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Hello, welcome to World Business Report from the BBC World Service.
My name's Ed Butler.
On today's edition, the threat of impeachment hanging over the Argentine president.
Did Javier Millet really pump and dump a cryptocurrency, as some of his political opponents are suggesting?
Also in the show is Kenya's debt story, offering a glimmer of hope for the sub -Saharan nation.
And a rare painting by the mysterious artist Banksy goes up for auction.
Are artworks like this a good investment?
When you have an artist like Banksy who is known for his shock value and sometimes cheeky, provocative, political statements that are quite guerrilla, he's maintained his mystique because he's still anonymous.
He really does live in people's imaginations.
Assessing the state of the art market later in the show.
The US and Russia have outlined their intention to build relations far beyond a deal over Ukraine.
Those are the words of both nations today.
This could extend cooperation, they're suggesting, on other global issues and develop sizeable economic and investment links.
Well, President Donald Trump has been speaking specifically about the prospects of a peace deal at a Mar -a -Lago press conference in the last hour or so.
This could have been settled very easily.
Just a half -baked negotiator could have settled this years ago without, I think, without the loss of much land, very little land, without the loss of any lives, and without the loss of cities that are just laying on their sides.
You have those magnificent golden domes that are shattered, will never be replaced.
you can't replace them.
Thousand -year -old domes that are so beautiful, you can't replace that.
The whole civilization has changed because of what's so.
When they're worried about not being seated, you mean somebody that should have gone in and made a deal a long time ago.
Well, President Trump also says he could meet President Putin face -to -face within just the next month.
Kyiv and European powers remain intensely wary, of course, insisting that they must be part of any talks process aimed at ending the war.
Earlier the Russian foreign minister Sergei Lavrov had this to say about the peace talks and the opportunities he said they offer to all sides.
Regarding the issue of which mutual understanding was reached this doesn't necessarily mean bringing position is closer together but I have already said that we have practically agreed that we need to solve the problems of functioning of our diplomatic mission once and for all.
Well, as for issues of our dialogue, there is a mutual desire to find definite solutions in international affairs and economic relations.
The words there of Sergei Lavrov.
Well, let's look at those economic opportunities he's speaking of.
For Ukraine, the last three years have, of course, been grueling, the economy depending almost entirely on the economic lifeline it receives from the US and European allies.
What about the state of the Russian economy right now.
I've been speaking about this with Alex Izakov.
He's the senior economist for Russia at Bloomberg Economics.
So both Russia and Ukraine have been hurt badly by the start of the hostilities, start of the war back in 2022.
By now, both economies have broadly adjusted.
Russia has actually expanded by 7 % relative to 2021.
And the difficulties that it has faced initially in the war have mostly faded.
Basically, the market for investment goods and for consumer goods have been in balance.
That is not to say that Russia's economy is totally fine.
The energy sanctions are shaving around 5 % of Russia's overall export revenue and inflation is pretty high by historical standards.
Right. Yes, exactly.
It's closer to 9%, 10 % they think, and it could be higher perhaps because no one's quite sure of the data, are they?
Interest rates are very high.
Inflation in Russia runs at two to three times the central bank's target.
And the government and the central bank try to bring it down by, I think, a very tight policy, interest rate policy, but also pushing back all the spending that is not directly related to military and the wars.
So fiscal policy is pretty tight as well.
So now we have the prospect, I guess, of peace talks.
We have the prospect coming from Washington explicitly of perhaps a potential cooling of the strains that have existed between the United States and Russia.
Presumably, there are huge opportunities for Russia in the event of a peace deal.
I think some of the effects of the peace deal may be immediate.
I think one of the more visible ones would be a decline in interest rates and the decline in the cost of borrowing for Russia's government.
I think some of the effects will take much longer.
So, for example, I don't think that foreign direct investments will recover, not even on the horizon of quarters, but maybe it will take many years before foreigners will be as comfortable investing in Russia as they did before the war.
But definitely the fiscal balance will be much easier to achieve for Russian government compared to now.
And there are a lot of other kind of rather imponderable aspects to this, aren't there, because of the brain drain that Russia has experienced in the last three years.
A lot of its young, most talented people have fled the country, perhaps to avoid conscription and other things.
And also there has been the freezing of Russian assets, primarily in Europe.
Now, I guess a big question will be whether those assets are to be deployed on the reconstruction of a war damaged country, Ukraine, in the aftermath of the war.
I mean, how exactly this deal plays out and what happens, who's paying for this reconstruction, I guess will be perhaps an important question when it comes to the economic futures of both Ukraine and Russia.
Yeah, for sure. So financial aspects of the peace deal and settlement will be very complicated, not only because they are always complicated, but because there has been a lot of stuff that happened to Russia's assets in these three years.
