Bloomberg. It is now a little bit more than one year since you were elected. Lets begin with your noisy neighbor to the north. Donald trump. At the moment, mexico has 20,000 National Guard on the border. You have also since taken in 20,000 asylumseekers that come to mexico who would otherwise be in america. Today, secretary of state pompeo said mexico needs to do more. When you look at america, do you see it as an ally or bully . Pres. Obrador he is an ally. We are not betting on politics of force, authoritarianism. We think of the solution to the problems. We do not think the solution to problems should be through coercion. We think of cooperation for development. That is what we are for. It is indispensable to have a Good Relationship with the United States because of friendship, trade, commerce, and geopolitical relations as well. We have 3180 kilometers of order with the United States. If we were in any european country or south american country, perhaps we could have a different type of relationship with the United States, however, we are neighbors. This neighborhood makes it mandatory for us to understand each other. There is Nothing Better than politics. That is what politics were invented for, to avoid confrontation. We are convincing, persuading, saying the best way to face the migration phenomenon is through the cooperation for development. That is being able to help Central American countries. We are also able to support mexico, for mexico to be supported as well, but mainly Central America, so we could promote productive activities for there to be jobs. Many people do not know the biggest flow of migrants, the highest number of people passing from mexico, they come from Central America and from variouss, due to circumstances, are going through an economic crisis, lack of job opportunities. There is violence in those countries. Migration from mexico to the United States as fallen, and it will continue falling increasingly with time. What we have been seeing in recent times is growth of Central American migration. So, then what are we recommending . Development. On friday, as you know, guatemala agreed to a Safe Third Country Agreement to deal with those people you were talking about. It will now, and people from countries like honduras or el salvador seek asylum, they have to seek asylum in guatemala first, rather than going to america. Would you ever let mexico agree to the same . Pres. Obrador we wouldnt. We are enforcing a program to reduce the number of migrants, with protection for those coming into mexico through more surveillance systems, according to our legislation and also protecting human rights, respecting the human rights of migrants. And, yes, we have mobilized the National Guard because it was a necessity. We already had that planned since before the threat of terrorists. We are now dealing with the problem of insecurity and violent through the creation of this National Guard. Because before, in the constitution, we were not allowed for the navy and the army to participate in Public Security work. So, we went through a passedutional reform, almost unanimously by all of the Political Parties of mexico. The National Guard may constitutionally help us control migration flows with human righst. The results have been good. Although, i insist that the best is to look into the causes of this. People do not migrate because they want to. They do it because of need. I have a dream that i want to turn into a reality. The day will come during my administration in which mexicans will not be going to work to the United States anymore, because make its because mexicans will have work and they will be happy where they are born. John when you were interviewed by bloomberg in 2017, you accuse donald trump of having a campaign of hatred against immigrants. He does not want mexican immigrants in america. Do you still believe that . Pres. Obrador i think that. As we normally say, he has been doing a lot less of that now. When i was in the United States, this was a different discourse. It was more of an antimexican discourse. But now President Trump is more , moderate. John more moderate with mexican immigrants you think . Pres. Obrador yes, yes. This is something noteworthy. We are grateful to him for that. John do you think it is the Interest Rates are now problem to growth . They are too high . Pres. Obrador yes, but im respectful to the autonomy of the central bank. John can we look at the mexican economy . You have talked about the mexican economy. You are doing very well as president. Approval rate, but in the end, a lot depends on the economy, and you were hoping for the economy to grow at 4 . This week, there are worries it may go into recession. You can see Consumer Spending is not very high. Industrial output is not very high. Do you think mexico will go into recession this year . Pres. Obrador no. We are doing fine. We are doing fine and doing well. The economy is not growing where we want it to grow. But, on the other hand, there are no risks of recession, and we have other indicators as well that show the economy is fine. For instance, the peso has been strengthened. This is currently with the highest strength and level in the world. There are indicators like the inflationary instance. It is lower now than last year. And, something that is very important, salaries. This year, the minimum wage increased 16 . This had not happened in 36 years. The 30 six years of the neoliberal politics, 2 economic saying 4 ine this sixyear administration. Technicians may say, how could you go from 2 to 4 in mexico . Well, before the neoliberal period, for 50 years, before 1983, since the mexican revolution, since the 40s of last century until 1983, we grew at 6 a year. The year the mexican miracle in the economy, that is what we want. John can you have a mexican miracle with Interest Rate at 8. 