LATVIA METEORITE REPORT 2009

In general, Latvia has survived better this year than many pundits, including me, would have thought possible. But the trends have not been good and some of these may come back later with a vengeance

Politically the Dombrovskis government has held firm against all critics with leather-suited finance minister Repse as the backbone. The other parties in the coalition have acted like spoilt children, refusing to sign papers for the IMF they agreed upon previously, and even bringing back the hated Skele to "save the country". Thankfully President Zatlers has improved dramatically over the year and shows new found confidence. Time will tell if he has the personal and political strength to face up to the election challenges created by Skele, Lembergs and Slessers next year. His predecessor VVF had a 5 minute rush into politics again as a possible EU Council President and then promptly disappeared. Former PM Kalvitis went to Russia and raised Latvian national hackles by having longer at dinner with Putin than Zatlers had with Medvedev

The working half of the government managed to deliver the 2010 Budget on time but still tried to cheat by not creating the cuts that were asked for by the EU and IMF. Instead they intend to raise dodgy taxes that most independent financiers think will never create money. The Constitutional Court has already ruled the pensioners cuts illegal so the budget is 100m Ls short before the year has even started. And the tax receipts continue to fall making the budget figures even more suspect. Conspiracy theories abound about the IMF and EU, and about anyone else who can be blamed for the crisis.

Business has steadily declined although there would appear to have been a welcome levelling out from September onwards. Christmas sales were apparently 25% down in the shops from last year. The shops are dropping prices daily and new "cheap shops" are springing up, and doing good business. Some observers see signs of business and export improvement. It is probably too soon to call.

The real weakness this year has been public service. The ministries have simply failed every test thrown at them. The grand plan of employing highly educated professionals and promoting only those with the right political allegiance has become a burst balloon. The appalling results show that the current civil service leadership structure needs a total rethink.

The real estate market has bombed. Flat prices for rent and sale are gradually dropping all over the country. There are still some companies with deep pockets holding out for a rich Russian to save them. Some bizarre prices are still apparently being paid. But there are few signs yet of real international investors. The prices have further to drop before anyone with common sense is tempted. The risk of failing to find paying tenants for all the empty flats and offices is just too great.

Socially the country has entered a strange time warp. Everything looks OK on the surface but people are going about their business in a robotic fashion with little joy to be seen. Understandably, many people are now fleeing the country, for UK, or anywhere that will either employ them or marry them. But these are mainly low paid workers. The wandering, coffee drinking executives are becoming unemployed in growing numbers as companies either fail, or thin out the management. There are too few tax incentives and too little investment funding to coerce them back into business again yet. Judging by the joke jobs on offer on CV online, if they are waiting for paid employment, they could be standing in line for a long time.

One good thing is that the crisis has put nationality and language onto a back burner, except that is, for the few language bigots who still see anyone not speaking fluent Latvian as evil. Thankfully the Russian speaking Riga Mayor Ushakovs has turned out to be a likable and normal human being with both good and bad sides who just wants to get the job done properly. Businesses of course don't care at all about language, they just want the cheapest worker for the job (I wrote "best" and then realised that this was not true at all - talent still has no meaning here!). Lets hope that a 3 language state is a true bonus from the crisis.

But Russia deserves a mention. As a country it seems unable to behave sensibly when dealing with the Balts. The queues of lorries delayed at the Russian border crossing is a Russian national disgrace. Sending a spy plane to overfly Latvia was also stupid and frankly childish. Lets hope that 2010 sees some common sense and graciousness from the big neighbour. But I won't hold my breath.

And Latvian servicemen and women continue to serve abroad with great distinction and praise. We all owe them a great deal.

The highlight of the year was of course the spoof Mazsalaca meteorite. It brought fame - and a large muddy hole to Northern Latvia. On TV, Interior Minister Linda Murniece tried hard and failed to defend the overserious actions of the police and customs. Everyone enjoyed the very good and funny joke perpetrated by Tele 2 except her. It nearly cost her her job. Tele 2 now totally dominate the airways with outstanding adverts showing that the best of Latvian business is as good as anywhere. If more companies could deliver this vitality, Latvia would soon leave recession.

But what about trends. The black market is back with a vengeance, partially forced there by sheer determination of people and companies to survive and partly because of the incompetence of the government tax structure penalising work and effort. It will be hard to recover honesty. The loss of people from the country will also further reduce tax income and may stunt growth later as firms fight for good workers. Morale is also low but the nation seems set on enduring rather than protesting. If it continues calm as the 2010 budget bites it really will be a miracle. And there are still a few people hell bent on screwing the country for every penny they can get. Corruption is becoming less acceptable but there are still large numbers who either do not care or don't recognise it as wrong at all. But at least shops seem to have stopped closing.

What marks the year for me - I think the friendships gained in common adversity. As I try to make my business work, I am surrounded by friends and colleagues working to reduce the effects of the crisis. Many are unemployed or are trying as hard as me to survive in business. Latvia is full of good people and I am meeting more every day. Lets hope 2010 works for those who deserve it.

THE BUDGET

The Latvian Government 2010 budget has been passed by Parliament. It contains many unpleasant tax rises. As you would expect, most of these are being blamed by politicians on the unreasonable demands of the IMF. The IMF team are in town for talks and they are clearly unhappy Bunnies. The key reason is that the budget is a fudge. The Government was supposed to cut 500m off their huge running costs but have wimped and only cut about 350m. This means that the other 150 has to come in tax rises, and this from a national tax base that is shrinking rapidly. Even with this extra blood money, there will still be a 600m shortfall (about 8% GDP I think that is) and of course the money for this has to come from somewhere too. In comes the IMF and EU with their duffel bags of dosh.

On the daily news, the budget sounds as though it balances and quite likely on the surface citizens will think that if the IMF accepts it this it is OK. And if you accept that it is right to run a huge deficit each year then it does appear on paper to balance. The figures technically look as though they work. But that deficit will not go away after the budget and nor will the public suddenly find more money to spend.

The IMF team is between a rock and a hard place. The Government knows this and is playing on it. If the IMF accept this weak and rotten budget they will be blamed when it fails (and it probably will unless God has told Finance Minister Repse something he has not told the rest of us). If they reject it ( and of course they actually have no legal power to do that), it would have to go back to Government and the Parliament again and the Government will fall - In that case a new budget from, for example the Peoples Party, would just give away pre election money in a wave of corrupt populism to win the elections next year. So bad though this budget is, it may be the best of the worst.

And if the IMF withhold their loan (not free gift remember), they will be seen as evil Americans (of which most of them are not of course) and the country could implode socially for lack of ability to pay pensions and unemployment money. And unpaid and hungry Russians suddenly becomes a security issue not to be played with at any cost. And of course there will be no magic money in the next 12 months from a sudden improvement in business, so the overlarge government structure, and the debts from this year will carry over to next and still have to be paid somehow. How this is to be done is of course never discussed.

In recent weeks I have been amazed by the stoicism of the Latvian nation. I knew that they had endured much before under the Soviets but now I can see this character trait in its full glory. But this Government (and those of Kalvitis and Godmanis) has also destroyed any basis for national honesty and decency by unfair tax policies, refusal to accept responsibility for their actions, and by the self seeking way most Parliament members behave and vote. Avoiding paying, and living outside of the rules is growing as a national sport(typically not paying for public transport), and this is very very sad.

What is clear to me is that like Italy in the 70s the country is beginning to work and exist totally independent of authority. Many people I talk to just want to leave, and leave quickly because they simply have no appetite for the fight. I am glad that I joined the SCP. They have stuck to their principles throughout all this, and I have been proud of the way many of the younger members have grown into fine politicians. Our day is probably not yet, but it will come.

What to do now though?

No taxi stories this week!

This week has been interesting for me with several business opportunities presenting themselves. All have been in partnership with Latvians and it showed me that the crisis has not dampened the energy or enthusiasm of everyone for doing new things. I just hope we can make some of them work. Sadly another friend has lost his job.

