countries. the relationship is or that affect government-to-government level but i think in many ways the fruits of collaboration between the two countries happens with the private sector. brazilian companies provide tens

of thousands of years of jobs and vice versa. talk a little bit, what do you see as some of the obstacles from a u.s. company standpoint that are commonplace the us-based brazilians looking to expand to the brazilian market both as a result of u.s. policy and as a result of brazilian policy? and what sort of policy changes would need to happen to make companies like intel, other multinational corporation, and small and medium-sized see greater opportunity to enter the market speak with good question. first and foremost, 200 million people, rising middle class, 100 plus million people already in the workforce which generates more activity, rising education levels at this stage is set for brazil and the brazilian population, the economy, for businesses to do more in the country. so want i want to start with that and say also you've got almost 30

years working in the country. said, the opportunities to go faster. i think every multinationals when you look at brazil vis-à-vis other markets they recognize the size but the recognize on the flipside some of the complexities. be that complexities take world bank, the world bank puts out an index which measures ease of doing business. when you look at the matter, brazil is upwards of 66% award as some of the other latin american economies are more in the top 3% of the that metric looks at things like how quick can you open a business, how easy is it to get in and our people, et cetera, working in the country. i think there's some basic things we could do to enable velocity on the front that i think velocity to making technology can enable some of the velocity through that. so the localization requirements in brazil.

i think the opportunities for the government, for the policymakers to look at things like measures and metrics of adoption of ict over the way to look at as opposed to perhaps just saying hey how the ict is producing countries. that would enable a more thriving ecosystem that would generate these hundreds and hundreds of workers using technology that would've been self-sustaining. >> there's a huge amount of u.s. investment in brazil but there's also, we were reminded a few weeks ago by the chinese prime your, premieres visit, $53 billion, agreements signed, we do know is that will come to fruition but lisa they were assigned. but still there's still many more companies come many more investing in brazil. china also overtook the u.s. as brazil's largest trading partner a few years ago.

imagine if more of this business was going to u.s. companies and chinese companies. what could be done on this front from a business perspective to kind of allow u.s. businesses to really be able to kind of thrive in the brazilian market at a time when there is increasing interest from other strong countries? >> so look i don't think it's and four. it's not china or u.s. to its china and u.s. everything that's why we're sitting in today and hopeful or all of us have one thing we do should i think is hope for will come out of this. i think now is the time for the u.s. to look the u.s. and brazil meet each other. those 200 million consumers great opportunity that i think there's lots of things that brazil can get in game if they provide easier access and vice

versa. i hope it is an and conversation more than just what is china doing. i would love to see similar agreements with actions below those. >> i think far too often the question is what you doing about the chinese incursion into latin america. this has to be in and conversation, as long as everybody plays by the rules. >> i think a critical point when he was about china and u.s. i think the are two completely different negotiations between the u.s. if you take the discussion and the level of interaction between the u.s. and brazil, we are 1000 years ahead in a sense we are doing china in a different perspective it we are trying to attract very basic investments

for infrastructure. it's completely different scenario. i think the challenge for brazil and the u.s. right now is trying to do negotiations for a more sophisticated level. that means regulatory issues are the key element right now. i think paris -- were talking about how we can make the way you was developed technology and the brazil company develop technology. how we define the framework for the internet governance. so more sophisticated issues has nothing to do with china pursue relation. this sense with opportunity again in a sense we have avenue to converge with u.s. in this sense. we do not, we just don't have

the opportunity with china. china is completely different. of course, we cannot afford to pay more close relation with china but i would say it is not as strategic as with the west. >> i would like to add a few ideas. i agree completely it's not either china or the u.s. we see in brazil international affairs more not as a zero-sum game. we are better at addition and multiplication subtraction entities. we see this as a compliment of foreign relations and helps to exploit new opportunities for development. with regard to the investments. i think in this area of technology, several american companies are investing in research and develop in brazil apart from intel, we have new

investments in r&d. by several covers that are here today, microsoft dupont, ge and several others that are investing in brazil in this area. and we need to have our human resources trained to make meet this new demand of engineers, mathematicians. ..

she is implemented not. is there something more american to that? i don't think so. the world becomes advocates for the strip where relationship. >> we've been talking about the business-to-business engagement from u.s. companies investing in brazil but it's incredibly important to point out the number of brazilian companies investing in the united states as well. the numbers do not do well. >> there was a new study that will be launched like streak in preparation for the visit. it is cautioned by the brazilian trade investment promotion agency. i believe they are here. it is amazing defining they have

in this new report. i won't tell everything because it still confidential. but between 2001 and 2012 come to brazil was an emerging country whose fdi increase in most. if you look at the emerging countries. and nowadays you like to travel. >> i like to travel. i actually agree over it now. >> if you like to travel, there is a good sense will probably fly on the brazilian aircraft. and if you get hungry you can order of brazilian hamburger with brazilian ketchup on it and drink a brazilian or brazilian orange juice to make up made

with plastic manufactured in the u.s. by a brazilian petrochemical company. after that you are going to pay with your money in an account in the brazilian egg in the u.s. so that gives you an idea 20 years ago. >> i think there's oftentimes a lack of recognition of how important brazilian multinationals are and how many jobs brazilian multinationals provide. >> i won't tell the numbers now the figures. >> we are going to use the last 20 minutes. i have 20 more questions. i'm sure you don't want to hear more of my questions. we will take the remainder to ask for questions from the audience. if you're watching the webcast you can tweet your question.