35 . I know you have been very good with not interfering with the central bank. With Interest Rates at 8. 25 , that is much higher than other countries. It is more difficult. Do you think it is the Interest Rates now a problem to growth . Do you think they are too high . Pres. Obrador yes, but look, im respectful of the autonomy of the central bank. I would like the central bank of that is but one thing to be desired and another thing is what is possible. I would like the central bank not only to work on controlling inflation but for it to be thinking about growth as well. They are more cautious about inflation. This is not a bad thing. This is not the wrong thing to do. It is important to lower the rate to encourage growth. This is an issue i am leaving for the central bank to decide. We trust we are not going to be able to just grow but also to develop. Growth is creating wealth. Not necessarily distributing wealth. Development is growing and distributing wealth. Our administration, what it is now doing better than before is distributing income. Although growth is scarce, little growth, there is a better distribution of wealth. That is there is more wellbeing. John when most people from the left come to power, they tend to spend money. What has happened with you is you have come in and followed policies of austerity. Some of your critics say, if you want to distribute wealth, the government should pay more, and they say you care too much about the surface. That is one reason the economy is not growing, you have cut government expenditure. Do you accept that . Pres. Obrador well, that is the new paradigm. Im writing a book that will be called the immoral economy. The first problem with mexico is corruption. That was the main problem, because now, i can tell you that today there is no corruption that is tolerated, top to bottom corruption. It is a matter of reducing salaries and expenditure to increase salaries and wages and that support those in the bottom ranking levels of society. Never had so much money been allocated for the poor than now in mexico. You cannot have a rich government with poor people. We dont want the budget to be staying within the government structure. For the budget to be dispersed and for it to be transferred into resources for mexicans, especially the poor mexicans, to do this as well with no debt, without increasing taxes, without creating new taxes, in the left the idea was that taxes had to be created to be increased. I do not believe that in mexico it is necessary. I believe the fundamental issue here, if you tell me, for instance, tell me in one phrase what is the plan, i would tell you doing away with corruption. ,john what do you say to Foreign Investors watching this . Can they trust you not to intervene again in the economy . Pres. Obrador we are not going to be intervening. Mexico continues being a very attractive country for investment and there is a rule of law that didnt exist before. John there was another thing which investors worry about. They look at mexico and except you are fighting corruption. They accept you are keeping the worrytrong, but they also about the interventions you have done, which are more like leftwing ones. You came in and stopped the airport. You came in and canceled the oil drilling options. Now, you are talking about gas auctions being canceled. Is that what you say to Foreign Investors . Can they trust you not to intervene again in the economy . Pres. Obrador we are not going to be intervening. Contracts are being respected. We will not be committing any type of abuse that we are respecting, and we need foreign investment. The case of the airports had to do with corruption. They wanted to build the new International Airport over a lake. This is the part of mexico city, of the valley of mexico, that is sinking more than any other part. You can build an airport in the ocean, but it is very costly to build an airport in the ocean. Works was that all of the with risks of it sinking, with overpricing, very high pricing, or better said, a very costly a onerous project. So we said no. That does not mean stopping growth and progress. First of all, we reached an agreement with all of them. We said we will not be owing one peso to any of the investors. Whether they are share holders, those who bought the bonds, and the contracting companies, all of them are being paid. That is the first thing. The second thing is that we are going to be building the new airport and a military base have sent alysia santa lucy a santa lucia. Do you know how much we will be saving because of this decision . 100 billion pesos. John will you allow more options . Will they come back this year . Pres. Obrador yes, it is possible. Except that we have to have returns. Do you know what they did . There was a reform, the Energy Reform four years ago. They said investment would be coming to mexico. So, they gave out these contracts, 107 of them, to extract oil. They were projecting, they spoke about, and put it in writing in the considerations for the Energy Reform that, by now, we would be producing 3 Million Barrels of oil each day. You know how much we are producing now . After the contract, we already granted 680,000 barrels. Contracts, we already granted 680,000 barrels. They granted the contract. How many barrels of oil have been granted on though now . 