Yesterday was a good visit to the Latvian Chamber of Commerce. With a thousand members they are hopefully part of the solution to a revitalised Latvia. But a look at their handbook shows the huge gulf between the very few large successful companies and the huge number of smaller enterprises with fewer than 30 members. The chief Zanete Jaunzeme-Grende was full of positive ideas and thinking. She has trips arranged to China and Scotland soon, so hopefully they will both bring something.

I have had discussions with four good consultancy companies from UK who want to bring their reform experience and expertise to Latvia. I hope that soon someone will realise their value and use them.

The number of beggars and bag people is increasing daily. Luckily the weather is mild.

Will the last taxpayer to leave Latvia, please turn out the light!

The rumour today is that the government tends to close the Latvian borders in 3 months time and not let anyone else leave. It is so wonderfully Orwellian it may just be true. But there is no reason to do it then unless there are other plans afoot so that probably places Devaluation firmly into the first week of February. You heard it here first.

Of course I may just have given away another secret government misery plan so I apologise to Ventspils Police in advance. It is now nearly a year since they arrested Dmitrijs Smirnov the University lecturer (remember him readers?) for the heinous crime of daring to speak his mind freely about the economy. I always thought that was what we paid academics for in the first place!

LEAVES

5 years ago I went to Minsk. One of the abiding memories of that wonderful trip was the sight of 40 or so workers walking in a straight line in the park clearing leaves. A sure sign of Soviet control I felt. This week I saw the same leaf clearing in a park in Riga. I fear we have progressed backwards. I think it is a great idea that those unemployed should do something positive with their time but when we have literally hundreds of unemployed executives and teachers, why cannot we run lessons for them all and do something positive - back to school!

WASTE

My friend Lars who runs Swedish owned Ragn Sells waste company in Riga says that after steady drops in volume all year, waste (rubbish to the rest of us!) has now bottomed out. This says something important but I am not sure yet what.

My building supplier client Maris from Buvejam LV says that his customers have simply stopped phoning. Luckily he has Plan B in place and intends to be there for the recovery. We are about to start an advertising campaign. He says his friends who have shops are all saying the same. The slow decline is still going on and the next marker point will be February when the money stops for the last group made unemployed and the big 500 million cuts start to take effect. I fear that despite the good news of waste, we have the worst still to come.

FLAGS

I passed the Europa Hotel yesterday on Barona Iela. All the flags hanging outside were wrapped around the posts and looking very sorry. Self respect and attention to detail has gone. I think it probably sums up the sad way the country sees itself.

ANOTHER TAXI STORY

Friday evening I was invited to the Riga Fashion Week party in Hotel Latvia by my American film director friend Ryan. It was the first time I had been in the new night club since renovation. The half we were in looked good. The other half had about as much soul as a fridge. needless to say the other side was empty. I wonder sometimes who designs these places. I hope they got their money back.

The fashion crowd were as you would expect, beautiful people and very well dressed. There were lots of them too. The language was heavy on the Russian side but if they are bringing business to Riga then well done them. Judging by the queues at the bar there is no serious shortage of money in this profession either. Ryan was networking hard to get some new people for his next film, and being one of the oldest in the room, I just enjoyed the beautiful girls, the music and the beer.

There was a fashion show of Jeans. Some were good but some of them were the belt round the knees baggy type. I know its showing my age, but they do look really weird. And how do you run away from the police when you are wearing them for goodness sakes?

At a sensible time (sadly, 2 minutes after the last tram had left) I hailed a taxi. Off we went, or to be precise, off we didn't go. The engine kept dying. The driver was on his first evening with the firm and being watched by an assessor so he was not a happy boy. We finally got going and the driver apologised and told me that they had just filled up with illegal Russian petrol and the fuel was dirty.

We had several unplanned stops on way to home and a couple of kilometres at a good 3km per hour. The trip took a little longer than usual. I found the whole thing really funny and it made a great end to the evening. It was just another cameo of the way the country is going. On one hand an assessor to make sure that everything is being done properly and on the other, illegal petrol. I am sure that neither man saw the irony.

As they left, I wished them luck on the trip back into town. I hope they made it.

West to the sun - or East to goodness knows what?

This afternoon I had a long phone call from a Latvian who liked my Blogs. It was good natured and educative. But I had a strange feeling from his words that I am inhabiting a strange parallel world here in Riga that many Latvians do not see. Everyone and everything was to blame except normal Latvians for the crisis. I could easily blame the Latvian language. When you translate Articles, Blogs and comments it is clear that no one here knows how to say anything straightforward. The future is never discussed. We go through every historical twist and turn, every shred of irony and call on every allegory we can think of. Every politician stinks, is to blame for something and is dishonest. Or worse all are secret Skele or Lembergs moles under deep deep cover to re-emerge like butterflies from the chrysalis at some later time. Emerging of course to return the country to darkness. And the EU and IMF are totally to blame for all this. No Latvian ever seems to blame themselves, even those who voted for the most corrupt. The language mix is simply impossible to follow for a foreigner. No wonder the Russian speakers stick to Russian to communicate.

But I wonder if we are not reaching a point where something here has to change. This week the Finance Minister Einars Repse has tried (or has actually succeeded - we have to wait and see) to sack the head of the State Revenue Service, Dzintars Jakans. The man has actually been dragging his feet badly on reform. This could be for many reasons and the conspiracy theorists will find loads, but I suspect that he is another past political appointee who like many in power simply has no clue what to do at all. Reform = cuts, doesn't it? The Peoples Party aided by the Goons and Farmers want to use this sacking as an excuse to bring down the government, but conveniently they say they will wait until after the budget is finished at the end of the year. I don't think they know how stupid and weak that makes them look. They had all day Friday to act if they thought they had a real case, but they showed what cowards they are by doing nothing. I guess that's because they know the only person who can do the real budget work is Repse and they have to wait until he is finished.

The real opposition forces in the form of the Oligarchs have been plotting too and Lembergs, Slessers and Skele (he came back the week before last amid trumpets, dancing girls and ribbons to save us all) have formed a new political Axis. Perhaps in half hearted opposition, former President VVF has also thrown her political hat into the ring and started with education reform. The comments were mixed. Many were saying thank God she is back whilst others were more vitriolic about the "Canadian" noting that she was in charge during the 7 fat years and did nothing. Mind she is not an economist!

So what next. If the coalition is going to fall we could be seeing a major turning point in Latvian politics. The end game might be closer than we think. A left turn to corruption and closer ties with Russia, or a right turn to honest government and a chance of a better future. The choice might just come down to the stubbornness of Repse and the decisions of the President. But it is clear that whoever holds the levers of power as we go into the election next summer will have the scope to bribe and fool the population. The big prize is to steal the EU and IMF money - and there are those who eye this greedily.

Sadly, I suspect that good Latvians will wait much longer before they really fight back. They would much rather sing their way to democracy than be active. But that will not work this time folks. The enemy are Latvians too and understand the weakness of this. Those in the countryside just hope the IMF or EU will come on white horses and save them. The Russian speakers keep their heads down and try to get by or even earn enough to live well. Latvian weakness is their political opportunity. And the forces of evil will rub their hands with glee as Latvia becomes more like a failed African state every day. They know that if good men and women continue to do nothing they will be the eventual winners.

And all the while, Russia waits and watches like a hungry vulture.

Have we turned a corner or is this a false dawn?

The last few weeks have been quite difficult for me. I have been trying hard to find new clients and have only found people who were clearly worse off than me. I have been looking at the evidence of what is happening really hard but it is difficult to call. There is a noticeable increase in traffic on the roads, almost back to old times. People are going about their business and daily lives with apparent normality.

