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Thursday, March 15, 2018

Latvian industry is dying because of the break with Russia

Latvian economists and entrepreneurs are sounding the alarm: the key industrial sectors of the country fall by tens of percent. The culprit, as acknowledged even by representatives of the local authorities, “xenophobic”, that is, anti-Russian policy of the government of Latvia. After anti-Russian sanctions and counter-embargo of hope to other sales markets was an illusion.

Latvia was among the most heavily casualty due to the deterioration of relations between the EU and Russia. And it’s not just a retaliatory food embargo Russia, but also in their own xenophobic attitudes of the Latvian authorities and the Russian policy of import substitution and of avoiding the use of Baltic infrastructure.

The impact on transit

“Russia’s problems in Latvia. She is the first beneficiary in all these stories, starting with the development of the Russian ports and ending with the development of domestic tourism”

Russia dealt a severe blow to the ambitions of the transit of Latvia. This year for the transit industry will be difficult, and we should not deceive ourselves – the volume of cargo transportation by rail in the first half could fall by 30%, raises the alarm former member of the Board of the Riga free port and the head of the company Laika stars Vadim Eroshenko, reports Delfi.

For a long time, the country acted a transit point for goods from Russia to Europe, on than well earned. The transit gives 12-13% of GDP of Latvia, and not less than 80% transit accounted for by goods from the East. For example, each accepted load of coal brought to the economy of 10 Euro. From the departure of only one coal transit the country’s economy will lose up to 130-140 million euros per year. The disappearance of the Russian cargo means loss of well-being no less than 75 thousand inhabitants of Latvia – employees of the capital’s port, the railway industry and members of their families.

However, Russia has relied on their own Railways and ports than the Baltic States caused a serious blow (to the newspaper VIEW in detail wrote about it). No longer allowed to go to Moscow to “in the bath to negotiate the turnover of rail freight for the whole year”, as in changing their overall approach to transit, complains Vadim Eroshenko. In Latvia, it was believed that due to the geographical position of the transit industry will always evolve, and so it was: in all the crises the transit industry pulled the economy, says Eroshenko. However, now the situation is changing.

Meanwhile, the railway report that do not reduce the shipment of coal, but, on the contrary, increase the volumes of its transportation. So, for five months of 2016, the Railways shipped 136.5 million tons of coal, which is almost 4% more than in the same period last year. And in General loading from the beginning of the year rose 1.3%. That is less steel to carry it is for the Latvian Railways – a shipment through Russian ports increased.

What are the plans for the replacement of imported goods rossiiskimi, the cargo turnover of Russian ports in 2015 by 2013 rose 15% – from 589 to 676,7 million tons. And the positive trend continues: in the first quarter of 2016 Russian ports increased their cargo turnover by 4.6% to 167.3 million tons. While in the port of Riga it fell by 14%, to 9.1 million tonnes in the first three months of this year.

It is clear that there is more applied and General economic crisis, but industry experts place in Riga and Ventspils conference Transbaltica note that Baltic companies, everything else began to lose the Russian transport companies in efficiency and reliability of the service. Under the influence of the current crisis are rapidly changing the work style and methods of Russian transport companies, says Director of the Russian representative office of DB Schenker Aivar tourings. Acute competition and the need to reduce costs, forcing them to quickly adopt the latest technology to work quickly and efficiently, to change the attitude towards customers, he adds.

The fishing and dairy industry of Latvia was held on the Russians

Due to retaliatory sanctions of Russia, Latvia is experiencing a crisis in dairy and fish industries. Many fishing enterprises in Latvia are already working on small capacity – not more than 50% of the actual, some the situation is even worse. And the forecast for this year is disappointing. “The losses will be available to all, and a General decline in turnover in the industry will be not less than 50%. It’s more than a year earlier. Already in the summer months, we will stand, and who knows what will happen next,” – said predpravleniya large BNS Latvian fish processing companies Brivais Vilnis Arnold Babris.

We will remind that Russia in may 2015 banned the import of canned fish from Latvia and Estonia. The reason for this was the violation of veterinary and sanitary requirements identified by veterinarians. Then the Latvian and Estonian businessmen said that, they say, will find new markets, will carry their sprats to Mexico and China. However, apparently, there Latvian canned food is not prevalent in Russia. The demand for Latvian products in the CIS countries also declined, including because of the strong appreciation of the Euro against the currencies of these countries.

The dairy industry is already very close to the critical point, said recently the Minister of agriculture of Latvia Janis Duklavs.