10,000 barrels. So then, what am i telling the businessman with those contracts. We are going to respect them, honor them, and they are not going to be canceled, but we cannot convene new rounds to grant new contracts if we have no results. You,let me also clarify to that there is a plan to recover pentax production. This is a successful plan. We are already working in 22 oil production. Mex this is a successful plan. We are already working in 22 oil fields. We are sure that by the end of this year we will not produce more oil in we will recover and rescue the oil industry. John your finance minister, we understand that he wants to use some of the money from the oil rainy day fund, some of the pemexfrom that, to buy bonds, to help their balance sheet. Do you support that . That would add ability to pemex. Pres. Obrador i do not to create instability. If we use that fund, some might think there is a crisis. This may affect economic and financial instability. In this sense, i want to act in a conservative manner. There is no need to use that fund. Mexico continues being a very attractive country for investment. There is the rule of law. In the past, there was everything that was crooked. Now, it is the rule of law. Legislation, the law is respect. There is no authoritarianism and the executive branch is not the power of powers like before. The one in command in everything in mexico used to be the president , always in command, but this is not the case anymore. Although, this is a president ialist regime, we are respectful of autonomy of the legislative and judicial branches, and this did not happen before in mexico. President obrador thank , you very much for talking to bloomberg. Thank you for your time. David he calls himself a fulltime nomad, born of a german father and a puerto rican mother in hempstead, new york, he took his new phd in economics with him to asia in the middle of the vietnam war, doing research in markets largely ignored by the west. Mark mobius turned to investing after he correctly predicted a downturn in the hong kong stock exchange, and by 1987 he was running a successful business in taiwan. Thats where he was when John Templeton asked him to start the first emerging markets equity fund in history, starting with 100 million, and growing it into 50 billion over the next 25 years. Now, mobius is setting up in another new direction, taking all he knows about the fundamentals of investing in emerging markets and combining it with good corporate governance, which he sees as the next frontier in e. M. Investing. So the fulltime nomad will stay on the road, continuing to travel more than 200 days each year. On bloomberg big decisions, mark mobius. Mark mobius, welcome to bloomberg big decisions. Mark thank you. David lets talk about mark mobius. How did a young boy from hempstead, new york, become what you have said is a fulltime nomad . When did you first live outside of the United States . Mark right after i graduated. By the way, prior to graduating from m. I. T. , i had been at the university for a short stay, to study a little japanese, and i got a scholarship to study in japan. The overseas training program, it was called. And that changed my life. Being hit with this totally different culture. I had traveled to europe, but i had never experienced anything like japan. At that time i said to myself, i want to come back her i want to understand more about this culture. I started doing research in japan, in korea, in thailand, in malaysia. I spent a year in korea. I spent another year in thailand doing the survey research. Then i went to work for monsanto in hong kong. David it sounds like you started out with an emphasis on asia. Mark oh, definitely. David was it that it was that different from the United States . Mark it was totally different. The culture was different. You must remember, in those days, korea was just recovering from the korean war, and thailand, the same thing. The development that took place. The vietnam war was taking place at the time i was living in thailand. I could see what was happening there. This was all new and exciting for me. David what about the business side of it, and, for that matter, the Financial Markets side . Mark after leaving monsanto, i decided to stay in hong kong and started my own Research Firm doing industrial research. I worked in countries like indonesia, thailand, all of southeast asia. Researching things like equipment for farms, bulldozers, cars, trucks, all kinds of things. And when i was doing this private research, i had my own Research Firm, one of our clients asked me to do a study of the hong kong stock exchange. By the way, at that time, i knew nothing about stocks to speak of, except my phd had been on communication satellites at m. I. T. One of the parts of that research was to look at the Communications Satellite corporation. It was listed when i was doing that research, and i bought the stock and made some money. That was kind of an exciting thing for me, but other than that, i didnt know much about investing in the stock market, because i didnt have any money at that time anyway. So when i got this request in hong kong about the stock market, he had basically asked me, what do you think will happen in the market . It had had gone up quite a lot. I didnt know anything about fundamental research at that time. I had not read grahams book or anything like that, but i found a book on technical analysis. So i started doing analysis on the stock market in hong kong. And i noticed there was a pattern, the famous head and shoulders pattern, you know. And we were all on the right shoulder. I told my client, hey, you better watch out. Sure enough, the Hong