if you have a question of adobe microphones floating around. first question over there. if you could identify yourself, named organization. >> correspondent of the brazilian newspaper global. we were having this conversation over 10 years ago in a meeting between the two presidents would be about to happen, we would be certainly see support for brazil in the security council of the united nations. i have this curiosity. why isn't this an issue and what has changed in the brazilian and the american perspective? thank you. >> thank you. i look down my panel. >> i'm trying to take the answer. there is two very important

movements between the two presidents that is the defense and some elements of global issues. why is this so court? we can understand this kind of agreement, preliminary agreement as a way the two countries are going in a direction that we finally find a common political ground between the two countries. this more brought political agreement between the u.s. still has the element that? to define a more concrete agenda. if we compare the resilient u.s. relation with others, the difference is basically because the other countries do have a broad political platform between them. brazil and the u.s. don't have it. this kind of element that is more strategic and defense now

starts to have a sign that we can have some thing in common ground, i would say about local platform. 10 years ago it was a little bit different from that. now i think we have a different time to discuss this kind of issue. you are right. it is not the concrete element with itself to be a part of the security council. but there are two or three issues i will say between brazil and the u.s. used to be a very complicated element. now we have conversations and this is important in terms of logical operations. >> other questions? over here. >> erin stanley with "financial times."

i want to premise by saying i am an onerous 100%. why should we be skeptical about this visit? what are the things we can take away and what reasons are there to be skeptical in it may be dismayed he a bit more talk than substance? >> i'm sorry but you are not going to get that answer from me. i'm an optimist. that is how you stay in government for 30 years. it's a mac there is no reason to be scared to go. >> i think the biggest thing would be a missed opportunity. if nothing tangible come saturday, diabetes skepticism. you could argue that this is or groups that want action out of this get frustrated out of it because there isn't action.

but given where we have come from i think it is outside. >> it seems unlikely given the breadth of the conversation on education defense technology to defense cooperation to global regional issues and other issues. but thanks for that dose of skepticism. >> i saw another question. first row over here. and then we will go to the last row. >> alex and the council on economic affairs. when we talk about defense security cooperation a couple years ago to the u.s. and afghanistan a couple months ago dear sent it from brazil to sign a deal that has been broken for a few years fewer take. is there any possibility when president rousseff comes to

washington. >> defense deals. question in the back row. >> teresa lesh. >> theresa welsh coming u.s. news & world report. this is for secretary jacobson. wondering if you could expand on the brief comments he made him speak about how brazil and the united states can collaborate with their growing political and economic crisis there. >> reappeared thanks, teresa. >> on the first issue on the defense issues, i am not necessarily the right person to answer in terms of any specifics. there will be a bilateral meeting between defense secretary's ahead of the presidential meeting and that is where you may see more specifics come out of this. but there is clearly an interest in moving forward on defense cooperation and having more conversations about cooperation

between the two governmental side than on defense industry issues. obviously there is a fair amount already. my brother at the department of defense are better qualified to give a broader answer than that. i don't know if anybody has any more. >> we would like to mention defends itself cover something related to that aerospace industries. the two companies brazilian company an american company partnered to create a research center to task the bio field. this is something very interesting. it will help us to reduce emissions in the feature and the center is going well and there's already some products in the

market and they qualify for the commercial use. they be in the future you have brazil in the u.s. the private are partnering to sell this kind of product, which is a lot of value in terms of research and development and science and innovation. this will also be a very combative environment in the future since all countries in the world have to reduce the issues. >> question on venezuela. >> let me say on this question i think that we believe and have for a long time that brazil is a crucial factor on venezuela appeared its influence is critical not only bilaterally with venezuela because of the relationship but obviously played an important role vis-à-vis venezuela and certainly at one time three

foreign ministers from brazil ecuador and colombia were playing a pretty crucial role. we hope that can reemerge as important in terms of getting it is set for elections freeing political prisoners, especially those on a hunger strike right now as days go by. this is particularly important. i think the leaders are certainly going to speak about the importance of moving ahead as both of them have individually on the elections issue moving ahead on many of the concerns that they haven't venezuela. >> thank you. other questions? second row. here's a question as well. >> mark with the brazil u.s. counsel. hamas hunter and how might this visit help politically

domestically. >> i'm sure peter has a softball in the first row. >> things. i want to ask if we could also address where we are on some of the reforms typically economic reforms and brazil and things can't happen unless some of the change is the president is proposing in the finance minister is proposing are actually going to occur and i would love to hear little bit about that. >> great thanks. would you like to start off on the reforms? >> i think for the political side, it is very important. right now it comes back to the "financial times" question. to my right now is facing a very complicated domestic political

context. the coalition was that she was leaving and she is facing the risk for police causation. paragraph situation has to do with the emergence and opposition groups from the more brain side of the political spectrum. when toma in this context has a meeting with the u.s., she tried to recall part of the issues they used to be for a more liberal or more brave when groups. for her is very important the timing of this meeting and the sense they should try to indicate look, i'm not just a national leader or whatever, but also have this kind of global engagement relation with the u.s. for her it is very important.

it is an opportunity for her to assess to the media that right now is in a position to her to have a good agenda with the brazilian media also. for her it is very important for the political side. >> you want to address the question. >> sorry, kind of a broader business engagement. it is on economic reform, right? again the economic reform this stat is -- i will let my colleagues comment on the status of the economic reform. businesses need to see business in the country come and ease of doing business and how to do with reform and as they have

been posting more confidence in the dirt to continue investments were five years ago was pretty obvious and evident. a lot of folks are looking for that stability. >> are there other questions? third row and then a quick question to some closing remarks. >> john sanchez. the president said to those to congress yesterday about terrorism. there is a means that we can see some movement in global entry for the visit and so we can see some increasing tourism flow particularly from the u.s. to brazil. >> things. >> i guess what i would say on that as i anticipate that there will be a positive conversation on global entry as part of this visit. i don't know whether that will

be an announcement of actual employment station or anything. it is getting kind of clothes. but obviously, we are pleased by movement of the bill and we are going to continue to get us that brazil had to move forward on the issue. >> just about the low-hanging fruit from the dead complexity of getting visitors into the country and vice versa have a real-time example. our chief marketing officer actually landed in brazil on monday and some of his entourage that would have come up and couldn't get visas processed in time. or vice versa. folks coming to the exchange programs, things of that nature that have complexity on our side side -- i'm saying i say because it is not equally easy to do. i view that to let the private

sector -- >> i think it's also a matter of what else can happen in the future. you had the comet before. and give it to presidential direction just a quick final question. and then the respect to. what happened in washington on the trip waiting for delma? for delma to come back to brazil and say this was successful? >> from the western given the private sector i think a clear indication that there is room for improvement in terms of the economic gains for brazil in the economy would be the key element. if he had these he had these in her hands when she came back to brazil this is the outfit that