But my instinct is to think that this normality covers a whole multitude of sins. The number of Pardod (for sale) signs continues to rise (although I am pleased that my friend Alexanders who runs Mobius selling expensive British Vertu mobile phones has opened another shop in the old town) but in general there still appear to be more businesses closing than opening. There are almost NO adverts on the trams and buses. The exceptions are the big mobile phone companies who are having their own battle royal for our ears and fine words. The prices in most shops have dropped agin. Some have put up prices but they don't seem to have customers. I cannot ever remember seeing any people in one or two shops - but still they stay there. One or two have grasped the nettle and have reinvented themselves to a new lower price level quite successfully. The pubs are mainly empty except for those used by tourists. One nightclub I heard about had no one at all one day last week. Heating bills will arrive this month and that means a direct export to pay for energy- well if people can pay that is. In opposition, the National Bank Governor says we have turned a corner.

We are at the point where the international community (IMF, EU, Swedish banks etc) is demanding that 500m Lats are cut from the government budget. Now some of this will stay in circulation but there are bound to be more effects and they cannot be positive. Tax rises cannot stimulate anything, even accountancy firms!

So my instinct is that what we see is the tip of the iceberg. The big bad bit is under the surface, and with lots of sharp edges. What is amazing is the stoical way society continues its daily round. I suppose that after occupation by the Nazis and USSR, this is just another bit of stress to be suffered. It is just a shame that this time the punishment is being meted out by Latvians upon themselves.

Naked Brits perform at Riga opera!

Nothing seems to deter British stag party tourists to Riga from anti social behavior. On a chilly friday evening at 1900hrs this crowd paraded their bare bodies for all to see on the edge of the opera car park. The new British Embassy Charge d'affaire to Riga Dr Anthony Stokes has clearly got his work cut out. This bunch were lucky not to be spotted by the local police.

Should the Lat be the world reserve currency!

I watched an excellent BBC programme on the world economy this evening. It featured American Robert Mundell, one of the leading monetary economists in the world. He was highlighting the danger of the world reserve currency being the dollar and advocating change. The fact that the Chinese are currently holding 3 TRILLION US dollars I found to be a pretty persuasive argument. If the USA goes so does China, and probably the rest of us too. That means planting even more potatoes in Mazsalaca.

So the Lat seems to me to be a good alternative. My reasons are as follows:

1. Despite the crisis and Latvia going downhill faster than a 4 man bob, the currency has held its (false) value rather well.

2. It has solid IMF backing.

3. There are more than enough trees in Latvia to make all the paper.

4. Being located in the centre of the known world (the EU), Latvia has super transit links all over the place, including a railway line to China to carry all that 3 Trillion dollars worth of Lats

5. It is already the reserve currency for Sweden.

6. The Lat has pretty colours.

To add to the fun, apparently the Godmanis government and National Bank governor acted unconstitutionally when asking for IMF and EU support by not getting the agreement first of Parliament. So the whole support package and subsequent budgetary change is illegal. Will they go to prison?

Latvian railways - a rough diamond in need of care and polishing

The "transit" part of Latvian Railways is one of the real national success stories; helped by Russia admittedly, but business is business! 30% of the business is actually privately owned, taking nothing from the government and makes a profit. This is unlike the franchises in many other European countries. The main markets for Latvia are Russia and Belorussian, but they also bring and take goods to the Asian "Stans" and even to far away China. A common experience in Latvia is seeing and hearing the huge oil trains of 40 or more wagons rumbling and schreeching on lines that look simply far too delicate to hold such a heavy monster. I live about 600m from the railway and at night the whole building shakes as the full trains head for Riga and Ventspils ports.

One of the really clever things though is that all the countries share rolling stock. This means that goods or oil are loaded onto the nearest waggon and moved immediately. This greatly speeds up and increases traffic flow, and of course profitability. It is a clever idea that the EU could perhaps copy.

Lines are being slowly upgraded. Thales is upgrading the signalling from Ventspils to the Russian border and Bombardier are doing the next stage. There is though a lot of EU money unspent that the Ministry sadly has not got its act together to organise contracts. It may be lost.

Sadly, the commuter train story is a bit more bleak than transit. The Latvian railways are badly under resourced and also seriously in need of new lighter and smaller trains. At present the old large trains are still pulling heavy, often empty carriages. The government expects the goods profits to be used to subsidise people. This reduces considerably the scope of the railways overall. For tourists the good news is that travel is free. Well that is not quite true but many journeys are one twentieth the cost of their UK equivalent. The trains are frequent and clean, just a tad short on air conditioning in the summer. But you can certainly "see Latvia by train" although some journeys are a bit too much of a forest view for most. With Hotels as littl as 15Euros a night in places like Liepaja, a Latvian train holiday is great value for money

But one real anomaly is the lack of a train between Tallinn and Riga and then south to Poland. This line needs making soon please.

Another brick in the Latvian crisis wall!

The Latvian Building Materials Traders association is holding the government to account for letting contracts to illegal traders. Vice President Guntis Sokolovskis points out that those traders who avoid taxes and don't pay wages are in a better position to get government contracts because they can offer lower prices for goods and services.

The State is apparently still awarding contracts on the basis of lowest price against the technical specifications. Sokolovskis points out that the disordered government policies threaten the honest traders who are paying both white wages and taxes.

There are many companies in the building trade who are owed large amounts of money or owe money. The usual practice is to close the company and then open another one. This year 587 new building supplies companies have newly registered despite the industry contracting severely.

The Association has 34 dealers and a combined annual turnover of 386million Lats.

Mr Repse - 3 Points of contact?

There were two earthquakes in Latvia this week. The first was 2.7 on the Richter Scale and was only 40Km below the surface. Thankfully no one was hurt. But clearly something is happening deep below Latvia and it raises questions about a larger quake sometime in the future. I hope the emergency services are thinking about this carefully.

Back on the surface, the second earthquake was the publication of the Letter of Intent to the IMF from the Government (and I promise this time no dry humour about the IMF - this is too important for that). This document was signed by the government except for the Tautas Party. The TP clearly have objections about the note but no one I talks to thinks that those objections are for the benefit of Latvia. This was confirmed by the rather damning television telephone poll on the news show Kas Notiek Latvia last night.

But to the document itself. There is a rule in climbing that you keep three point of contact as you move forward. Of course we have all seen free climbers on television doing amazing things and breaking this law. But there are two things to remember when watching this, first they are the absolute best in the world, and second, they usually die early because they fall off. The Latvian government in climbing terms is still a novice and needs to move carefully, especially on a crisis climb like this where the overhangs are large and growing worse as we move upwards. Moving(and changing) everything at once may not be a good plan.

I mention all this because the document raises several thoughts in my mind. Firstly there must be someone clever in the finance ministry who can write good corporate "fiscal speak". There is nothing wrong with this because I wrote the first Membership Action Plan for Estonia to gain NATO membership. But whoever wrote it, the Latvian Government signed it and must take full responsibility for the language and the contents. And inside the note there should be a balance between the fiscal social engineering required by the bureaucrats of the IMF and EU, and the reality of running a living, breathing country of real people. This takes compromise, intelligence and strong leadership.

What is worrying is that as far as climbing out of this crisis, the two "legs" of strengthening the "banking and fiscal system" and providing "social guarantees" appear to have been well covered. I totally trust Mr Repse to get that right; he has had plenty of practice recently. But nowhere can I find any indication that the two "arms" we need to help us move forward of "inward investment" and "supporting Latvian business" have been thought of in a positive sense at all. In fact this climber would appear to be expected to climb upwards whilst someone beats his hands with the tax hammer of increased VAT, increased personal income tax, and the new real estate tax. This paper gives me the feeling that the government do not know where the real money to run the country comes from in the first place. For someone to pay real taxes to support the country, they have to earn it by risk taking business first. The paper is fiscally solid, but totally devoid of humanity. I feel the dead hand of "top down control" old fashioned Socialist/Soviet thinking here.

I am not an economist by education (but note that none of our Latvian economists have covered themselves in glory so far, so I surely could not do much worse than them), but I do have a small business and know what I see around me each day. I already feel battered by events here. And I am noted for being one of the most positive men on the planet. How much worse is it for newly unemployed skilled workers, sacked civil servants and businessmen running S&MEs? There is nothing in this paper to warm their hearts that the government understands how their new job will be created or where the hard money that drives the economy comes from at all. And if only half the government sign the paper it is also hard to see how trust will be created for inward investment from international business. Yes two new banks want to open here, but I guess that they do that to take our Latvian (for Latvian read IMF) money out, not to create new wealth for us.