Kong Market went down dramatically. He was very happy. I said maybe i should get involved. At that time, my company had a client who was selling snoopy toys all over asia at that time. David as in peanuts snoopy. Mark peanuts snoopy. It was a woman who had been a window dresser at Neiman Marcus in california. And she thought the idea of doing a giant coloring book, and she approached Charles Schulz to do this snoopy coloring book, and it was very successful. She asked for other items, toys, whatever, and she had a whole list. She got all the rights to the snoopy products. She initially came to me to look for manufacturers in asia. I did that, but then one day i suggested, why dont you start selling . She said i didnt know there would be a market here. We started selling for her in hong kong, and it was pretty successful. That business became larger than the consulting business. I was not really interested in it, so i handed it over to my chinese staff and joined a brokerage company, who were looking for analysts at that time. So i became a sell side analyst in hong kong stocks. David your father was german, your mother from puerto rico, so you had some cosmopolitan in you way back in hempstead, new york. Mark [laughs] thats right. David looking back, how much of that informed your intrigue with different cultures, fascination with different cultures . Mark i think it probably had a big impact. The fact that i had a spanishspeaking mother, a germanspeaking father, who had to communicate with each other in english, and the fact i was exposed to the puerto rican culture, and we went through the war, dont forget. My father was german during world war ii. He was almost drafted into the u. S. Army. He would have been fighting his own brothers. His brothers were in the german army. I think it had a big impact on my thinking. In the sense that i realized you cant have any prejudice. You have to keep an open mind. David there was a point when you gave up u. S. Citizenship. Was that hard to do . Do you see yourself as an american or a german . Mark it was very difficult to do, the procedures involved with giving up american citizenship was very difficult. I found with me living overseas and traveling to so many countries, it was more advantageous for me to be german. I could travel to more countries. It has not affected my love for america, that is for sure. I still feel a very close bond with america and because i have relatives here in america. David sir John Templeton, famous investor, found you or you found him. Who found whom . Mark it was quite an experience, because he was the person who was very analytical but at the same time had a great empathy for people. David sir John Templeton, famous investor, found you or you found him. Who found whom . Mark it was interesting how that happened. Being with this brokerage in hong kong, i was doing a lot of the sell side research, and John Templeton was using this research and very often we had to go to nassau to visit him and present the research. He got to know me and what i was doing. That is really how it came about. It was quite an experience because he was a person who was very analytical but at the same time had a great empathy for people. Plus he was quite religious and living in the keys, this enclave in the bahamas, and reading all the research, he needed people to come in and give information what was happening globally. He was the first truly global investor, but he did it from nassau, from the bahamas. He did some travel, but most of the time he was there and had people come to him and talk about research. That is what i did. As a result of that, when he was thinking of starting in emerging markets, he thought of me. At the time, i was living a great life in taiwan, acting like a mandarin, chopping all these documents in chinese. And then templeton came along and said, look, we would like you to run this emerging markets fund. David so John Templeton had made a strategic decision, it sounds like, to make emerging markets a priority for his investments. Mark yes. David what led him to that . What in his Investment Strategy led him to that . Mark he had already been investing in mexico and others, but what really led to that decision was the ifc, the International Finance corporation, the world bank group. They came up, by the way, with the term emerging markets. Antoine van agtmael was in the shower, and he thought we have to make something positive about these countries. So he said lets call it the emerging markets. They decided to start a fund, institutional funds for emerging markets. They defined emerging markets as all of the middle and lowincome countries on a per capita basis. And that included all of asia, except japan, australia, and new zealand. Included latin america. At that time, there was no eastern europe. Would have been eastern europe, china, and latin america. When we started, we had six markets in which to invest. It was hong kong, philippines, init was hong kong, philippines, thailand, malaysia, singapore, and mexico. That was it. Then we started the work to invest. Very difficult to find a way to put the money away. David as you describe it, you had a good position in taiwan. You were happy there, successful. You had a great future. How difficult was it to say, i will give it all up and go with John Templeton . You [laughter] mark it was really curiosity. Again, i am a perennial student. I thought to myself, taiwan is great. I am living like a mandarin. It is a very comfortable existence, but if i went out, i would get exposure not only to asia but other parts of the world. That piqued my interest. I