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Update No: 257 - (30/05/02)

Dynamic economy
If one looks at the figures, it appears that the Latvians have virtually caught up with the Estonians. The GDP growth was around five per cent throughout the 1990s except for a hiccough in the 1998-99 period due to the Russia crisis. But in 2000 GDP grew by 6.6% and in 2001 by 7.6%; GDP growth is billed to come in at 5% in 2002.
Foreign investors have been seeing this as a sign of welcome for their attentions and have been bringing in FDI at around US$300m per annum. Accumulative FDI tops US$4bn.

Widespread disaffection
But all this positive news, plus the placing of Latvia on the fast track for EU entry in the first wave of enlargement in 2004-5, has not convinced the electorate that Latvia is doing so well. When asked their opinion of which Baltic state is faring best under reform and transition, over 50% plump for Estonia and more choose Lithuania than the 12% who do Latvia. Clearly, the feel-good factor is largely absent.
The reasons are not so hard to seek. Latvians are beginning from a very low base; their economy was the 10th poorest in Europe at independence and the poorest among the Baltic states. Wages remain the lowest among the three, a reason for the abundant FDI, as is the superb location as a gateway to or from Russia. The future may be very bright but the present is still grim for many, especially the old, the unemployed and those condemned to exiguous wages in the medical and teaching profession, the lower end of state employment and the sweatshops of many of the smaller enterprises.
Nevertheless, the future really holds out great promise. The communist past has been totally discredited and the EU beckons. In a generation or two Latvia could well attain the goal Putin has set for Russia - parity in living standards with Portugal or Greece today.

The Greek model
That Greece or Portugal are in their sights as having small, but successful economies within the EU, is well attested. Latvians love to go there on their holidays. President Vaira Vike-Freiberga paid a visit to Greece in late March, along with a delegation of businessmen. Then she went off for a vacation in Crete, not itself Greek territory, but of pre-eminently Greek culture. 
Greece is the lodestar as the epitome of Europe and as a country which narrowly missed communism in 1945-47, only to fall into the lap of the European Community, the true home the of the Latvians as was the Hanseatic League before in the Middle Ages and the Renaissance.

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FINANCIAL NEWS

IMF "very pleased" with Latvia's budget performance in first quarter

International Monetary Fund (IMF) representatives on a visit to Latvia are very pleased with the Baltic state's budget performance in the first quarter of this year as the actual figures are much better than was planned, said a spokeswoman for the Latvian prime minister after talks with the IMF mission, BNS News agency has reported.
In the first quarter of 2002 the Latvian total state budget had over 3m lats (5.235m euros) fiscal deficit while the agreement with the IMF allowed for as much as 20m lats deficit. 
Sanita Skiltere, a financial adviser to Latvian Prime Minister Andris Berzins, said the cooperation memorandum with the IMF for another 18 months was likely to be signed in late June. The current Latvian-IMF memorandum expires this autumn.
The IMF representatives at the meeting with the Latvian prime minister again pointed out that Latvia still had an unsatisfactory and comparatively high current account deficit but agreed that it was not critical.
Berzins told the IMF mission about Latvia's progress in the movement towards membership of the European Union (EU) and NATO, which most probably will further stabilize the economic situation in the country.
Latvian Finance Minister, Gundars Berzins, said earlier the government could make the final decision on another agreement with the IMF about further cooperation in mid-June.
Last autumn, when the IMF's previous mission was in Latvia, no agreement was reached as the fund's representatives objected to the high deficit planned under this year's budget, so Latvian and IMF officials agreed only on budget indicators that Latvia would try to meet by the middle of this year.
The IMF board of executive directors said in its latest assessment of Latvia's economy that Latvia last year had had one of the best economic performances among the EU candidate countries, but concerns are caused by the high current account deficit.
The IMF is rather sceptical towards Latvia's budget for 2002 planning a deficit at 2.45 per cent of gross domestic product (GDP), thus aggravating further the situation concerning the current account deficit.
While admitting Latvia's need to raise spending for integration in the EU and NATO as well as to pursue the intended tax reduction, the IMF officials said, however, that Latvia should set out priorities more clearly and restrict spending, especially in the election year.
Initially Latvia had undertaken in the cooperation memorandum with the IMF that the deficit under its budget for 2002 would not exceed 1 per cent.