At some stage in the future, the IMF and EU money must be paid back by Latvia Ltd. This means gaining an income that is higher than the still exorbitant cost of government spending. How Latvian business and society will be developed to create that money needs to be addressed in a note too. Maybe that plan is part of the Top Secret annexes that we the public have not been shown?

Taxi! How much to the airport please? 100lats - cheap at the price!

Ten yours after the last "taxi war" there is taxi trouble again on the streets of Riga. The stimulus has been the production of a fleet of Air Baltic coloured taxis operating out of the airport and trying to deliver (for now) a service that does not cost and arm and a leg.

For far too long, Riga taxis have been ripping off tourists, charging criminal amounts for the short journey too and from the airport. This has not been helped by the appalling bus service. Thankfully the new Mayor of Riga, Nils Ushakovs cut the ridiculous baggage charge on the bus route. The idiot inspectors were pouncing on unwitting tourists and fining them, thereby ensuring that they never darkened the doors of a Riga hotel again. Now at last something sensible is happening. Hopefully the Interior Ministry, police and Riga council will settle any political differences they may have and get us a taxi service we can all afford to use. I suspect that this may take some time though.

Ushakovs also this week went round the Old Town night clubs and read them the riot act. We shall see how much effect this has. At least he is trying.

So now the summer sales have finished and the new winter clothes are in the shops. Some clothes shops have started to discount already and I have seen 70% off already in several places. Sadly I cant afford to buy everything I want! It is clear that we still have huge overcapacity. There are enough jeans on sale to keep all of India happy, and there are more badly made and expensive cheap-cloth suits than Latvia could ever want.

Flat prices appear to be dropping more slowly this month. One reason might be that there have been lots of moves into cheaper flats already reducing demand. The medium priced new flat owners (most with larger debts) are hanging on and trying to avoid the inevitable. But when the utility bills come in many will have to bite the bullet to get a tenant. A Russian firm has gone round offering cash for flats in our block. I guess they have gone everywhere. I forecast a spate of cheap cash sales in about two months.

I have seen another couple of businesses not taking credit cards. I wonder when un-taxable cash will truly become King in Riga (as it is already in the regions).

The anti corruption bureau is now also inevitably being squeezed for funds. I would have thought that this was one of the last things that should go. It shows that the government still has not got joined up policies. There are far less important things to cut than this, especially at the moment with lots of free IMF money sloshing about.

More beggars - but in town still no children. This used to be a feature in the past. I guess the police are stopping them. There is though a growing number of clearly homeless mentally ill people roaming the streets. They are a terribly sad sight as they drag dozens of full plastic bags around. Many of these people, and the normal beggars are physically handicapped in some way which says much about the social system here. We have so so far to go.

Is the IMF money laundering?

It is entirely possible that by accepting the money from the IMF the Latvian govenment is breaking its own laws on money laundering. As we all know, the IMF is bankrolled by the USA. The rumour has it that the USA sees the loans to the Eastern European countries as a clever way of handing over paper money produced for the magic "quantitive easing" and totally unsupported by any collateral, and later getting back good money (plus interest) in return. Now if this is true then the Latvian govenment is supporting a highly questionable and probably illegal act. If this "clear money" came from Russan business serious questions would be asked!

The really bad news though is that the crisis has officially worsened - the Hammock shop on Brivibas is going to close. As regular readers will remember, I mentioned the shop on April 12th and questioned how it survived. Well it hasnt. I saw the Prime Minister on television this morning. He looked more smug than usual as he commented that the government recovery plans were working. Not from where I look they are not. I predict that a lot more shops and companies will follow Hammocks into oblivion this winter.

And judging by the growing queue of beggars outside the free food places, a few souls will disappear in the cold as well. I see and hear of no plan how to deal with the homeless. Perhaps there is one, but it is being kept as secret as all the other government plans. Democracy currently has no home here in Latvia.

PRICES - DOWN DOWN DOWN!

I hope that my mum doesn't read my blogs or she will be wanting to visit Riga again to spend my money shopping.

There is no doubt now that major change is taking place. Some of the main streets are now full of empty shops (and it is creeping into the Old Town too) and in the main shopping centres prices have nosedived. I have even seen 90% reductions in one place. But still there is no understanding either of customer thinking or what a "sale" is for. All to often there are signs saying "up to 80% reductions" and then you have to search hard to find anything with a cut like that. It becomes annoying when shoes or clothes are still being sold at less than 50% off from what was a totally stupid and unreal price in the first place. Still, one shoe shop in Alfa Centre had a real sale with shoes at 7Ls and the place was full. The next door shop was empty. I bet they did not draw any conclusions from that!! But for any followers with cash, Riga is now well worth a shopping visit. Pass it on.

It is difficult now to see where Latvia goes next. We are still on the downward path with the next round of school and hospital closures to come. There is still no developed logic behind the cuts and personal interests are driving things in the regions. Unfortunately corruption still abounds, it just appears in new, nasty and more insidious forms. Perhaps the worst was hearing that the National bank staff, including the boss Rimcevics were still taking home obscene salaries. He had no remorse and showed a level of lack of understanding of what he had done equal only to a US banker. It was embarrassingly reinforced by the PM who said that salaries were the bank's business. Again we have weakness from a national leader. It seems to be a trait. The whole of the bank staff should be cleared out and new people hired from abroad.

But on the surface in Riga there is far less to see. Shoppers are still out and cafes are being used, just a bit less than before. The fact is that 20% may be unemployed but 80% are still in work, even if they are getting 25% less money than this time last year. The real crunch will come when the unaffordable heating bills arrive in the autumn. Many pensioners get less money each month than their utility bills. But the general atmosphere is a stoic determination that all will come well in the end. That is a Soviet legacy. There has been worse here before. At least no-one is being carted off to Siberia - they have all gone already to UK and Ireland.

What is obvious now are the numbers of heavy drinkers on the public transport. More and more you can smell alcohol addiction. It permeates everything. There are also more people with unwashed clothes and bodies. It is the unpleasant aroma of poverty!

Latvia - Twitter, Blogs, Writing

I have been overwhelmed in recent weeks by business emails, Twitter followers and helpful blogs telling me about the new art of media marketing using Web 2 tools. I am supposed to want to get hundreds of people to follow me and what I write and somehow this breeds money. The key appears to be that we should all deliver some sort of marketing training package, or new way of improving our media offering that others then buy from us to make - yes you have guessed it! - their own way of delivering marketing training and better media packages. Hardly anything seems to be real goods and services.

This spiral of activity must of course stop when everyone has sold training and media tools to everyone and they are all perfect. One of the major contributors even admits that his business is a spiral sales package and that it relies totally upon pyramid selling - as if that was somehow a positive benefit.

So far Latvians seem to have used these tools to practice their favourite sport of creating new political parties and doing een more political complaining, rather than for productive business. But it set me to thinking if we could deliver better business from Latvia using these tools and I think we can.

The keys of course are that:

1. they have to be aimed at selling to and informing the rest of the world, not to Latvians,

2. they must be written in English, not Latvian or Russian.

So far the majority of Latvia Twitter posts I get are rarely in English and I think that they are much poorer value for this. This is especially so as most people here seem to have better English than me. As a country Latvia has so much to offer and it does no-one any good by hiding the beauty and possible business opportunities from others when there is simply no need.

SHRIMP SALAD

I was shopping in Alpha Rimi last night and heard the wonderful exchange

Girl: Can I have some shrimp salad please.

Shop assistant: I wouldn't if I were you.

Girl: Why not?

Shop assistant: The Chef forgot to put the shrimps in when he made it!

Bliss.

The real thing to see yesterday were the prices in the Alpha clothes shops. They have dropped seriously to levels unseen here for 10 years. But still there were few people buying. Even I just window shop now. New clothes will have to wait a while. More water in the soup please!!