thought, this is a great opportunity. Interestingly enough, templeton was a very frugal man. He did not like to spend money. When i had said, look, if we are in emerging markets, we have got to be in emerging markets, and we have got to open an office in hong kong. He was not so sure about that, but he allowed me to do that. I started with a small office in hong kong with two chinese analysts, who were still with me when i left Franklin Templeton in january of last year. And i started building up the network. The markets expanded. More and more markets were opened. David looking back now, 30 years later, did you ever envision that templeton emergingmarket group could be as big in successful as it was . Mark i had no idea. Under no conception did i believe we could grow the way we did. We got up to 50 billion. Can you imagine . We had Something Like 40 funds, in every area, we had asia funds, latin america funds, etc. It was just amazing, the growth. David it is not always a Straight Line up. Go back to 1997 and the Asian Financial crisis. How rough was that for you, or was it an opportunity . Mark it was both. It was rough. The interesting thing is when you have a bear market like that, a lot of people think, oh, you will get a lot of redemptions, and you will not have any opportunity to sell. Actually, it doesnt happen that way, or it didnt happen with us. The market crashed down, and everybody was sort of paralyzed, and it was only until you saw a recovery that you begin to get the redemptions. But we never had any problems. We were able to redeem had threeday period in which to get the money back to the people, because we had a lot of liquid stocks we could sell, but it was a big shock for asia. And it is still reverberating. I mean, if you look at the bond reserves in relation to gdp of these countries, it is very high, because they are now realizing they cant be caught with not enough on the reserves. David looking at emerging markets today, do you think they have underpriced the trade risk . I mean, it seems to be developing each and every day. Mark what we are seeing now is a revolutionary change in world trade as a result of what trump is doing. What we see is that there is going to be a movement of focus. For example, chinau. S. , big trade war, goods from china getting more expensive. What happens . A lot of that production moves to another country. So what we do is we look at countries that would benefit from this change. Vietnam, bangladesh, even turkey, egypt. These are lowcost Production Centers that can take over a lot of the chinese production. It is already happening. As you know, one event just today or yesterday where the vietnamese are accusing chinese suppliers of relabeling so that it gets shipped through vietnam to the u. S. I think as a result of this change, there will be a good chance for opportunities. I think something very important to remember is going to be positive for a lot of countries that have not benefited by the general rise in trade globally. So i dont see that as a big willso i dont see that as a big problem. Of course it is a problem with china, but even with china, they are realizing that they cannot focus only on lowcost production. They have got to move up the scale to higher technology, which they have done. David one of the side effects of the u. S. China trade conflict is the need felt by china to shore up their economy. If the chinese yuan goes down, which is one possible consequence, what will that do to emerging market investment overall . Mark if they devalue too much, and as you know they have almost gone up to seven, and they could break through that, which i think theyre going to be very careful to do, because they want the renminbi to be a reserve currency eventually, so they will be very cautious. But if they continue to devalue, that of course will not be good for the other countries that have the opportunity to take over some of this production. So this is something we have to watch very carefully. At this stage, with 10 devaluation, which we have seen, we are close to 10 , it will not make that much difference. David you built an amazing career, based, in part, i think, on the multilateral systems constructed by the United States with the western world after world war ii. In we see those systems under some pressure. As you look forward, how dependent are investments in emerging markets on a solid, international, multilateral system . Mark you are absolutely right. This is breaking down, and we have to realize china will become a dominant, if not the dominant player globally. At least in the foreseeable future. And the balance between the u. S. And china will become more and more equal, and maybe even moving towards the chinese side. But we have got to look very carefully at what structure the chinese see themselves Going Forward, what part of the structure they will play. And the rules they impose will be somewhat different of the u. S. It is very interesting to watch them moving into africa, latin america, and other countries. Of course the objective of what we can see now is for them to supply goods and services and infrastructure in order to get Raw Materials out, but these countries are going to also begin to demand a more equal trade with china, in other words, more manufacturing that they can put people to work with. So this is going to be a big challenge for china. China is going to run into the same problems that the u. S. Has had over the last 50 years in trying to go into these countries. So it will be very interesting, but you must member the chinese must remember the chinese world order will be