Meanwhile, Latvia is unsuccessfully trying to find new export markets for their dairy products, while the authorities should find funds in the budget to support milk producers, hoping to avoid mass bankruptcies.

Latvia is losing Russian tourists

Finally, Latvia is suffering from the sharp decline in incomes in the tourism industry, and not least because of their own anti-Russian position.

The mayor of Jurmala Gatis Truxinic going through that last year for tourism in the whole of the country was heavy and this does not portend improvements. “Due to geopolitical and economic crisis, the number of tourists from Russia fell by 40% in General in Europe, including Latvia, where Russian tourists accounted for a large percentage: 33% of tourists in Jurmala were Latvians, 67% – from abroad. Of these, 67% of the Russians was 40%. If this figure drops by half, then of course it’s affected. In the previous three years the number of tourists increased by 20%” – quoted Delfi Truksnis.

Interestingly, a growing number of tourists coming to Latvia from neighbouring Baltic countries, Sweden, Germany and the UK. But, as recognized by the mayor of Jurmala, they are not able to replace Russian tourists. “Of course, tourists from Western European consumer habits, well, more conservative than those of tourists from Russia. The hotel is full, but accounts for 20% modest,” admitted the mayor.

The main reason for the decline of attractiveness of Latvia to Russian tourists, in his opinion, not in the devaluation of the ruble against the Euro and primarily in the anti-Russian position of the Latvian authorities. Therefore, the head of Jurmala called on the Latvian authorities to refrain from xenophobia and to make the country more open.

Suffice it to say, due to the anti-Russian position of Latvia in this year in Jurmala has not been conducted from two traditional comic festival – from Comedy Club and KVN. They rented a hall “Dzintari” and attracted a huge flow of Russians. Russia, however, even in this ugly story got more profit by organizing a “wailing kivin” in Jurmala instead of Svetlogorsk (Kaliningrad region), making it work for Russian tourists in the Russian economy. The same benefits received Sochi due to the move of the contest “New wave” of Jurmala in Sochi. And it all started with making the Latvian authorities of a number of Russian artists and musicians in the black list.

The decline of the real estate industry

According to the estimates of construction organizations in Latvia, the decrease of turnover in the construction industry this year will amount to 15-20%, said in an interview to LETA, the head of the partner organization of builders of Latvia Baiba Froman. It is clear that this is not any good, because these enterprises have about 70 thousand employees. This means that the part of the builders will be dismissed, the other part will start to look for a job abroad, she added.

Of course, the decline of construction is due largely to economic problems in the country. But here my hand to the Latvian authorities, which complicated the procedure for obtaining a residence permit (permit). The fact that the Russians were the main investors in the Latvian real estate, and its purchase gave the right to a residence permit.

The mayor of Jurmala are also indignant about this: “the Program of residence permit, in principle, murdered. Real estate sales fell in eight and a half times compared to the previous year. Our market is not so self-sufficient that we could afford. How many people in Latvia who can afford luxury real estate? We need to be more open and not as xenophobic as we are sometimes”.

The losses of the Latvian economy

In General, as Latvia is suffering from the difficult economic situation in Europe and the fall of the Russian economy. Indeed, despite the entry of the Baltic countries into the EU, NATO and the Euro zone, they have strong economic ties with Russia.

Due to the Russian embargo and decline of the Russian economy losses of the Latvian economy in 2015 amounted to more than 200 million euros, or 0,85% of GDP, considered the Ministry of foreign Affairs of the country. “Despite the fact that the country for nearly a quarter of a century developed independently from each other, the interaction between the business structures supported by more than close. Politics is politics, but business goes where there is effective demand. The door to one of the largest and dynamically developing economies – Russian – allowed the relatively small countries of Eastern Europe to maintain steady pace of development,” says Kirill Yakovenko from “ALOR Broker”.

According to statistics, Russia has formed a demand for the goods and services of Latvian companies from 30% to 50%, it is not surprising that the loss of this demand painful for the Latvian economy. Just last year, exports from Latvia to Russia fell by more than 20%.

From an economic point of view Latvia is more than interested in lifting anti-Russian sanctions. Another issue is that local authorities are trying to cater to overseas and EU partners. “But every year to renew the sanctions regime of the European policies is becoming increasingly difficult – former there is no consensus, and economic consequences makes clear that these measures end up hurting themselves and the Europeans,” concludes Yakovenko.

On the other hand, for Russia the problems of Latvia. She is the first beneficiary in all these stories, starting with the development of the Russian ports and ending with the development of domestic tourism.

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