JANI

Trips to Finland, Estonia and another trip to UK have reinforced my view that Latvia really is in worse condition than the rest of Europe. Not that I needed much convincing. Tuesday morning at Stanstead airport was hectic and the number of travellers was huge. It makes Riga airport look even more rural than it is.

But at least I manged to get back for midsummer celebrations in Mazsalaca. Jani is special for Latvians and when I got back into Riga it was empty like the city of London on a wet November Sunday. Everyone seemed to have left for the country. The Jani evening was warm and bright. It never really got fully dark. The only difference this year was that the table was not groaning under food as previous years. Eating is now expensive and money must be preserved. But there was still enough meat for all, including the dogs and cats, who must think Jani is gods answer to them. they sit round the bonfire poised and watching for any plate that touches the ground - and becomes officially theirs!

So back to work. Gatis Kokins has highlighted the long Economist article about the Baltics on Twitter. I think that people do not realise how precarious the Baltic States are in security terms at the moment. I hope that we get through the coming months without unwelcome visitors from next door.

Hammocks, queues, deceit and Cardiff

On Brivibas Iela there is a Hammock shop. Yes I did write Hammocks! What it is doing there I have no idea. Who buys Hammocks in the winter for goodness sakes? I pass it daily, indeed for 6 months I lived just a block away from it, and I have never seen anyone in there. No-one. It is always bright and colourful with lots of lights on, so the electricity bill won't be small. It has appeared so resilient that I had decided that if that shop closed we were all in trouble. Its still there, but there is a ''30%'' off sign in the window. I predict that 50% will soon follow - SO IF YOU CAN BEAR TO WAIT A FEW WEEKS, THERE WILL BE HAMMOCK BARGAINS TO BE HAD BY ALL.

YOU HEARD IT HERE FIRST.

The recession effects continue to add up steadily. Today I noticed for the first time that the evening queue at WEF bridge has gone. Well not quite true, it was there on the other side, but surprise surprise, it was caused by the traffic police doing whatever it is that traffic police do to create havoc at the busiest times.

Not surprisingly the government withheld the true cost of the recession and the cuts required until after the election. ''Just normal'' was the most heard comment. It is sad that even in a time of world crisis the Latvian governing class is still totally self serving rather than caring for their own people. I hope they are ashamed of themselves. Somehow I doubt it though - abusing the people of your own nation is a national sport here. I heard that one of the Ministry of Transport appointees was getting 18K a month. In USA or Britain that might be acceptable. Here that is obscene and totally corrupt. Sadly the law allows it.

So I end with Cardiff. I was there last Thursday. I was overwhelmed by the activity, vitality and sheer shopping energy. As I have said before, the effects of depression in UK are very very hard to see, and in Cardiff they were totally invisible.

Urine Soaked Trousers

I was on the number 40 bus yesterday. An old man got on and using his walking stick stumbled along to the seat adjacent to me. He had visibly urine soaked trousers and the stench was truly awful. I am not proud of my immediate thoughts because they were not charitable. On looking more closely I could see that he was really well dressed with a good jacket, shirt and tie and he clearly had the mark of intelligence about him. No one wants to be like that. Certainly no one who takes the effort to put on a tie before they go out! He must have prostrate problems and the embarrassment for him of being like that must be awful, especially in a country like this where to be sick means to pay money, and in most cases money you simply do not have. But he was clearly still proud. I found it quite hard.

The IMF have told Latvia they must reform the medical system. But this is not good enough. The IMF needs to define the word reform in great detail (it is not understood here. Most politicians think it means cuts not service improvement!), they need to spell out in great detail what they mean and want and then they need to pay for and send experts to make sure that it happens. This man needs help, but I see absolutely no chance that anything that Latvia does in the coming months called ''health reform'' is going to deliver it.

The rumours are beginning to grow that one or two serious companies in Latvia may go under in the next month or so. As I try to find shops for my new shopping complex in Adazi I am seeing clearly that the screws are turning tighter. It is proving hard to convince firms to expand now, although it is certainly a good time as they can screw really great terms out of the market. It will be much harder later. Another growing rumour is that the Government is considering dropping the VAT rate. Even if they do, it will only be effective if they also do some serious confidence boosting measures.

My highlight of the week was chairing an IT security conference for the Latvian subsidiary of headtechnology from Germany. We had great day with good speakers from UK, Luxembourg, Israel and Germany and loads of new things to think about. I enjoyed the enthusiasm of the attendees and the quality of questions. Clearly the IT sector in Latvia has some very bright boys and girls in it. I enjoyed dinner too. Thank you Andris.

Museum Night

Last night was museum night in Riga. Thousands turned out to go round the museums free and see new exhibitions, shows and music. Town was full, although perhaps not as much as last year. It was ironic in these times of rapidly growing unemployment that when I came in to town on the tram, the Work Museum had a 75m long queue and when I left at midnight the queue was still at least 50m of dads, mums and kids.

But leaving was interesting. the trams ran as normal. Again this shows the total lack of linkage between government and people. There were hundreds of people waiting for trams and buses and then showing their disbelief and anger that the service was finished. My last tram only went to the depot at Brivibas Iela and then I had to walk the last 5km home. On the tram a Russian speaker went up to the driver and tried to highjack the tram and get the lady driver to take it right to the end of the line at Jugla. His initial verbal force got him a slammed cabin door for his efforts and a sharp ''get away'' in Latvian. Then he changed to soft pleas and offerings with full actions and facial movements. The passengers were in fits of laughter and really egging him on. It was wonderful comedy theatre. When I got off he was walking unsteadily up the road arm in arm with a lady, the two of them laughing fit to burst in drunken happiness.

I saw my pickpocket again on Friday on the number 6 tram. He got on totally stoned and when I looked round he had slumped sitting to the floor at the back and looked completely dead to the world. Next time I looked he had gone. At least in this state he is not going to be effective.

Saw some Chinese visitors this week in the Old Town. Most of them were walking around with face masks. It really did look daft. Were they after protection from us from Swine Flu or were they protecting us? Sadly my Chinese was not up to asking.

I went Orienteering Saturday to Riga's Championships. Not a bad result for me - about half way up my age group. Got lost a bit too many times though. Interestingly the biggest groups were the 10 years old boys on the mens side and the 16 year old girls on the womens. So no complaints about lazy youth and the computer era in this sport. There were also 6 ladies over 80 running too. On that wonderful note I shall end.

50% Off.................

Now I see a trend. It is clear from the last weeks that a sign in the shop window of 50% off is the first signs of the death knell of the company. Main streets in the centre like Terbatus Iela and K Barona are riddled with these, even Benetton is sporting 50% signs. A few weeks ago this meant the finals stages of clear out of the winter gear but now that is no longer true. We are now talking about massive reductions on the summer stuff. Some shop staff are actually noticing customers now too. Not most sadly, they carry on talking to each other or reading as they have always done.

What I first thought was strange was that many of the shops selling outdated fashions are still there and only showing 25-30% reduction signs. But then I realised that's because they have long term brand loyalty, some even from Soviet times, much cheaper prices overall and fashions that are still OK to wear for the older generation. Benetton and Nike may be flashy and beautiful but the majority of the population could never be seen dead in their stuff. It is simply too bright and garish. And the younger population (those not in Ireland or UK) no longer have the same spending power to waste. Mind some shops amaze me still. The hammock shop (yes I did write hammock) still seems to be going strong depite me never having seen a customer there. the same for the sports bar on K Barona that is nearly always empty. Someone said they do lunches. Not sure when though. Must be at four in the morning! And the eternally empty gaming bars continue their money laundering ways. What is unclear now is where the money to launder is coming from. Not Russia surely?

So the high street is struggling. What next? The rent prices for flats are dropping but are still high, and real estate sales prices are so high they are bizarre. One of the banks selling houses in its window has a picture of a concrete shack about 100km from Riga at 140,000Lvl. That's almost sick in its stupidity. Its not worth 15,000 in any money.