For example, Russia's central bank frozen reserves already back the 50 billion G7 loan to Ukraine.
So the revenue streams from those frozen reserves are already kind of allocated and used up.
So releasing those reserves will be challenging because they are already like a collateral for the G7 loan to Ukraine.
And you can't really see that being unpicked by a peace deal.
Is that what you're saying?
That could be unpicked, but that would basically raise a larger fiscal challenging for Ukraine's allies.
And that would require finding those $50 billion somewhere instead.
So that can be done, but it's pretty tricky to do.
And you think it would be politically unpalatable, particularly for European partners who regard Russia as a perpetrator in this situation.
Yeah, exactly. So one of the goals of that were to avoid relying on the European taxpayer to back that kind of expense rate.
And unpicking that deal would basically do that.
Alex Izakoff of Bloomberg Economics on the economics of a peace deal with Russia and Ukraine.
Now it's being called the biggest crisis of his one year presidential term so far.
Argentina's president Xavier Millais has been accused of promoting a new type of cryptocurrency.
It's called Libra. This on his social media site X last week.
He later deleted the post that he put there, but the value of the currency went on to spike before it later collapsed, leading to allegations of currency manipulation against the president.
A lawmaker for the opposition, German Pedro Jim Martinez, said President Millais had serious questions to answer over his conduct.
We are facing an unprecedented scandal in which the main character is the president of the nation.
There has been a fraud of enormous scale, which has Javier Millé as one of its necessary participants.
47 million Argentines must know whether they have a president who lets a scam happen right under his nose without noticing, or if they have a president who is a scammer.
Well, for his part, President Millet has denied having any personal link to this cryptocurrency.
I didn't. I didn't because I acted in good faith.
Somebody approaches me and proposes to create an instrument to fund projects in Argentina that is interesting to me.
Now, it's true in wanting to help those Argentines.
I was slapped in the face.
But did the state lose anything?
Nothing. OK, let's get to the bottom of this, if we can.
Marcelo Garcia is America's director at the consultancy Horizon Engage.
Hi, Marcelo. Just explain very simply then the president's contention here is somebody tweeted something at him.
He just went, oh, that looks interesting and sort of tweeted it on.
And it led to this huge market response to this rather obscure cryptocurrency.
Hi, thanks for having me.
You're right. The explanation though, that the president gave in this first appearance after the scandal is pretty feeble, mostly because he claims to be a very experienced economist, actually noble material.
So Argentines believe that he knows everything about economics.
So being scammed or not knowing what he was tweeting is something that's not very credible.
But he chose to give that explanation because the other explanation would have been that himself or somebody in his inner circle was actually involved in something that is corrupt.
So that would be a worse situation for him.
Yeah. So spelling out the claim, it's that it was a kind of what's called a rug pull scheme.
He was encouraging the unwitting investors or perhaps people who just believed in him blindly that they would make lots of money by investing in this thing.
And then, of course, immediately it gets sold off on the markets and the whole thing comes crashing down, making some people a lot of money.
But obviously, most of these investors lose everything.
Correct. And in a way, this is just to give a little bit of context, this was a totally unnecessary and unforced error crisis for the government.
Just the day before this scandal broke out, the government announced the lowest inflation number in five years in January, 2 .2 per month, which is still 80 percent annually, very high, but it's still the lowest in five years.
So the president just got himself into this unnecessary political crisis that until now, we don't know what the consequences could be.
I mean, you had Mr.
Martinez, the opposition legislator, announcing an impeachment proceeding that is unlikely to make progress at this stage, at least.
But we don't know if there will be any other revelations coming from the people other than Millet and his inner circle involved in this cryptocurrency.
There's going to be an investigation happening in Buenos Aires.
There's been an investigation happening in the United States, most likely as well, because most of the people that lost money come from the United States.
So the consequences of this are still very much unknown.
And very briefly, then, it makes the prospects of his own coalition partners, his own coalition, a minority coalition in Parliament more vulnerable.
Yes, in a way, Millet has decided politically to go solo in his in his project.
This means, you know, I know I will do well.
Argentines will vote for me time and again.
And I don't really need partners in the sort of political establishment, which he calls a cast.
So that is a big gamble.
If you triple, if you make a mistake or a false error like this, that, of course, becomes a question mark.
And, you know, for foreign investors that Milley needs to invest in the country, you know, that this raises questions about whether his political project is sustainable in this type and form of management.
Marcelo Garcia, thank you very much indeed.
You're with World Business Report from the BBC World Service.
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Now let's switch to the general markets outlook.
I'm with Ayako Yoshioka now.
She's the senior portfolio manager with the Wealth Enhancement Group in the States.
Hi there, Ayako. The S &P 500 has hit an all time high today.
I mean, it keeps hitting all time highs, doesn't it?
What's going on? Yes.
Hi, Ed. Thanks again for having me.