much more different and more important Going Forward, and we have got to adjust to that reality. David you describe yourself as a fulltime nomad. So give us a few pointers here. Mark i have been to brazil, i have been to vietnam, singapore, thailand, hong kong, london, here. David in one month. Mark in one month. David you have a new chapter in your life. You have a new firm, mobius capital partners, and you have a new book, invest for good. And the two are married up quite directly. Mark thats right. David explain the theory you have Going Forward and how it differs from what you have done in the past. Mark in the past, we said what is important are fundamentals. The graham and dodd thesis. Look, you have got to look for cheap stocks that are undervalued, that are not noticed by people in order to get great returns. So that is one part of our, we call it sort of two pillars. But then we have also realized over the years that if you engage with companies, you can improve your returns. Because if they improve the corporate governance, they can also improve their earnings. If they improve earnings, then the stock price will perform better. So we decided to establish a company that had those two pillars in mind. One of course the basic value orientation. Find companies that are undervalued. The other pillar is to engage in the companies, to help them improve their governance. David we hear a lot about esg, environmental social governance, in the developed world. Not as much, i think, in the developing world. And sometimes we think it is because the overall structure of the government surrounding the corporation isnt as conducive. You dont have the same rule of law in these places. Can you develop an Effective Governance system as well as, you say, leading to environmental and social in the regimes that are less conducive . Mark youre absolutely right. There are a lot of countries that are not paying attention. But it is changing very rapidly. You must remember, as you read the principles of the united nations, the esg principles, the sustainability principles, it applies to all countries around the world. Boone the world. And a lot of countries are paying attention to this. More and more we are finding local regulations are being changed, in order to improve the environment, to make sure workers rights were honored, and that sort of thing. It is not restricted to developed countries. It is really something the emerging countries are paying more and more attention to. And when we talked to individual companies, it was quite amazing to find that they are very aware of sustainability in what they are doing. But if you go back to when we started in emerging markets, and when you think about what we looked at in companies, we really were looking at these esg factors. Because if a company was destroying the environment in some way, chances are they were going to get in trouble with the local communities or maybe even the government. If they were not treating their workers right, the s of the esg, again, they would have a high turnover, and then the governance aspect was important, because we wanted companies that would listen to shareholders and respect their rights. David there is no question that quality of management matters, that values in a corporation matter. But do they matter as much as the overall business . I learned from a wonderful businessman named tom murphy, from cap cities. I remember him saying one day, david, if you had to choose between Good Management and bad business, and bad management and Good Business, take the bad management and the Good Business. Because there is some chance you can fix the management. Because no matter how good the management is, basically if you have a weak business, you cant turn it around. Is there something to that . Mark i think there is a lot to that. Thats the reason why when we are looking at a company one of the questions we ask, what is the sector like . What is this business globally and within the country like . Is it a Good Business to be in to begin with . Are the margins good . Is the growth there . Otherwise you can have terrific management, but it will not go anywhere. Of course the best combination is a good industry and Good Management. David you describe yourself as a fulltime nomad. Give us a few pointers. I think 30 million miles you figure you have traveled . Mark in the last month i have been to brazil, been to vietnam, singapore, thailand, hong kong, london, here. David in one month . Mark in one month. David best way to get over jet lag . How do you manage that . Ark then the evening or late afternoon, exercise, then get a good nights sleep. The next day take half of one. The third day, dont take anything. By that time, you will be in good shape. David best hotel you have ever stayed in . Mark they are all so good. Recently i was at the grand hyatt in brazil in rio, and it was fantastic. It was really great. It is all about service. You know, and attention to the people, in addition, of course, to the location, but that is probably one of the best i have been at. David mark, thank you so much, mark mobius. Great to have you here. Mark thank you. David how has humor changed . Are people laughing at the same things or are there certain things you can make fun of now and couldnt . Lorne there is almost nothing i did in the 1970s i could do now. David are you ever worried there is a guest host not up to the task . Lorne yeah. David how do you coach them to be ready . Lorne you can get almost anyone through it. David what does it take to be a leader . Lorne if you are in power, everyone knows youre in a power, so don