And the news from my friends running small companies continues to depress. Many, if not all have cash flow problems (and when I went to business school and we did wonderful cash flow charts, no-one talked about what to do if the clients simply cannot or do not pay). I know of one company where the staff are working for virtually no money, just to go to work. Ho hum.

But the former transport minister Slessors talks of creating 50,000 jobs in Riga in his highly financed and very public bid to become City Mayor (that's 3000 more than the official and much disbelieved current unemployed figure for Riga). Who is going to employ and pay these people I wonder? Half his old plans have stalled in the crisis and I am sure that more will yet. I wish him luck in his new country of Fairyland.

Sunny day

Just been for a run in the forest here in Riga. The weather is beautiful and the park looks lovely. I just wish we could get rid of a bit more rubbish. This must be one of the nicest City places to run in Northern Europe along with Central Park in Helsinki, the hillside park in Prague and Lidingo in Stockholm.

LATVIAN GOVERNMENT OUT OF TOUCH STILL

I have been quiet for a while but just watching and listening. On the surface there is still little visible change from 5 or 6 weeks ago. But I am hearing increasing dissatisfaction from people that the Government has not understood the nature of the crisis or the steps needed to deliver change. We are about to see massive redundancies in the education system and probably in health as well. These are being trumpeted as reform. In fact they are nothing of the sort, they are just cuts plain and simple. Where is the urgency?????

But reducing the governments load upon society has got to be only part of the solution. The other part is to make things better - and that is simply not happening. Serious players like Diena's Business magazine have conducted polls, brought in businessmen for seminars and training and other things. They have laid down clearly what is needed but to no avail. It is like talking to a brick wall. All the problem areas of trying to do business in the country remain and there is no support.

So the downward trend continues and with no repair in sight. The President just dithers and the Government sits smugly, talking reform and thinking that there are mathematical solutions for all this. There are not. This is about people.

The workmen have been hard at work improving the local forest and making it more like a ''park''. Call me a cynic if you like but does the fact that the local elections are close have anything to do with this sudden burst of activity. Well even so, it is nice to see some tidiness appear and a few well placed park benches, ideally placed of course for the huge numbers of unemployed alkies to sit on. Its a pity we never see police here though. Last night I ran past one 30 year old totally comatose sitting in the middle of the track about 50m from a block of flats where young children were playing. Every day a group of older drinkers gather near there in the morning and just get totally drunk. At least they appear harmless, but it still must feel threatening for many women and children.

The motor show in Kipsala yesterday was good. The first show I have been to here that looked and felt right. But it was still thin on the ground in some areas. I would say it was rescued by Renault - so well done to them.

GURKHA VOTE IN UK

Wonderful wonderful news. The Government has lost the vote in the Gurkha case. Nasty Mrs Smith must now go. Britain owes a great debt to the Gurkhas and now we must pay them back properly.

This evil policy and set of rules must be changed today...............................

IS IT ALL AN ILLUSION?

I have been working on some Telecoms stuff for Ukraine all this week. I suspect the chances of turning it into folding money are slim but the opportunity is too good to waste. But whilst doing my research on Ukraine I read a comment that despite the terrible troubles with the Government and the growing poverty, the outdoor street cafes and downtown life of Kiev are going on as if all was rosy.

I had the same feeling yesterday afternoon as I walked through Old Riga. The sun was shining, the outdoor cafes were full, young boys on roller blades were being annoying and very tall Latvian girls (6 foot 3 or more) were walking around with short skirts and high heels talking 10 to the dozen and totally unnoticed by all except us foreigners. There was simply no sign of crisis at all. But at lunchtime I was celebrating a Names Day with my friend Visvaldis and he said that his company could last no more than three months. I know the feeling! My publishing client from last week is not going to last a month I suspect, and has still not paid me, and whats worse, one serious client company emailed me this week to say that I would have to wait another month for payment. All my book learning and cash flow projections go out of the window at times like this. So thank you Matthew in Athletics Weekly for your speedy contribution for my writing.

But if this normality that we have been seeing these past months is really an illusion and not real then why are the government apparently doing so little. The plans that are coming out show no urgency, or desire to make serious changes. I went to a Latvian school recently to a friends daughters parents day and the headmistress said that she had had to make no cuts at all. She was totally unconcerned about it all and it showed. There is much political talk of reform on television every day but if anything is happening, nothing is evident. The police still patrol in threes and fours carrying briefcases and bags, wearing inappropriate shoes and talking to each other as if the world around them is not there.

Perhaps I have got it wrong and I am an illusion and not really there? No that's not true, the tram and bus inspectors keep checking me - so they can see me all right.

MUGGED

One of my younger friends Arturs, a good country boy, was mugged this week on a once in a year visit to Riga. It was in broad daylight, on a main road near shops and by the main tram turnaround point. After losing his bag and wallet and having had a bit of a scuffle he went into the nearest shop, a flower seller, to wash the blood off his hands. He was delighted to find that he was unhurt and the blood on his hand wasn't his. He was lucky. Hopefully the muggers will think twice next time.

COLD, CROSS AND RUBBISH DAY

It was bitterly cold today with a very sharp wind. The sun was out all day but it made no difference. It was also the Latvian cross country championships. The standard at the front of the races was good but it dropped away sharply after a few runners. There were also very few young children so the health of running is not good at all here.

And today was also Big Clean Up day where everyone goes out and cleans the roadsides and forests. The woods where I live are awful with litter and need far more than one day to clean. before I went I saw the weather man in the shops in his scruffy gear and carrying loads of the white bags everyone uses. So he was obviously off to do his bit in the woods. I bet television comes to follow him. But it is a good idea and UK could do with the same thing. The sides of the A1 are just rubbish tips.

I went to the forest and gardens exhibition yesterday. It was really weak, not just with people but also layout and ideas. I went with my colleague Juris and he asked loads of questions. It was clear that there were hardly any products made in Latvia (apart from the plants on sale of course). Virtually all the ceramics and garden furniture were foreign and again even much of the wooden made stuff was from other countries. But one good thing is that one of the Latvian tractor selling companies is opening a factory to assemble vehicles for Russia and Egypt this week. That is a serious happening. I hope to visit there on Tuesday.

But it was a good day apart from seeing the rabbits on sale for breeding to kill for skins and all the heads and horns of Deer and Elk. I do not like this sort of thing at all especially the poor seeing the poor bunnies.

DOWNWARDS STILL MORE.

Our main street Brivibas Iela is now about 10% empty shops. Considering the number of banks and untouchable shops like supermarkets that is a lot.

But there is still difficulty persuading some client companies to cut costs. One thing is that the closeness of the society means many people are working with friends. This creates a strong customer loyalty and people do not want to change suppliers. I can understand this but it does not help

The newspapers have also led with the fact that 13000 more are becoming unemployed each month. One friend of mine on hearing this said, ''yes but they are all losers!'' This is a very stark comment but something I have heard before from even highly educated Latvians. I am often surprised at the apparent lack of softness and compassion here. I think it is some sort of historic self preservation system. Luckily for these ''losers'' summer is coming and at least they will not freeze in the coming months if they are homeless. lets hope the crisis settles soon.

One of my new clients is in publishing. They have really good titles but advertising is slipping fast. It is hard to see how cash flow can be improved in the short term and at best they have two months buffer. This will be challenging indeed for both them and us.

END OF CONDUCTORS!

Yesterday the second of April was the last day of conductors on the buses. On April fools day evening one of the conductors asked us for our tickets back so she could sell them again! Impending poverty creates strange new rules.

I shall miss the ladies. Most of them were at least 70 and seriously formidable. Some have become legends. Two of the girls on the Airport bus, both in their 60s were clearly highly educated and spoke marvellous English. they always went out of their way to help tourists. The company and Latvia should have been really proud off them. One lady on the 21 bus was hilarious. Again about 70 years of age she used to take naps in her conductors seat and if there were lots of people on the bus she stayed put and everyone at the back of the bus got a free trip. I shall miss her. Sadly they are no more and we now have to buy an electronic ticket or pay the driver. But there has been no comment that now all tickets are 50 centimes not the 40 we payed the conductors. A silent 20% price hike.