she means to go forward in a sense to good the kind of political division she needs. to create the idea that there is a concrete economic gain for brazil in this approach in the u.s. >> on the u.s., president obama calling its fourth-quarter what does this have to look like to be a win from the u.s. >> we are back to having regular conversations that there is a lot going on below that all of the four of the fatah on the ministerial level and below are now working again after pause is and the movement ahead

especially when a tougher issue is whether its governance or defense or climate will have advances. all of that to me as a victory of this visit. >> that's an appropriate way to conclude the panel. before debbie comes up to give us a close, a quick round of applause. [applause] a great pleasure to introduce the representative from the u.s. brazil business council are part of this event and her partner multiple events are done on as though a great working relationship and also vice president. >> thank you very much. as you can tell from my appearance you get two for the price of one today. i am here representing the u.s. business council and the private sector that does business in and

with brazil and also carville who has had the honor previously serving as chair of the brazil u.s. business council for three years. we are approaching are 50/150. where 100 years old and 50 years in brazil so it's quite an honor for us to be here. but the panelists and guests alike, i'd like to see a lot of familiar faces. that was an outstanding discussion that gave us all a glimpse into the future of the bilateral relationship and the president visit to washington not only as we heard about the bilateral relationship but also the focus on the global relationship on global partnership on issues in the regional partnership which is quite important. we are pleased to save them for the president and we look

forward to her visit. a special thank you to roberta jacob said. we know you've got a lot on your plate right now and we are proud to have you leading the dialogue and we are definitely looking forward to your next step. three deputy chief admissions benoni belli thank you for being here with us today. i want to say thank you for bringing all of these issues to the front burner. thank you very much the atlantic council and the brazil council. we are grateful for you being gracious hosts for us and i also want to congratulate the arts center on the launch of the latest influential report coming out prior to the visit that will advance cooperation between our two countries. ricardo, special congratulations to you for your thought leadership. in advance of the visit.

the analysis we believe will provide a great race for us in future cooperation between our two countries and for the larger benefit of the trade discussion taking place between the two countries. sale in the u.s. are at a pivotal moment in the private sector plays a crucial role in helping to define a clear agenda with concrete steps. we've remained engaged as the dirt in conjunction with counterparts in brazil over the last few years as the relationship has taken different twists and turns and we are hopeful for the outcome of the commercial side of this is it. after hearing from our distinguished guest today, it is clear their relationship is moving forward their agenda is appropriately ambitious yet still achievable and worth hearing. on behalf of the brazil u.s. business council of the u.s. private or i want to reiterate our commitment to strengthening

the brazil u.s. relationship in contributing to a positive agenda for president rousseff's visit that benefits both countries and citizens. it's a pleasure to be here this morning at thank you for host and have a wonderful and restful model that day, the weekend. you have deserved it. [applause] >> thank you very much. before everyone is come i want to thank adriana for being with us today. and i also want to thank our fantastic team led by natalie and a black sweater. [applause] the vision and dedication that is the entire fantastic team. if you haven't received your copy of the report, the report, it is out there. it is also interactive online and will be launched in the next hour. thank you in thank you to our

panelists. >> president obama and brazilian president rousseff will meet this week. >> today looking to serve in

public opinion will miss the knowledge of k-12 education issues. the friedman foundation for educational choice releases the results of the annual election survey live from the american enterprises to two at 3:00 p.m. eastern here on c-span2.

>> next a discussion or sean donovan. from "the wall street journal" cfo conference, this is half an hour. [applause] several fun facts i think you've known -- >> i would not confirm or deny. >> his youngest son is at a's player in a boy band in d.c. that has another prominent parents not involved with the band. he's designed part of this house as a trained architect and his father, michael, just recently became a u.s. citizen since the early 60s. >> 53 years in the u.s. >> quite amazing. >> i want to bring up a word he don't like all that much, which is the word shutdown.

>> that's a nice way to start. >> talks up in the last week of warning of the possibility of a shut down buried behind the other things at the moment is an impassive stories about spending for the next budget. i could summarize where he stands but i'd be interested this is heading in the direction where we could in the fall be a shut down because of the division can be overcome? >> i will not rule it out and here is why. we have this word in washington that sequestration. a word that no other human being outside of washington has ever heard of and to translate it it was basically cuts to the budget they were supposed to be so terrible that they bring everybody to the table to make a deal. pam was equally shared. it went into effect. is terrible for our economy

lost 750,000 jobs and republicans and democrats came together and fixed it through marie bryan deal a few years ago. unless congress acts sequestration comes back october 1st and that is what the sites about. exactly right. the president has been very clear. one of the things we've tried to do is be very clear about what our bright lines are the negotiations so we can create space for where there may be ideal. the president said would put under budget in early february he's not going to accept a budget deadlocks and sequestration. six versus sequestration. if we don't get a deal in the midst of a heated presidential campaign, we won't get one next year so we will have many more years of this. the translation of that if he would veto bills that are rich that they sequestration level. and at the same time some were

saying let's fix the defense budget and not what we call the nondefense budget. the nondefense budget as everything from the state department homeland security and veterans administration but all of the feeds one of our economy. education, infrastructure, basic research, all of those things would be heard if we just fix the defense part of the budget. >> president is in some ways raising defense spending but wants to raise that there funding. >> evilly sequestration is bad for national security and defense of the homeland. he agrees with republicans that we ought to do something. he also agrees that we ought to be doing something and the last thing that often gets lost in this debate is we want to fully pay for what we do in discretionary spending with

long-term cuts on what we call entitlement, mandatory spending in the tax side. that is where the fiscal problem is long-term. the discussion is that the lower level in decades as a share of our economy. that is not where fiscal challenges. entitlemeentitleme nt programs than on the tax side. what we want to do is what congress did a couple years ago. the so-called marie ryan deal offset smart savings. >> you say it is possible to do a government shutdown. they are in those positions for a repeat of that in a different setting. what are your odds that actually happens. >> the odds are better than 50/50 we get a deal because we hear more and more democrats

