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Latvian report Latvian report
by Euro Reporter
2012-10-18 08:15:07
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Latvia needs diplomatic expansion

An increasing number of analysts and experts believe that the global economic center is slowly but inevitably moving from West to East - primarily towards the economically fast growing Asian countries, but also towards an association of leading emerging economies known as the BRICS countries (Brazil, Russia, India, China and South Africa). For this reason, the logical question arises, what active steps is our country taking to adapt to these changes and to gain from these markets? As it stands now, the economic foreign policy of Latvia, if it’s possible to use such a term, is clearly subordinated towards political interests, and focused on the European Union, but diplomatically the Ministry of Foreign Affairs of Latvia, in addition to Brussels, traditionally is trying to please the so-called Anglo-Saxons, primarily the U.S., as well as Germany, the European Union’s leading member state. Perhaps, due to excessive trust the attempts to go beyond the Euro-Atlantic space are timid and modest, linking the future plans of foreign policy and economics mainly to the West. At the same time, the BRICS countries from a theoretical concept, existing only on paper have evolved into a real political union, their leaders meet regularly to iron out inconsistencies and align future plans of action, as well as to agree on yet more projects involving new economic cooperation. Already, BRICS countries now constitute a market worth at least 14 trillion dollars, which is still growing,  but even a fraction of this market would be a significant incentive and contribution to the Latvian economy.

Unfortunately, and for historical reasons, Latvia has close economic ties only with Russia. More recently, links with China have developed, but minimal attention is being paid to other equally fast growing markets - India, Brazil and South Africa. India, with its developed IT sector, which is undoubtedly of interest to Latvian entrepreneurs, is currently undergoing an intensive economic reform and is a regional power, which in many areas competes with China, while Brazil and South Africa are the strongest economies within their continents, having not only  significant economic influence, but also political influence in their parts of the world, which means – as a result of successful economic cooperation they can become the entry point for Latvia to South America and to Africa. At the same time, our country has only a couple of honorary consulates in neighboring regions to India, Brazil and South Africa. In practice, this means that Latvia is not represented to one and a half billion people in the world’s markets! Of course, any cooperation must be mutually beneficial, and Latvia also has something to offer to entrepreneurs from these countries, including our unique geographic position, and the location at the border post of the former USSR and Europe, as well as our knowledge of the former Soviet Union markets. Unfortunately, the austerity policy implemented by Latvian governments for several years has also led to the fact that Latvian representation in many important parts of the world is limited to a network of Honorary Consuls, the latter primarily  dealing with non-economic issues. Due to austerity there are also no openings of new diplomatic missions although the benefits of long-term cooperation would far outweigh the costs of maintaining diplomatic missions, as evidenced, for example, by the opening of the diplomatic mission in Uzbekistan. Latvia has to be ambitious, find funding and set a goal to open its embassies at least in India and Brazil by 2015, which would be a strong economic and political signal to the entrepreneurs of these countries. The necessary funds are not astronomical.  According to the estimates of the Ministry of Foreign Affairs of Latvia the costs to open embassies in Brazil and India are approximately 1.2 million lats.

Hopefully, now that it is becoming more evident that Latvia has overcome the economic crisis, the funds for these purposes will be granted, and I at least  as an MP hope to encourage such a process. Granting these funds is particularly important because a number of countries which stick to the principle of parity in the matter of diplomatic missions - want  embassies to be established on both sides. One such country is South Korea,  Asia’s fourth largest economy (after China, Japan and India). South Korea is also important to Latvia. In May of this year, after several years of informal consultations, formal negotiations were started regarding the conclusion of a free trade agreement between three countries - China, Japan and South Korea. Of course, there are many contradictions among the countries of this potential economic alliance, but the market outlook is very attractive. Basically, the words “free trade agreement” also mark the second main desired direction of Latvian diplomacy after the BRICS countries.  The global economic crisis has slowed down the formation of national economic alliances and free trade zones, but the most important areas, which sooner or later (but better sooner!) will  need a strong presence of Latvian diplomats, including the union of Gulf Arab countries, the South American free economic zone, the Union of South-East Asia and the African Union. The opening of fully functional diplomatic missions in the administrative and strategic centers of future alliances such as Jakarta and Riyadh should become the next goal of Latvian foreign policy. Only by implementing an ambitious foreign policy, diplomatic expansion in a positive sense, can we look forward to an economic success story with a great potential for the future.


Latvia says met euro inflation goal, aims for 2014 entry

Latvia has met the inflation goal for euro entry and should qualify to adopt the currency in 2014 when European Union officials examine its economic performance early next year, the Finance Ministry said on Tuesday. Targets for euro adoption include budget deficit and debt ratios as well as an inflation rate no more than 1.5 percentage points above the average of the three lowest EU rates. EU data released on Tuesday put that target at 2.94 percent, the Finance Ministry said in a statement, while the relevant rate in Latvia was 2.90 percent.
"According to Finance Ministry forecasts, Latvia will fulfil the Maastricht criteria also next spring when Latvia's inflation indicator will be measured," Finance Minister Andris Vilks said in a statement. Despite the sovereign debt crisis that has spread through the euro zone's weaker economies over the past 3 years, Latvia sees the euro as a more stable currency than its lat.
Public opinion is firmly opposed to euro entry, but the government does not intend to hold a referendum on the issue. The Baltic nation endured tax hikes and spending cuts when the global financial crisis hit to overcome debt problems with the goal of adopting the euro.

Latvian transport ministry proposes redistributing Cohesion funds from failed train procurement for other purposes

the Transport Ministry of Latvia recommend redistributing Cohesion funds from the failed train procurement for other purposes – developing the East-West railway corridor's infrastructure, the high-speed railroad project Rail Baltica, airport infrastructure, highways and roads, according to the ministry's draft order prepared for the government's session tomorrow.

The Transport Ministry points out in the accompanying letter that the procurement contract has not come into force and, taking into account that all project activities should be completed by August 31, 2015, an instant decision is required regarding the country's further actions with the European Union's funds, ensuring that they are fully absorbed. As reported, Latvia's passenger train operator Pasazieru vilciens announced the train procurement in December 2009. In March 2011, the European Commission confirmed that LVL 100 million will be provided from the European Union's Cohesion Fund for the project.
Under the failed contract, the total cost of new 34 electric trains and seven diesel trains that Pasazieru vilciens wanted to buy was LVL 144, of which LVL 100 million would have been covered from the bloc's Cohesion funds, whereas Pasazieru vilciens co-financing would be LVL 44 million. Together with the train maintenance cost, the contract amount would have reached EUR 610.76 million (LVL 429.24 million), and the new trains would have been manufactured by August 2015.

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