Spring is here at last. Except in the forest the snow really has gone. The new government is in place and despite not having met the standards required by the President by 31 March, he has let it stay . Not that anyone expected anything else from him really. But we shall see what they can do. The teachers marched in protest today, hundreds of them. One was on television last night. He earns 180 lats a month. You cannot live on that.

THE DOWNTURN CONTINUES - DOWNWARDS

Arriving back from work in UK this week I expected spring to be in full swing so it was a bit of a shock to see that it was still snowing. Topsy turvy weather this year to be sure. I also noticed near the airport that the buildings under construction for the new business park were now lying idle. They look like concrete half finished works of modern art. This is sad because I went to the RIXPORT opening only 6 months ago amid great fanfares, grand speeches, cocktails and free umbrellas.

On the tram Friday I noticed a few more shops had closed and for the first time in years there was a beggar trying to convince the hard hearted occupants to give a few centimes. He was out of luck. The bus to the countryside has also become affected by the crisis. The drivers now go so slowly to save money that you have plenty of time to admire the snow covered scenery and look for deer and foxes. The downside is that you have to listen to Latvia radio 2 for longer.

But all in all the population seems to be holding up well. The wit and humour written as comments on the Latvian Internet portals show that they are more robust than most. But any country that survived the Nazis and the horrors of Soviet occupation should be able to last through this crisis, even with a government that shows no sign whatsoever that it knows what to do.

PICKPOCKETS

Friday morning I caught the bus to Riga airport and a white faced drug charged man of about 22 years of age got in behind me. He brushed up against me and I realised immediately what he was up to. I gave him a hard stare and then watched him from the other side of the bus. About 3 stops later the woman next to him gave a shout that her purse was missing. Someone pointed at me because I was closest to her (thanks lady!) I pointed at the lad and said - its him! -he dropped the purse and tried to pretend he wasn't there. Lucky for him the bus stopped then and as he got off I gave him a real face to face earbending in my best pompous military fashion (years of training for that of course!).

What was amazing was that I was watching this pickpocket all the time and he still managed to unzip a large bag and take out the purse without me or anyone else seeing. Reminded me of a good party magician. Two things struck me, the first was that the conductress had stayed overlong at the other end of the bus. I think she knew he was there and was keeping safe. The second was that after he got off I was astounded to see that just two seats away from the woman was a Riga policeman. He had sat through it all and done nothing. What a bunch they are........

PENSIONS

The decision of the Latvian government to reduce their pension contributions by 40% does not bode well. Pensioners are already the lowest of the low in payment terms. There are so many other things they could do to save money first. I wonder if they really have a clue?

I note in Dienas Business that Oberhouse Estonia are talking up the housing market in the Baltics. They are clearly not looking at the same figures that I am. Rental prices are dropping rapidly. Mind after a few phone calls to owners, customer service has not improved yet.

WANT NEW STAIRS - COME TO LATVIA!

Yesterday I visited the Latvian building exhibition in Kipsala looking for new clients. I went with a colleague who is fixing up his old house so we needed to ask loads of questions about basic stuff like costs and delivery times. I also needed to do some research for the British Ambassador Richard Moon about who wanted to Export to UK and what UK companies were present.

Crisis there may be, but it has not made the industry improve its customer relations and selling ability. On stand after stand we met bored looking staff who did not want to talk or help. On one stand selling wooden doors the staff just surfed the Internet while we opened all the doors by ourselves and then left - unhelped. At the Lode brick making stand, the front man was totally rude and dismissed us not even listening to what we wanted to ask. We were horrified. I know the Lode boss so will be phoning him today.

There were exceptions. The wonderful man trying to sell us baths, from company Vannas, was as good a salesman as it gets. He was committed, funny, knowledgeable and dynamic. We struggled to get away! On another stand the also very dynamic wooden floor salesman said without a hint of irony that his company had not yet seen evidence of the crisis. I hope they pay him well and realise what a gem they have. I also had a super chat about water pumps on one stand. I hope they sell some, they deserve to.

Things that were also noticeable were the disproportionally large amount of Russian speakers involved in the building and interior fittings trade, the lack of English within the trade as a whole and the fact that virtually every stand was selling foreign goods (not much from UK and USA mind) from all over Europe and Canada even though most of those articles could have been sourced and made here in Latvia. It beggars belief that wooden products should be imported from Canada and Italy. The best things made in Latvia were the stairs. They were pure works of art. I have never seen such design and quality before. Please come here if you want stairs....

It was an interesting day but I was left with a feeling that here was a national industry in crisis and not trying to help itself at all. It was sad really.

SNOW

Well I mentioned spring on my twitter blog and down comes the snow. Loads of it. Politically we are still waiting for a complete list of the new Government. Some of the lesser posts are part of below the surface haggling. The SCP has its party congress this week so we shall see what the leaders there say about the whole affair. There is still no apparent leadership from the new cabinet and without this there can be no clear progress. I suppose my hope is that Latvia really is like Italy and manages without a Government!

No visible new evidence of change on the crisis. Depressingly I saw two beggars sitting in the slushy snow near Hotel Latvia last night. They were both soaked through. That is no life for any human being. It has got to be wrong. A police car drove past as I was there and both policemen looked out and laughed. That was the saddest thing of the day for me. When the official part of a nation does not care then it is a short run to the whole society losing its soul. The good news is that some new shops have taken over the premises of one or two of those that closed. There is still hope.....

CAR SALES

Not all of Eastern Europe is dying of starvation yet. In Latvia the February new car sales dropped from over 4000 last year to under 400 this. Warsaw Voice reports that new cars sales in Poland has gone up by 13% monthly to over 13000 sales last month. This is an annual increase of 7%. What are they doing that we are not? Buying cars is the simple answer!

NETWORKING EVENT - AND SCAMS

Well the networking event in Arena Riga wasn't. It simply was not a business event. There were too many speakers, unrehearsed and simply wanting to spout political nonsense. We all know that the government has failed but until the SCP get in there is little point wasting time trying to tell any of the current lot what to do because they will not listen. There was virtually no chance to network in any effective way, no name tags, no ideas of companies or products, just faces and nonsense. What a wasted evening it would have been had I not been rescued by Jevgeny who took me home for beer and snacks and chance to talk proper business.

Now to scams. I have got bored of the Nigerian nonsense. The numbers of scam messages do not seem to decrease. It is time that this was pursued internationally and people were put in prison. But yesterday I got a clever one from Amazon.co.uk trying to get me to give my card details, then one from Hong Kong about selling domain names and last night a phone call from Japan. The world wide recession is going to increase the number of people doing things like this and Internet crime will rise exponentially. People need to be on the lookout for dishonesty and really trust no email that they are not expecting. If something sounds too good to be true, it is...........

SLOW SLIDE DOWNHILL CONTINUES

The slide downhill continues. Prime Minister Godmanis has left the government and the bargaining has begun, still without the Russian party of course. They will be in the government because they have too many seats not to be, but unlike America which has now officially embraced minorities, the idea of the Russian speakers being in control was too much for president Zattlers who even refused to see their candidate. But it will be interesting to see as the financial pips squeek how many of the anti Russian policies last. Not many is my guess.

Shops continue to close, especially in the expensive areas near the centre. When I told my sister about this, she said quickly "just like Swansea then!". So perhaps my trip last weekend to Surrey which still looks as prosperous as ever should have been to Wales to look at things there.

There is a bit of a fightback though. Tomorrow there will be a mass networking event for 2000 Latvian business leaders in Arena Riga. Apparently the President will attend as will VVF the last President. I shall go - and report back.

CALM BEFORE THE STORM

President Zattlers has gone on record now saying that he thinks people do not trust him. Well no one that I speak to thinks of him as anything other than a puppet of the ruling Tautas Party. They have now dropped in the polls to a little over 2%. If I recall rightly, this is even less than Mugabe gets in Zimbabwe and that must be saying something. At least unlike that unhappy country, we do not seem yet to be on the way to a million Lat note to buy a pack of chewing gum. In my local food shop prices this week have actually dropped for staples like milk and Cadburies fruit and nut chocolate, and supermarket chain Rimi are price busting hard by bringing in their own brands for coffee and cereals. The coffee was half the price of other brands. I just wish they were running the heating company for Riga. Heating prices are absurd and getting worse.