than republicans come out and say it the right thing to do. speaker boehner said a few weeks ago he was open to a deal in the open house said the same thing. the problem is that we don't want is don't want us to govern and that don't want us to govern and that crisis is seen too often. that would like to get started right now we are working with democrats to stop the progress about the defense appropriations bill this week because we think that is a key signal to congress that has got to stop this charade and get to the negotiating deal. i hope they don't leave it to the fall whether it's a shut down for a last-minute deal. that's not good for anyone. >> i want to get to corporate tax reform and talk about the highway bill. maybe we can bring up the first question if you have your ipaq handy there. what is your biggest concern when it comes to the federal

budget? i don't know if we have -- and will pop open a second. people are fast answers. complexity of the tax code still coming in. federal growth in federal debt. people but going for three items. so we had complexity of the tax code seems to be the winner. i don't know if you would have them one that yourself. >> well, couple things interesting about this it does show the substantial progress we've made on the federal debt. we still got a ways to go but our deficits are below 3% of gdp, which is kind of standard measure of most economists use below the 40 year average after having tremendous challenges a few years ago.

i think it is interesting to see how few of you are really focused on that piece. on the tax side the president agrees and both of those things, the corporate tax rate and the complexity of the system has broad bipartisan agreement. in fact the president has been clear and we are working well on a bipartisan basis to try this calendar year to see if we can get tax reform done. i think there is a chance for a broad business tax reform that would include both domestic and international. >> is to be within the orbit of trying to get some highway. >> if you do this right, it is deficit neutral over the long run. it actually would produce real savings in the first decade and we are to use the savings toward something i think all business people would agree is a critical

need in this country. we would increase spending by 40% think it a six-year reauthorization to the highway trust fund. we've done a dozen different short-term extensions. anybody who tries to plan, you are planning your business lives. think about a governor trying to plan infrastructure investment with months at a time extension for the highway trust fund. >> how active are these discussions? >> i think the thing to watch for chemotherapy discussions happening and particularly as the trade debate has been front and center and move to the next big issue it's going to be around corporate tax reform where we can have bipartisan cooperation. if you look what is going to happen with the highway trust fund there is an extension until the end of july.

the hope is negotiations around a basic framework over the next couple of months. and then an extension of the highway trust fund through the end of the calendar year to give time to really put together a comprehensive package. >> there's so many plots playing out at the same time. we have the trade that involves the coalition, that overspending and sequestration. i have a funding bill will. then they will be at the end of the fiscal year some possible shutdown. even in that setting you can move forward on corporate tax overhaul. >> sometimes bigger is easier, not harder in washington. if you pull together tax extenders, if there is some budget deal at the end of the year at business tax reform, they get this done together.

a hard thing and this goes to the answers we saw. everybody agrees we can bring the corporate rate down as part of the president's proposal that we can make the tax code simpler. the problem is one of your making the task is the employer is taking away somebody else's benefit in the tax code. it is really when the rubber hits the road on the provisions you are going to be eliminating to get the simplification that the politics get tired. i would say to your audience, to all of you here if you believe this is something we have to do as a country, we all have to stand up and be willing to give up certain tax breaks that may benefit if narrowly in terms of a particular industry a particular product for the larger good, which is to get a simpler tax code in a lower rate and that really is the goal. not easy. that is where the rubber hits the road when they start talking

about the talking about the specific loopholes the specific loopholes that close to what provisions we get rid of that will pay for love or integrate. >> utah today and a lot of times in the past our debt to gdp is something like 74%. the norm before the recession was under 40. the hope is to get it to something like 70. >> that is if we do nothing. the president's budget that takes' budget that takes staff within a's budget that takes staff within a 10 year window would put it not just a stable path and then bring it down significantly further than the subsequent decades. a couple things we have to recognize. even cbo numbers are substantially better than they were a few years ago.

bias that? health care costs are growing slowly. if there's a single driver on the cost side for important than the deficit picture is hot deficit costs. with the affordable care at with health care costs overall than the slowest rate in 50 years has made a huge difference. in the year 2020 we expect to spend about $200 less on federal health care expenditures than expected a few years ago. that is how dramatic just a small change can be in terms of those costs. there's a lot we are experimenting with they could pay huge dividends and breakdown the debt dramatically in the carter years. we also have to recognize the population is aging and we have too few workers per retiree with the baby boom happening.

immigration reform is one of the most powerful things we can do. we bring down the deficit by trillion dollars over 20 years and that's a critical step we can take to rebalance demographics. >> i was hoping before we get some questions we might talk about the whole mention of cfo and maybe some interesting advice for the audience. in the meantime we have one other audience response question. it will overlap a tiny bit schematically. if you could change one thing it would be and will have to wait and see. see if we had the time down here. the bipartisan budget process. cut the federal deficit, reduce overall tax rates.

strong desire for that. >> code. help us get a deal done this year. that would be great. >> again the federal deficit came in a distant fourth. that is interesting. i don't know whether you withdraw a direct correlation between the way you have to deal with beauty and interest within the rather large federal government. to come up with the budget to craft a budget on people in the room dealing with the equivalent of a debt ceiling by the end of the fiscal year and sequestration. i'm interested in what advice you might part from your own experience on working with these kinds of conflicting interests to make it all come together.