Yes, the S &P 500 hit an all time high today.
It was up about 15 points, about a quarter of one percent.
And it was really driven by some optimism around perhaps the end to the Russia -Ukraine war.
We also think, don't we, or are expecting any moment that the Wall Street billionaire Howard Lutnick will be confirmed as President Trump's Commerce Secretary.
Is that likely to be a popular move for Wall Street, do you think?
You know, I think it's really going to depend on where trade policy ends up.
I know I know that Letnick may be determining some of that going forward.
But really, you know, the market has been dealing with a lot of uncertainty related to trade trade policy.
So we'll have to see.
We'll have to see. But tariffs do still loom large, at least in the rhetoric of this administration, don't they?
And they they really could hurt market confidence.
Absolutely. You know, nearly half the companies within the S &P 500 have factories that are located outside the United States.
And the companies in the S &P 500, you know, generate over 40 percent of the revenues from outside the United States.
So, you know, trade policy and tariffs are really going to wreak havoc on, you know, how they report earnings and revenues going forward.
Ayako Yoshiyoka, thank you very much indeed.
Well, sticking with briefly that subject of Howard Lutnik and his confirmation we're expecting today, I spoke earlier to Tonya Evans.
She's the author of Digital Money, Demystified.
She's also a law professor at Penn State Dickinson Law School in the US.
She had some concerns about Mr Lutnik and a possible conflict of interest in the job.
We always want subject matter experts to be at the head of something so consequential and significant as a cabinet appointment.
And the cabinet has many pro -crypto appointees that sit on the cabinet as well.
What makes Latinx nomination controversial, I think, is because of the deep ties and President Trump's recent executive order that makes it a priority to have stable coin legislation.
We have two bills, one moving through the Senate and one moving through the House specifically on embracing stablecoins.
So as Commerce Secretary, let Nick will help shape trade policy and that could directly benefit Tether and other stablecoins.
The thoughts there of Professor Tonya Evans.
Let's turn now to Africa.
It has been a tough few years for many African economies since the end of the COVID pandemic with rising prices and of course, debt crises for many of them.
But news this week suggests one silver lining.
For Kenya anyway, its gross public debt has fallen for the first time in at least two decades.
That's thanks to a strong Kenyan shilling.
The country's national treasury has said that the total liabilities dropped 2 % for Kenya compared to a year earlier.
I spoke earlier to Jason Braganza.
He's executive director at the African Forum and Network on Debt and Development based in Nairobi.
I asked him what made Kenyan shilling one of the best performing currencies of last year?
We've got to look at it into perspective vis -à -vis the economic performance, but also vis -à -vis the huge cash injection that was pumped into the economy that allowed it to stabilise its currency and gain a lot of confidence on international capital markets and avoid a lot of the price volatility or exchange
rate volatility that many countries around the world we're experiencing during 2024.
There has been, you know, a lot of favourable restructions also that have taken place and repayments of its debt that has taken place that has helped.
But certainly, we were starting at a very low base.
So I think it's important to put that into perspective.
Yeah, it's a bit like bouncing back after the pandemic.
You know, economies did bounce back incredibly fast, and it looked like stellar growth.
But actually, all it was, was recovering from something pretty terrible that had gone before.
I mean, exactly, exactly.
I mean, the current exchange rate of around 129 is still very high if you compare it to before the current administration took power.
The shilling was trading close to 100 shillings to one US dollar for the longest time before it slipped all the way to 129.
Of course, COVID happened in between that.
So, you know, the shilling is still performing not so well.
Yeah. So, I mean, this is a very technical conversation about currencies and therefore debt coming down.
And what are the fundamentals for Kenya?
Kenya was always one of those kind of bright performing economies for East Africa, wasn't it?
It was one of the powerhouses of that region.
How is it doing and how its prospects, would you say, for the medium to longer term?
I think there are two things.
I mean, there's been a huge infrastructure boom in Kenya, which has sort of helped improve trade, improve connectivity.
across the country.
And this has really helped build also a stable economy and environment for businesses to operate.
The only downside to this is a lot of the infrastructure investments that have taken place in the country of the last decade have been financed largely by debt and different forms of debt.
There's private debt, there's debt from countries and debt from international financial institutions.
The investments in infrastructures like roads, electricity, energy, railway lines take time to return a positive rate.
And so whilst these infrastructure projects are really good, their ability to turn positive revenue is in the medium to long term, whereas in the short term, the debt still needs to be serviced.
And I think that's the challenging phase that Kenya is currently in, is that it's made these very good investments in infrastructure.
But unfortunately, the timeline for the return or the positive return on these investments is still down the future.
Can I just, a wider question, though, right now, given the advent of the Trump administration, the talk of trade wars, I suppose the big concern right now, isn't it, for sub -Saharan economies is that they are likely to be potentially the biggest casualties if a growing kind of global trade tension,
trade war becomes endemic.
