The
European Commission has given the small Baltic state of Latvia the go-ahead to
join the eurozone next year. Skeptics are concerned that might boost the
influence of the country's wealthy Russian minority.
At the
Amberpines showroom in the Latvian capital Riga, wallpaper samples decorate one
corner, a wall is covered in glazed multi-colored tiles, and a fire crackles in
a wood-burning stove set up in front of tall stacks of firewood. Real estate
agent Тamara Raine is
working at her laptop computer, answering customer requests. Three years ago,
the government gave foreigners the opportunity to acquire a permanent residence
permit if they bought real estate - which saved her agency from bankruptcy.
"When
the crisis hit, we had problems selling apartments, just like everyone
else," she says. "Latvia's Law on Foreign Investment was a great
help." Latvians were deeply in debt during those years and in no position
to invest, "so we concentrated on foreigners."
Attractive
perk for foreign investors
 |
| New vacation homes in Jurmala.... |
Foreigners,
in this case, refers mainly to Russians. As a former Soviet republic, Latvia
has a large Russian-speaking minority. Raine's business model is based on rich
Russians who buy a condominium or vacation home on the Baltic Sea in Latvia.
Among them
are Yelena and Sergei, both doctors from Moscow, who bought a home in the
Amberpines vacation village project in Riga's seaside resort of Jurmala. The
advantages are obvious, says Sergei. He and his wife enjoy the area, everyone
speaks Russian, and there is no trace of the resentment against Russians that
lingered after Latvia declared independence from Russia in 1990, when many
Latvians refused to speak Russian at all. Added to that comes the permanent
residence permit: "If we want to travel in Europe, we no longer need to go
through the elaborate process of applying for a visa."
A magnet
for Russian money
 |
| ...right on the scenic Baltic Sea in Latvia |
Critics,
however, say this very generosity that applies to all foreigners who invest
more than 100.000 lat (140.000 euros, $182 800) in real estate as a weak point.
There is concern the Law on Foreign Investment could enhance Russia's influence
in Europe, or let the country's banking sector develop in the same way as the
banks in Cyprus.
Inna
Steinbuka, who heads the EU Commission's Latvian office in downtown Riga, does
not share these concerns: "Russians can buy real estate or invest in
Latvia because we have liberal investment rules," she says, but adds the
flow of assets by non-Latvians to the country's GDP is not high. "It may
be higher than in neighboring countries, but it is much lower than the European
average. Whereas in Cyprus, the banking sector held assets equivalent to seven
times the nation's GDP, in Latvia, it's not even 1.3 times."
Euro boosts
economic growth
 |
| Latvia stands to benefit from the euro, says Andris Strazds |
Latvia is
still grappling with tax evasion, corruption and money laundering - but apart
from those issues, the EU has now confirmed that the country fulfils the
Maastricht membership criteria required to adopt the single currency next year.
Its public
debt is around 40 percent of GDP, inflation is at less than two percent and
people are buying government bonds that were unmarketable just four years ago.
Latvia also posted the fastest economic growth in the EU with more than five
percent over the past two years.
According
to Andris Strazds, chief economist for Latvia at Bank Nordea, the benefits of
introducing the euro are evident. "Studies show that membership [in the
eurozone] could increase revenue from foreign sales by ten to 15 percent in a
few years." It would no longer be necessary to convert lat into euros -
"and that means fewer expenses for the economy."
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.