>> so i think one of the most challenging things i see as models and experience in the public sector but i actually worked for mike bloomberg in new york city as the house commissioner gary slough, which is an interesting joint experience in some ways. and private sector experience before that. what is often a challenge i see particularly true here but it's true of the private sector as well that i think it is easier. it is certainly not easy and budget math, but it's easier to show that the financial bottom line is. what are we spending but our tax rates? it is much harder to have a clear picture of what we are buying. if my job is to get more bang for the buck we are pretty bad in government but lots of places of measuring the bank.

what value are you getting for the money you're spending. one of the things i've really tried to do throughout my career in the public sector. under the numbers guy to figure out how you measure performance in the way you can link the financial picture. i thought that was a real challenge in the private sector to look at productivity and think about your workers, what they are producing, what does that product quality mean. if that is hard in the air it's particularly challenging in the private sector. i don't think we know what success looks like. be clear creating measures around not. it is not alone going to solve this. we have a fiscal deficit but we also have a trust deficit. if we can show what it is we are producing, whether we are

accomplishing their mission, will it get past some of the partisan. >> if you can highlight one area for some sort of deliverable what would that be. >> i would take an example that i worked very closely on. when the president came into office veterans for a 50% more likely to live on our streets to be homeless than the average american. there is broad political consensus that we shouldn't have folks who have served our nation in the military, stripping on our street. broad agreement. the problem was we didn't have a clear set of solutions about that. i work at the range of folks across the federal government. we put something together

,-com,-com ma a process where every month they meet with the most senior management across the government and we look place by place to where we were chatting down the numbers of veterans on the streets can the streets, getting them housed. and for years they produced veteran homelessness by a third street homelessness by 43% in four years. that is real progress and what is happening is congress is brilliantly putting money into veteran homelessness. there's other examples like that were a few can be very clear about what success looks like in looks like an escher looks like an escher print wirelessly and show real progress, you can build some sense of bipartisanship. >> i don't know if there are folks we can certainly turn. i don't know if there's questions from the audience. >> let me ask you just in line with what deal was pursuing, it

is interesting to hear you talk about creating the metrics by which you can measure success, the bang as he put it. how do you rally very dispersed large organizations, large organization like a windy, which is representative trying to consolidate their thinking on the budget of the nation of a national government or hug. how do you rally all the diverse styles about how the money can be spent around a budget in one direction. understandably, this makes a lot of decisions a lot of decisions and you got to go back and say there's money for that and they would refund their ideas. if you are in the business of doing something along the lines which is trying to create consensus within an organization that is compelling legitimate

claim, diverse claim on the money. how you do it? >> will look, first there is no substitute for actually creating a process where people have their say. but i also think of this goes back to the point i was making earlier. my general experience has been if somebody understands the reason why you are making decisions, if you say look we will not put our money back into the program and here is the reason why. it is not producing results in the same way this is. hear them out. but then the part of the process exciting. what i have found is if you have a clear way of saying here is why i make this decision and here is the evidence, then it's going to be a lot easier to

create consensus and if they're not happy to wipe out from the table understanding why the decision is made and do something about it. i can take my program and try to make a better or try to improve it in ways that next year i will have a better shot. the problem in washington is often that has got to fight against the retail nature of politics, folks focusing on their district rather than the president has tried to bring the sense of focusing on what works. we are going to drive money towards what works and show clearly that is how we make decisions. what i found that will not create perfect incentives but it will make it easier to get by and from a diverse set of folks across the administration. you've got to say no a lot in

the omb job. i'm sure you all a cfos do as well. having the ability to point to something and say here's what i'm basing my decision making on permit the object to focus on our mission makes a big difference. >> a lot of this was resolved in the past or has been resolved politically. does this suggest omb is adding to the machinery of analysis that you can get a range of programs presented to you in detail work groups on each of those the way that the cfos knight for divisions of their company? >> that is exactly our role. we are the analytic infrastructure. we have the beef or budget. we also have the time for management. we've created a performance that infrastructure called the agencies of government.

we have priority goals that each agency is required to set that we are tracking and linking that to budget information to get. >> that's always been the role as programs expand. does the omb have the capacity to deal with the ever-growing demand for that analysis that might've otherwise in the past been handled. >> look, it is fair to say that we can only focus on a share of those decisions. part of what we do is create a similar proposal within agencies to build the analytic capacity within agencies to performance management be an important part of what agencies themselves are doing so doing it ourselves, but not just -- this is true adversary out where we are

seeing now is the judge and jury, we are going to be less successful. if we can build a culture inside agencies come up with a better chance of actually building not trained to do it ourselves but building it across the federal government. >> questions from the audience. >> so one of our critical responsibilities is to make sure resources are spent appropriately and there is no fraud. so not to put you on the spot. i know you are new. who should we look to the government to do that for us? when you look at medicare covered billions of dollars of fraud now beating themselves in the chest because they post this publicly. for go after the most egregious fraud. by win back the night before. i saw something recently that

half of all disability claims for government employees are overpaid. look at things that the irs courtesy hangups when there's half a million hours allocated a year for lobbying activity. a lot of sa who represents us. who is making sure there is not fraud and making sure there is good value as we negotiate with the people who work there. i know it is a tough question. >> i would say to some extent everyone needs to be responsible for that in there needs to be accountability for it and we do have a system of inspectors general and other agencies like the general accounting office which try to create accountability around that they are constantly auditing, going in and looking out at where their problems within government and agency specific basis and across. we do a lot of work with the

organizations to make sure finding the individual problems around those things are connect it to a broader picture. is there a systematic or structural problem we need to take on. part of the problem is that you are not going to hear stories about where we met progress. we have a culture of the media particularly focusing on where their greatest problems. very clearly what you will see as is this more than an anecdote. what is happening overall? are the example is increasing, decreasing. one of the things and as you said it had omb about a year but something that had worked on extensively in overall across the administration or improper payments rate has gone down substantially across the six years of this administration.

we do measure. we look at the programs that are the most older what a fraud. we measure consistently voted the improper payments that go out and what are the things we are doing to stop that. we have seen significant progress in many of those areas. one of the problems and this is the frustration and the frustration of good process can work in d.c. you mention the irs. 40% of taxpayers are having their questions answered timely when they call in because budgets have been cut so dramatically for the irs. the irs commissioner has been very clear he has been doing what he can to improve the service that there's only so much you can do without the resources. it is getting to the point where we've had to cut back on again dramatically and we can show

that there's tens of billions of dollars that we are unable to collect. we basically shoot ourselves in the foot on a fiscal basis that we are not investing in the things that allow us to measure fraud go after folks cheating the system and ultimately if we don't have a tax system we can rely on in terms of enforcement that is a serious problem for the country going forward. one of the biggest concerns is the resources that allow us to go after fraud particularly on the tax side. >> other questions? >> i could ask a quick one. we haven't really brought up the hold debt ceiling and that limit issue. i think you'd feel better that it's now kind of pushed out into n-november territory. >> the deficit has continued to come down. we now expected to go longer. >> we were headed at some point.