Yes, absolutely. I mean, And I think the continent is going to be watching very closely what happens in the next few months, particularly on trade matters.
The AGOA, the sort of access to American markets from the initiative between the U .S.
and the continent, you know, a lot of people are paying close attention to see if that is going to be at risk and how that's going to impact trade.
It's an important indicator for the continent to also wake up and maybe smell that the roses aren't so fresh anymore because, you know, inward looking and protectionist policies is not something that's only unique to the US.
Of course, it's a lot more explicit and it's a lot more robust.
And so I think the continent needs to wake up and start looking inward as well into sort of building its own value chains, its own supply chains and finding ways to build value on the continent in terms of moving away from its raw commodity export dependence to sort of more intermediate and finished
goods production as well for the domestic market and not necessarily just for export market.
The Kenya -based economist Jason Raganza on a surprise reduction in Kenya's nominal debt announced this week.
Now, a rare and original painting by the mysterious UK -based artist Banksy is up for sale and it's set to raise millions at auction.
It's called Crude Oil and it has been owned by Mark Hoppos who's the founding member of the pop group Blink 182 in the UK, one of several Banksy's Banksy's that are owned by celebrities.
I've spoken about this with Melanie Gailes.
She's the arts market correspondent for the Financial Times newspaper in the UK.
I asked her first to describe this latest Banksy painting, which is now going under the hammer.
This painting is crude oil vetriano, which is one of Banksy's paintings that kind of riffs on art history.
So he has painted it himself, but he has appropriated, or shall we say hijacked, Jack Vetriano's painting called The Singing Butler, which is quite a well -known, quite a familiar image of a very smartly dressed couple dancing on a beach barefoot.
And he has doctored it.
He has added two men in protective gear holding a can of toxic waste in the sea and behind them there's an oil liner sinking so one one guesses this is his point about polluting our polluting our beaches yeah polluting our beaches and as you say a bit of a departure because one thinks i suppose of banksies
typically as these sort of spray kind of inkjetted kind of images on walls primarily this is very much an oil on canvas or it looks that way yeah exactly and he didn't paint from what we know he didn't paint that many oils on canvas this was part of an exhibition in 2005 when there maybe were 10 a dozen
of these works there was a Monet I think it's called show me the Monet which is a bridge Monet's famous bridge at givani which has two shopping trolleys and a traffic cone painted in the water underneath But they were very popular.
And actually, at the time, I found out they were on sale for £15 ,000 back in 2005.
It shows how the Times and indeed the art market have changed, particularly in relation to Banksy.
So here we have an estimated £3 million to £5 million sale.
Quite often these things go for a lot more, don't they, if the publicity is right around them.
Is this a moment for Banksy?
I mean, it's been a moment for him for some time, I guess.
But this UK artist seems to kind of grow ever greater in the public imagination.
Yeah, I think it will help that this work has a famous seller, a kind of rock star seller that's always nice.
People like to buy something that's been owned by someone well known.
The market, the wider market, and that's going to include Banksy's market, It isn't having its most exciting time.
It's not boom time at the moment in the art market.
But a work like this, in fact, the Monet work that had the bridge and the shopping trolleys, that sold for 7 .5 million in 2020.
But that was very soon after, or about a year after the stunt where he shredded a painting at auction.
So I think maybe that was Banksy's peak, peak moment.
But you never know.
Maybe we're going to get another peak.
the combination though as you mentioned of kind of rock and roll Hollywood the celebrity and indeed the news value that Banksy attracts more perhaps than other artists is that significant I mean I suppose the world of the art market generally looks for these high profile sales doesn't it to to gather
attention to to perhaps gather interest in publicity around the the wider a state -of -the -art market and perhaps therefore those high -value sales that pull everything else along with them.
Absolutely. The art market in reality can be quite boring, you know, lots and lots of painting selling for lots and lots of money.
So when you have an artist like Banksy who is known for his shock value and sometimes cheeky, provocative, political statements that are quite guerrilla.
He's maintained his mystique because he's still anonymous.
He really does live in people's imaginations.
And would you be saying to people, you know, this has gone on up and up and we've seen exponential increases over two or three decades, haven't we, in the values of many artworks or the best known ones, that its long term prospects remain strong?
I think it's fair to say that Banksy will go down in history.
I can't promise anyone that this will go higher than whatever it sells for, but hopefully it will at least hold that value.
Playing it safe, Melanie Gerlis, the arts market correspondent for the Financial Times.
In case you do have a few million pounds, dollars to spare, to pay for crude oil by Banksy, It's going to be at auction through the London -based auctioneers Sotheby's on March 4th.
That's it for this edition of World Business Report from me and the rest of the team.
Take care.