Whilst people watching this week, it is clear that we are becoming a nation of haves and have nots. The haves are still spending like there is no future. In the Spy Bar (which was full) on Thursday, students were happily drinking beer at 2 lats 50 a litre and did not seem as worried as I was about the prices. And the cafes are still full of people eating out. But the real cuts have not yet come. The government have announced that the public kindergartens will close for a month in July. That will have an immediate effect on the pockets of many families - or there will be a lot of grandmas on childminding duty.

My feeling now is that we will have another month or two at this stage of the recession. Then the high level of unemployment payments will drop dramatically and the national money flow will reduce. It will take two months or so for this to have an adverse effect on small companies and then another round of redundancies will start. June and July are the test months. If we get lots of tourists we might survive, but if not then I predict that the number of "for sale" and "for rent'' signs will climb dramatically.

HOT STUFF

There is a sign on the communal front door of our house advertising seminars for locals to come and talk about the awful heating costs demanded by Riga's heating company. Here in Riga most buildings are on the central heating network. It is always one day behind the curve, so it is cold when it is cold and hot when it is hot - simple really! You can see where the pipes go because they heat up half of the countryside and roads as well. No matter how cold it is there are broad swathes of Riga that snow never covers because they are simply too warm from the pipes running underneath.

This is party of a national problem - government monopolies! A few weeks ago I attended a meeting with the national electricity company who also have the same disease. When I suggested that there were available better local finance and social models for power (like Flensburg in Germany who are bidding for the Ventspils heating contract for example) the head planner answered me as though I was from the moon and quickly found it was time to leave! We still have a deep official culture of "mummy knows best" here and anything not agreeing with official plans must be wrong.

Sadly I doubt that our seminars will do much. I will try to attend because my last bill was extortionate by any standards. This is hurting me too, but not as much as the other tenants who are unemployed and get less pension each month than the cost of the bill. They cannot pay!

REZEKNE JAM

After my comments about the awfulness of Latvian radio two yesterday, which by the way, is in no comparison to the awfulness of Suffolk radio, I went to the spy bar in Old Riga yesterday evening to listen to a group of youngsters from Rezekne playing Latgalian music. It was really magical stuff. The youngsters play a combination of violins, bagpipes, accordions and drums and they sang really haunting Latvian, Russian and particularly Latgalian melodies. The sounds and harmonies were amazing and totally different from anything I have heard before. They play every Thursday and I shall be going there again..

TRANSPORT OF JOY

The bus and tram drivers of Riga are a breed apart. Most of them have been to the misery school of social interaction and are highly skilled in working all day without smiling at all. They are also skilled at driving with one hand and peeling 50 Centime tickets like a card sharp sliding the ace of hearts off the bottom of the pack. They force us all to listen to their music and this can be acutely depressing on a cold morning. This runs the full range of tastes from hard modern Russian pop to Latvian radio 2 that features some of the most depressing music known to man. It could be from any European country and usually features the accordion in full flow.

But today when I got on the number 6 tram at the stop by the wonderfully cheap Nelda supermarket in Teika, it was Opera blasting out loud from the loudspeakers. And it was good singing too. The journey was considerably more uplifting than normal.

Then I heard the rumour that two thirds of Latvian families have not paid their heating bills this month. As mine is higher than my usual UK bill I am not surprised.

A lull in the battle

I have not had much to write the last few days. There appears to be a lull in the battle. Not of course for the Agriculture minister Mr Roze who got his marching orders after the Government caved in to protesting tractor driving farmers invading Riga to the tune of 22 Million lats. It will not do much except keep the protests at bay for a while longer.

I sat in on a meeting with the head of the national bank yesterday. He did not give a sterling performance but that is probably understandable. he is in deep trouble and everyone knows it. he talked about where the government intends to place the loan, devaluation and Euroisation. Conclusions were hard to find but he did stress the need for stability. What was not clear was how much the shortfall will be in the national budget next year. He seemed to have few real solutions except hope.

I was interviewed by a remarkably bright young Swedish freelance journalist this morning. It was interesting because his questions showed that he, and clearly others in his country see Latvia as a modern democracy with similar values to their own. My Latvian colleague soon put him straight as to why this crisis was so bad and whose fault it was. Examples of corruption and inefficiency were on the tip of his tongue. I just listened and understood again the depth of contempt in which PM Godmanis and his government, including the President Zattlers, are held.

Another small bit of evidence of the growing recession is that now at the supermarket checkouts there are always small piles of unbought goods that have been left at the till or even in the baskets. These piles are growing noticeably larger each visit.

Tomorrow I am going to talk to some investors about making a new business web portal. Might be interesting.

RECESSION - THE PACE GATHERS!

After a week of looking for my own evidence of what is happening in the Latvian recession, the Internet portal Delphi said this evening that 14% are now unemployed.

But before I comment on what is happening, thank you to everyone who expressed worry about my fall on the ice last week. I still have the last bits of the bruise on my hip but I feel fine now and am back running. Not a nice happening though. Its lucky I am a young thing!

OK back to the recession - well one clear change has been the improved traffic flow as the number of cars in Riga has dropped. The notoriously narrow WEF bridge (VEF to you foreigners - it was next to a huge Soviet electronics factory (Fabrika) in Soviet Times) where we have a daily bottleneck has become no more than a blip on the regular journey. The buses are more full too. The shops are still reducing prices in the sale although a couple of days ago I walked along one of the mains streets at lunch time and over 50% of the shops had no shoppers in at all. Chilli Pizza was full mind. There are still some shops trying to sell goods at hugely unrealistic prices but they are now always empty. I give them two months at most. The number of empty shops is increasing slowly. And to cap it all, yesterday we seem to have had a bank raid in the middle of town. Crime is probably coming back.

But on the good side, a couple of new white goods shops have opened and people are still using expensive Stockmans store, and going to the cinema. A major out of town shopping mall is set to open in July on the main Tallinn road. One friend on Saturday was looking for a summer house to buy. Those who have, clearly still shop!!

Apparently in the Russian press yesterday one commentator said that Latvia would be bankrupt in 2 years. I think that any country that has to borrow seven and half Billion from its friends is pretty much there already. But I am told by my political friends that the Prime Minister thinks the real truth of the situation is too awful to tell the public. I have mixed feelings on this. I think the days of treating the people as serfs has gone, except in Russia that is. Latvians have been free of the Soviet yoke for 17 years so it is time they had a real democracy, not a joke one like now.

The President has also apparently bottled on his promise to get rid of the government if they fail by March 1st. He has realised that a new Team would get rid of him pretty sharpish too. His standing this week has not been helped by the fact that people have found out that he has been supporting his household to the tune of a BMW and a few other extras from the (obtuse) Defence Budget.

The big questions now are what will be cut to cope with the national deficit, how will the government afford the extra and unplanned for unemployment that only they have failed to see coming, and will crime rise to mid 90s proportions? And the real biggie of course is, what can possibly get us out of this ever deepening hole?

Hopefully investors will see the benefits of buying up every bit Latvia they can and making it work to their and our advantage. There are many benefits. The population is highly educated, the countryside and the ladies beautiful and the beer is excellent. Thankfully there is some small evidence that they might, as even today I have had a phone call from a Barcelona firm wanting to put me in touch with European hedge fund investors who deal in distressed properties. We do have some of these unfinished projects on view. There is a fast spreading joke that the national sport is now building a fence and then digging deep holes inside for people to look at.

I have yet to identify what my role is going to be in all this mess. I have no desire to join the unemployed so I need to persuade firms that my excellent advice is what they need. One of my consulting colleagues got a lovely reply from a large Latvian firm to his business offer. It said, sorry we cannot afford to hire consultants to get us out of trouble as we are in a financial mess!