do you foresee that has been a real problem in the impediment again and we seem to quite a few times to get congress to approve a raising of the debt ceiling? >> if there is a most basic task that congress has, it is to protect the full faith and credit of the u.s. government. i don't have to tell all of you that a default on r..would be catastrophic for the country. the president has been very clear. this is not something to be negotiated with, taken as a hostage. we have heard encouraging words from the leadership on both sides of the aisle, republican and democrat that we should not play politics with the debt limit. all i would say if it would be

deeply responsible for this to be the very first congress in our history to let us go over that cliff to push us over the cliff's and we are certainly not negotiating over the limit. they need to do it without any conditions. >> thank you very much. >> thank you. [applause]

>> omaha had a reputation in the african-american community in al maha in the united states that if you came in that if you came in with your bike in a bid to keep your head down and be aware you were going to be served in restaurants and you were going to san hotels given the club began their operation, the idea and effect the terms of a raise because it was then a part of the national lexicon at that time. the idea of civil rights was so far removed from the idea of the

greater community of omaha or the united states that they were operating in a vacuum. i like to say they were operating without a net. there were support groups that were not the prior experience is of other groups to challenge racial discrimination and segregation. >> union pacific is one of the probert b-bravo companies of america. it was founded in 1862 with the pacific with a bad sign into abraham lincoln. it combines several private companies to make union pacific and then they were charged with that in the transcontinental road that connects the east and west coasts. they started here moving west and central pacific starting on the west coast and then met up in utah. that is really what propels this even further.

they become the point of moving last, one of the gateways to the west. >> and we are live this morning at the american enterprise institute for discussions on the unfolding debt crises in greece and puerto rico and what impact it might have on the eurozone and the u.s. economy. live coverage on c-span2 just getting under way. [inaudible conversations] ..

>> it's my pleasure to welcome you all to our conference on "a tale of two debt crises: is puerto rico america's greece?." as many of you have told us come it seems our timing for the congress was pretty good trick and i need remind you current events, headlines and debates make us quite timely. we have the prospect for twin defaults come online from the "washington post" this morning of course closing greek banks weekend runs on atms news photos of the bank run stand in front of an atm. the governor of puerto rico

publicly saying the government's debts are not payable. and speaking of a debt moratorium. lots of debates about possible bankruptcies for puerto rican government entities or financial control board be imposed of a new depreciated currency for greece, or as my send to my friend desmond has called, and exodus for greece from the euro for the credit downgrades and all enough to keep us busy thinking about this. there is some entertainment and comic relief as part of this. since rating agencies and officials have announced that the default by greece on that regardless would not be a default. at least it wouldn't be called a default, and we have the president of the united states and the secretary of the treasury urging europeans to

find an agreement. i'm sure they really appreciated those helpful urgings. then there is the sober truth which is not troubled borrowers can keep going as long as the lenders keep making new loans, and the new loans go to pay the interest on the old ones even though nothing is changing except the dead is getting bigger. when the lenders stop lending more, it is a the end of the extent and pretend game. in my view, both greece and puerto rico are fine examples of debt-financed to govern centric noncompetitive economies which in margaret thatcher's wonderful phrase have now run out of other people's money. let me share a quotation with you all.

the history of greek borrowing is to live constantly beyond its resources, this begins. it continues, the debt burden was plainly beyond greek capacity and but for a long time they found new debt to furnish funds to pay the interest on the old debts. however, this came to an end. the greek government then declared that pending further negotiations it would pay only 30%, the interest on its debt. for four years the creditors committees and the greek government engaged in stubborn negotiation without issue. finally, on the initiative of the german government provisions were written into agreements whereby greece entrusted to an international financial commission, the duty of controlling the revenues set aside for debt service. however, greek opinion was profoundly hostile to this arrangement. the record says this author has a reputation of the earlier history.

this was all written by herbert flights in 1930 describing events in the 1890s but, of course there -- they are remarkable appropriate for june 30, 2015. both greece and puerto rico in their government accounts have shown a notable ability to accumulate debt. the are too many numbers on the slide, i know, but if you get a chance to look at it on the website that shows the biggest 10 u.s. states by debt including such notables as illinois, and compares it to puerto rico, and then converts this to per capita product and per capita debt. and we find that the average of the 10 biggest state borrowers at 21% stated municipal debt to gross product were as puerto

rico at 69%, remarkable three times the debt burden of illinois. when i showed these number to our collie, john mousseau, he said yeah but the puerto ricans don't have to pay federal income taxes so they can pay more to service their municipal debt. nonetheless, there is a huge level of government debt in puerto rico. as of today, something for greek and puerto rican government have in common are standard & poor's, and with standard & poor's on the panel, so using the ratings. they share ratings of triple c- with a negative outlook for the government of greece, and triple c- with a negative outlook for the puerto rican government. of course, when you have a negative outlook, there's one step down is default of various kinds. and it is important always to remember that although people talk loosely about the death of greece and the debt of puerto

rico, in all cases of this kind we're talking about the death of the government. it's the governments of debt that is at issue. and in these cases it all boils down, ladies and gentlemen to alex pollock's law of finance, which is loans which cannot be paid will not be paid. so the debate therefore is really about how to divide the inevitable losses among the parties. and for governments in particular it's about how to obscure the losses which are being taken and to keep the public confused about what's going on for as long as possible. now, our expert panelists are going to enlighten us further about the past present and perhaps the future of these two broke big time government borrowers. let me introduce them in the order in which they will speak.