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FOOD & DRINK

Latvia new home for Stoli bottling

Stolichnaya, the most popular Russian vodka in the United States, isn't bottled in Russia anymore. AO Soyuzplodimport, the private company that distils Stolichnaya, said it started bottling the vodka last month at its plant in Riga, Latvia's capital, after Russia stripped it of the domestic rights to the brand, Bloomberg Business News has reported. 
"We make it in Latvia from alcohol imported from Russia," said Sergei Boguslavsky, a Soyuzplodimport spokesman. "It's made from real Russian alcohol, so it's a real Russian vodka, wherever it's being bottled." 
U.S. drinkers buy about 12 million litres of Stolichnaya a year, making it the country's second-biggest imported vodka after Sweden's Absolut. Allied Domecq, the world's No. 2 spirits company, won exclusive rights to sell Stolichnaya in the United States in November 2000. 
In 2000, Allied Domecq trumped Diageo and Bacardi Ltd. to win a 10-year agreement to ship Soyuzplodimport vodka to the United States. The companies didn't disclose the value of the contract. 
Soyuzplodimport, also known by its Russian acronym of SPI, moved production to Riga beverage maker Lavijas Balzams, which it bought last year, after losing a six-month legal battle with Russia's trademark regulator and Agriculture Ministry. 
The company, which has registered Stolichnaya through companies in more than 100 countries, still owns the brand outside Russia, SPI said. 
Russian courts ruled SPI isn't the legal heir to VVO Soyuzplodimport, the Soviet-era trader that first owned the trademarks, in stripping it of Russian rights to the Stolichnaya name. 
VVO Soyuzplodoimport sold the brand rights to Soyuzplodimport in 1998, six years after the former state agency became a private company. The courts ruled the 1992 transfer was illegal. 

Major Russian brewery, largest Latvian brewery sign licence agreement

Russia's brewer Baltika and Latvia's brewery Aldaris, on 16th April in St Petersburg, signed a licence agreement on production of Baltika beer at the Aldaris plant in Riga, BNS News Agency has reported.
Baltika president, Taymuraz Bolloyev, said at a joint press conference with Aldaris president Vitalijs Gavrilovs, that the agreement provides for production of wheat beer Baltika Pshenichnoye and light beer Baltika Legkoye at the Aldaris plant. Baltika also granted Aldaris an exclusive right to sell Baltika wheat and light beers on the Latvian, Lithuanian and Estonian market as well as sell other brands of beer on Latvia's market.
Aldaris is planning to begin bottling the products in 0.5-litre bottles at the end of May. It is planned to supply Baltika products for sale at 70 trading places across Latvia. Bolloyev said this is the first time that production of Russia's beer will be done outside Russia. "As Latvia is a World Trade Organization (WTO) member, Baltika regards this project not just as a means of launching operations on the Baltic, Scandinavian and European beer markets, but also as a unique opportunity for operations by the WTO rules," said Bolloyev.
Baltika in 2001 exported 41m litres of beer or 3 per cent of the company's sales. The export volume in 2002 is expected to exceed 5 per cent. Aldaris is the largest beer and soft drinks producer in Latvia. Gavrilovs said at the news conference that Aldaris products occupy 45 per cent of Latvia's market. Aldaris in 2001 sold 75.84m litres of beer, mineral water and soft drinks, an increase of 15 per cent over 2000, and is planning to raise sales by 8 per cent in 2002. Scandinavian concern, Baltic Beverages, Holding owns 75 per cent of shares in both Baltika and Aldaris.

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FOREIGN ECONOMIC RELATIONS

London, Riga deliberate bilateral relations

The Saeima Chairman and the British Ambassador to Latvia, Andrew Tesoriere, discussed Latvian-British relations, legislation and other issues during a recent meeting.
The visit was introductory, LETA News Agency reported the Saeima press service as saying. During the meeting, Latvia's integration into the European Union and NATO, and Latvia's election system were discussed.
Latvian-British cooperation in various sectors has been developing successfully, the chairman said at the beginning of the meeting, underlining active contacts between both parliaments and Britain's support for the social integration process in Latvia. Latvia's integration into the EU and NATO will make both countries' relations even more active in the future, the chairman added.
Great Britain wishes to be responsible, react to Latvia's needs and provide assistance, Tesoriere replied. The chairman said politicians should work on not only Latvia's entry into the EU but also on informing the public because its viewpoint on integration into the EU fluctuates. The job of promoting the move to the EU and NATO is quite complicated right now because of the eighth Saeima elections in the autumn, he said. The chairman noted that after the elections, Latvia's foreign policy goals would remain unchanged.
Tesoriere wished to learn more about the bills Saeima should review and pass during the spring session of the parliament. After amendments to the constitution are passed, debate could begin on amendments to the election laws, he said. Both officials also discussed the election system in Latvia.

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