first david hitchcock, senior director at standard & poor's and desert west primary analyst for major states and for the commonwealth of puerto rico. he's been with standard & poor's for 35 years which means using a lot of debt crises in that time, as have i. date this bastion of municipal analyst group of new york, served on the board of the national federation of invisible analysts at the comptroller general's advisory council on government auditing standards and received the first impulse tora bora for credit analysis of states in 2014. next to the john mousseau who is over 30 just investment management experience and is executive vice president director of fixed income and portfolio manager for municipal bond investments at cumberland advisors. he's a member of the national federation of municipal analyst, a new york society of security

analysts, and his writing -- his writing has appeared in the bonfire and "the wall street journal" and the new times and he was last with us on this panel to discuss the bankruptcy been living of the city of detroit, and we welcome them back to discuss discuss some more complex and interesting issue. our third panelist as my colleague and the co-organized this conference, desmond lachman who specialize in the global macroeconomy, exchange rate policy, u.s. housing market and multilateral institutions. previously managing director at salomon smith barney in deputy director of the international monetary fund. desmond has written extensively on the global economic crisis, the dollar, the strength of the euro area and on the greek debt crisis in particular about which he has been an unrelenting and correct pessimist. next will be bert eli who's been a consultant, prominent commentator on banking issues since establishing his own

consulting practice for years ago. bert special analyze conditions in the banking sector and we've asked him today to include his views, the banking systems of greece and puerto rico. in his remarks. byrd has often testified before congressional committees and has interviewed by them into a regular basis and he often attends conferences at aei and is a prominent questioner of the panel. but today he will have to answer your questions. our final panelist will be whitney debevoise -- it's hard for me not to say that the french way -- was a senior partner at arnold and porter, which we join in 2010 having served as u.s. executive director of the world bank from 2007. whitney's expense includes brady plan restructurings at the end of the 1980s mobile debt

crisis. and get restructurings in belize, greece to argentina numerous privatization. we showed some of those coming along out of these debt problems. as well as eurobond by nancy. is written extensively on securities regulations debt restructuring, international banking and sovereign immunity. we're delighted to this truly knowledgeable and outstanding panel with us today. now come each of our panelists will speak from 12-15 minutes. after that we will give them a chance to react to each other or to clarify points that they have made. after that we will open the floor to your questions and we will adjourn probably at 11:00. dave, you have before. and thanks for being with us. >> great.

so as it turns out when you talk on puerto rico increase your to be very quick on your feet. i supplied new slides yesterday afternoon to the panel here updating greece, but i could not at that point update the slides for puerto rico. so already one of the slides is out of date, having passed about 12 hours. so let me start. i just want to make a disclaimer. i am a puerto rican analyst for a not an in depth expert of greece that i be happy to connect you with our greece team but i am passing on the comments to our sovereign group. i've been asked to talk about similarities between puerto rico and greece, and differences.

and so well, the first thing is we look at different criteria. i just want of a disclaimer. we are not using exactly the same criteria. so when i point to the metrics it's not necessarily weighted the same or even evaluated the same from one to the other. once a character of the u.s. the other is a sovereign nation. however, we also have additional criteria in our ccc category, which reflects short-term factors to short-term liquidity and they both come in under that and, indeed, the triple c- probably reflects the timeframe that we're looking at over six months for potential restructuring. and also point to some other longer-term trends. so this is still accurate because their criteria doesn't change. you can see within the ccc

criteria we have different gradations with a plus or a minus or without either. and so the ccc plus which we have all the was on credit watch negative until yesterday basically reflects that we don't have a clear path identified for a debt default or restructuring. a triple c- on the other hand indicates that we feel that is essentially going to happen within the next six months. for ccc+ we are looking over 12 months or longer for potential restructuring, maybe not a specific path. the ccc, we see a likely default within 12 months to six months particularly with some of the governor's comments in puerto rico yesterday. we believe that there will be

some sort of restructuring within the next six months that's nearly inevitable. so i guess i can go through pretty quickly this slide the actual i will read a little bit a couple of the ballpoint from our release that actually came up this morning. so basically we feel that default, distressed exchange retention of the commonwealth that is inevitable in the next six months, something unanticipated. we believe that the report that came out yesterday was released yesterday, it was commissioned by puerto rico people refer to it as the kruger report but it actually does have a formal title, the embrace of the by the administration in puerto rico indicates in our view that they

will pursue some sort of debt restructuring. the governor said something to that effect last night in his address to the commonwealth on television. and so we do it is our understanding that puerto rico has adequate money to pay its debt today and on july 1 and that it intends to do so and that we are not aware of a particular default that's being planned. however, we do believe that they will pursue a restructuring of some sort shortly. in fact, under current projections we believe that they will have to. typically puerto rico has needed to sell 1.2 billions of extra cash flow notes within the fiscal year which ends june 30. they typically get most of the

revenue towards the end of the year, particularly when the income tax comes in and they need cash flow financing in the fall. so while they might pursue various measures to boost their liquidity in the short run and bills have been introduced to tap the retirement funds or the state insurance funds before liquidity purposes they might sell trends, for example, to the gdp for liquidity. we believe that even those with a relatively temporary. and in our opinion come this fall or perhaps earlier they will have a very severe liquidity problem. which is within our six month timeframe. so that's puerto rico. this slide which i updated yesterday is still accurate. and it's got some pretty small pipe come but basically we feel

that greece is going to come for political reasons, prioritize payments other than to debt holders, and that it's a relatively inevitable that there will be a restructuring in the short run. at one point greece was rated lower than puerto rico but we feel with a six month timeframe encompasses both ratings at this point. so let me talk a little bit about order because pressure points. so first liquidity. they really need the market access as i just talked about particularly in the fall to carry them through the fiscal year. without that they'll have some severe issues on liquidity. and then there's some longer when issues. in the background, i'll get to the economy but both greece and puerto rico share a declining

economic trend which brings these issues to the floor but we should all bear in mind that these short-term issues are the result of a long-term trend which is underpinned primarily by economic weakness. in particular the pension system for puerto rico are at risk. they been underfunding them for years to they can afford to fully fund them on an actuarial basis. i seen some commentators point out the fact an actuarial basis they have no assets in the name employees retirement fund and expect payment to boost. that's not quite true because they sold some pension bonds a few years ago and they can use the cash for the. so they can actually pay on a cash flow basis engineers is negative unsure assets -- engineers -- which is what we would expect in the short run. but that can only last so long. we do expect that when that's exhausted to go to another

system and they will have to substantially boosted their payments into private system is there to fully pay promised benefits to pensioners. health assessments large projected deficits in the next few years and that's driving actually some of the biggest part of the out year gaps. that were projected and report that came out monday but we have been aware that for some time. and some of that is they are frontloading some of the payments they got from the federal government under aca and they will exhaust those in the short run would resort it into fiscal 2018, out years we see very large gaps to start to approach the size of the revenues they are projecting. so that would appear unsustainable. the debt service does increase perhaps not as rapidly as these other things i'm pointing to in out years. there's increased in general

fund debt service before they get to the general fund a lot of the press reports that they don't take into account when you look at the increase in general fund, kind that there's a sales tax which takes money off the top forgets to the general fund that have a lot of debt to take us up about-4% a year. although they have lowered operating deficits they are still having ongoing operating deficits. they are projecting this year and the last disclosure statement about 191 million operating deficits for fiscal year 2015, even though the 2015 budget was balanced on paper. we feel there's operating intimidation risks. even if a 2016 balanced budget is enacted on paper we feel they're still implementation risks. i can get into some of those details of that on the panel discussion gets into it but there's a number of reasons and certain things they did in

fiscal year 2015 that made it a little bit worse. as i alluded to before, underlying all this is the economic performance. it's been stagnant. basically the last couple of years there hasn't been will much decline but rather than much growth. a small decline on a real gdp basis. before that there was a bigger declined after some federal tax breaks fully phased out in 2006 but the operating deficits and their budget actually started around 2000. this predates some of that and that's partly because some of the federal tax breaks started to phase out before 2006. and maybe i should just clarify. the federal tax breaks, where federal tax breaks for manufacturers from the mainland that located on puerto rico those primarily pharmaceutical manufacturers are very high value wage industries.

so to the extent that those decline, even though they are a small amount of employment, as a big impact on the gross domestic product. so here's some quick points in comparison with greece. first of all puerto rico is a territory within the u.s. government. they have a nonvoting representative in the u.s. house of representatives but they can't even vote in the u.s. congress. greece is a full member of the euro area. puerto ricans have labor mobility within the u.s. there's been an exodus actually i call it a brain drain out of puerto rico to come to america for employment. that is labor mobility for greece within the eu. in terms of currency, puerto rico doesn't have control of its own currency. they use the u.s. dollar. whether greece has control about at least to have some representation at the bank but

we feel that the greek economy isn't very well synchronized with europe as a whole. fiscal transfers of big point of difference. about 24 25% of personal income and puerto rico comes from fiscal transfers from the u.s. government. the biggest fiscal transfer is social security but there's also medicaid, medicare food stamps, veterans benefits, and the things in it. so that provide some support. and for the more if you think about it, within the u.s. federal system, u.s. citizens don't really care if new jersey pays more than alabama into the federal government. there's not a huge groundswell of opposition necessary for making payments, transfer payments into puerto rico.

reese, on the other hand gets very limited fiscal transfer custom transfers of your -- greece. okay. in terms of economic growth or decline, puerto rico has had some periods of decline but they are not nearly as much greece from 2010-14 top of the head double the decline of puerto rico. in terms of debt, it's hard to look at. we look at debt ratios generally when we look at states not including underlying municipalities electric systems, enterprise systems some have been supported by the state general funds. and so some of the numbers that we saw in the earlier slide i might take issue with actually. you can look at it different ways to make it comparable to greece. it will be a little tough. if you look at overall electric system everything in it is

about 69% of gdp. if you look at simmer to a look at that state and argue it would be closer to about 40%. but for greece, this is just the end of 14. i have net debt about 172% from over 180% now. incomes in puerto rico a lot higher than increase but still low. by u.s. standards. and then lastly we look at the impact of a default. why there may be more dead in greece, you could say that its government help and maybe there's less impact on the debt markets as a whole whereas puerto rico that is privately held. now hedge funds are on a major share may be less willing to give per se in negotiations with puerto rico. they are going to have to negotiate if is a restructuring. and so perhaps there could be a greater impact on the u.s.

market. and so i think my time just ran out, and i will pass the baton. >> thank you very much. john. >> thank you alex. good morning. my role at cumberland in terms of managing bond portfolios is really driven by two things. returns on investments of course and preservation of capital. so when i view things in puerto rico and tangentially i disagree success it has impacts across all bond interest rates as we saw yesterday i'm doing it from the perspective of risk-reward capital preservation. entity go back basically -- if you go back a year as records

ago to the end of august 2013 this cover started the run on puerto rico debt and applet of yield we have seen since. it isn't the problems were not known before that. they were. most of the bond market knew that. what you had was dave mentioned at the end of his piece there, was that you had it tax exempt bond market here in the u.s. broad participation by retail investors in order we could. because of the double exemption from it free from not on federal taxes but state taxes in all 50 states. so not only did you direct retail ownership, even at large retail ownership across the meaning of immiscible bond funds that don't puerto rico debt. when the barron's article hit immediately you started to see

so often in the puerto rico bond market and outlasted right through the following january, january february competitive has kept it going since. so you started to see selling of bond funds until market the loss liquidity. we are going to look at some of the bond yields in the second, but this was the match that lit the fire. looking at cofina, this is a sales tax debt and you can see it's jumped up even higher than this yield now. we will see some charge. one of the great things as alex savidge at the beginning of this, coming on board on this day when both puerto rico and greece hit the fan over the weekend, you take the deck of cards and all the presentations filled them up in the air and see what you have left. kofi net debt traded at very low

levels for many years and even after -- cofina -- after the first appearance pc. the reason for that was that the cofina and that was always seen as being able speed is about the green line? is about the yield statement is the green line right. the green line. you can see that timelines on it as you go into january of last year, it jumped and, of course this may and june it is jumped. if this were updated you would see it even higher up in the 14% level. that there is come is that, and we think this if i could happen is that puerto rico is going to try to essentially grab a sales tax revenue and claw it back to the commonwealth. whereas bondholders have always expected that they get first claim on the sales tax. we will see whether this