Who stole the time?

Two and a half years since I last wrote. Officially, and if you read the international news, Latvia is back on its feet, unofficially it is not. There is still lots of poverty below the surface. After a couple of years of relative quiet, the beggars are back in the old town. They never really went away but the police seem to have relaxed their hold again. There will be many views on why this has happened. But the shops are definitely getting busier and the traffic is visibly back well beyond the amount of the 2008 crisis. Apparently agriculture is beginning to work at last.

But the real damage has been out in the countryside. There are many ruined and empty farm houses and villages are losing population steadily. The flat prices are coming down and in some places they are now ridiculously low. There would be more on the market but many families who have emigrated have just shut up shop and left. The large numbers of black windows on winter evenings bear witness to this.

Something is still wrong in the way Government does business. The reductions in 2008 did not bring reform. The education system remains archaic from 10 years and upwards. there is simply no modernisation. It seems as if there is a death wish to retain culture and labguage as the driving forces ignoring the reality of the surrounding world. The children are being punished. The Russian speakers grow up better and more widely educated and far more business and internationally aware. Latvians are condemned to public service as many do not speak Russian and therefore cannot service half the population. But to argue this is heresy - culture rules OK!

Now I am back writing I suppose I must continue.I need to open my eyes again. There are many remarkable things happening in this lovely country - but there are many dumb things as well. It will be a close race to see who wins.

Tomorrow I am going to talk to the Justice Minister Bordans. he has struck a blow for honesty and his party want remove him. Now that is really dumb because it just points the corruption finger firmly at them.. There are many investors looking to see who wins, especially the banks who have lost miliions here

Glen.

THE CORNER IS TURNED!

Well time to write again.

I have found myself in recent weeks saying that the corner of this crisis has turned. What makes me say that? First were the fireworks at New Year. They were everywhere and continued filling the sky with colour and sparkle for an hour or more. The amount was really staggering. No country in crisis could waste so much money. It shows that some spare money is coming back. The traffic is also back up to prosperity levels and the driving is almost as bad as it was before - not much petrol saving here! And in the main streets now virtually all shops are being used. There are still some blank stares but the numbers are few. Rents are clearly becoming realistic. The shops are generally more active. But a word of caution.

Not everyone shares in this change. There are still many beggars and destitute walking the streets. Property experts try to say that flat prices are going up but the truth is that the average price is, but this is because there are now many of the expensive flats for open sale and hire that for two years were simply not offered. And the banks are apparently more willing to loan for house purchase again. But I suspect that the bargains have mainly gone - for now that is. I am sure that there will be reductions for another 6 months as there are still people with bank loans hanging over them.

But a radical and possibly unpopular thought. I feel that for the long term, this crisis has possibly not been deep enough for the country to understand how to do business in the world. Today I went into a shop to browse for some trousers. I did not have time to buy today. As I started to leave the two surly looking shop attendants talking to themselves at the back of the shop scowled even deeper and one of them muttered something and glared at me directly- without any self consciousness about their rudeness. I think I will not be going back. I spent a few days in Dusseldorf recently and the level of service was just so much higher than Riga everywhere we went. Shop assistants were positively wonderful. If things become better here quickly then I fear a return to the awful pre-crisis service. And the shops in Riga are still asking stupid prices for things with the winter and spring stock. Clothes prices here are more in Lats than they were in Dusseldorf in Euros (for exactly the same items)

But like it or not, we have what we have. Let us hope that this government holds long enough to continue the stability. The refusal by the Prime Minister of the hamfisted and blatantly political structural and work changes wanted by the Head of the Anti Corruption Bureau is at least a good start. But reform still has to be started. Education and Health need some hard thinking and new systems. They simply do not work. If visiting a doctor and getting the medicine can cost 50 Euros or more for a visit, that is a system failing everyone except itself.

The big activity this year will be the selection of a new President or the reselection of President Zattlers. After an awful start he has settled down to not doing a bad job at all. He is showing more astuteness and confidence each outing and his surgeons intelligence that he hid for so long is now being used to the full. He will be a hard person to better this time around.

Stockmans sale - hope or dispair?

The huge numbers shopping in the "madness days" sale in Stockmans this last few days tell a tale. What that tale is though is unclear. On one hand it may be a sign that the recent election has brought hope of a recovery. Certainly the idea that a Dombrovskis-led coalition of virtually the whole Parliament, including the minority speakers is unusual, outside of Finland that is - where it is normal (and very successful) business. But apart from this step into the political unknown, it is hard to find evidence of solid improvement. More on this later.

Of course the sale may just have been a welcome relief from the rather bleak couple of years that many have suffered. Sadly another hard winter looks to be on the cards for many with heating bills likely to just as bad again. Coming back regularly from Bulgaria that is in much the same state, I see many similarities with excessively large cars living side by side with beggars. But there I have seen many horses and carts on the roads, they seem to have disappeared here!

But has Riga started to show signs of improvement? The signs here are mixed. But I do feel that there has been no more general downward movement over the summer. Flat prices for rent and sale continue to fall steadily despite the bizarre "talking up" of the real estate companies trying to get investors onto the hook. The number of beggars and visible alcoholics is growing slowly but steadily - sadly too many of them are dying young and unnamed as the monthly newspaper reports show. Shops are still closing regularly but Latvia is showing amazing robustness in this regard as new shops, bars, clubs and cafes seem to open immediately. Only a few places seem to stay stubbornly closed, and I suspect that the owners are simply asking too much rent.

Sadly "service" still sucks in Riga and is a common comment from tourists. Typically, museums close when people want to visit - as I found to my cost when my mother and sister came recently. It is also noticeable that shop prices have started to creep up again. This is foolishness as those who charge too much will be penalised by the public. One clothes shop I frequent was expensive two years ago but has managed to gather a great collection of clothes at modest prices and kept the look and feel of an expensive store. Their service is great too. It can be done. But I went to the chemists at Riga airport last week and the girl was seriously rude and offhand. It is so simple to be polite and helpful - it brings customers back. She clearly thought I was a tourist so it doesn't matter! Her mistake. Now she is immortalised as being rude in print.

But there has to be some change if we are going to make headway. Last year along with my business colleague Bill from UK we worked with the Ministry of Economy at Under Secretary level to help them understand how to use the European funds to create transformation using LEAN business processes. We wrote presented and ran seminars. We helped them produce a plan and helped them with the bill for Parliament. But at every stage they watered down the proposals so that responsibility would be transferred to LIAA and the associations and no one in the Ministry would have to do any work. We told them directly in print that their plan was wrong and would fail. Simply, LIAA and the Associations did not have the experience or capacity to do this work The measures were accepted by cabinet and two weeks ago the head of the Investment Agency LIAA Andris Ozols told me directly that the plan had failed and the money (a huge amount) had been lost with no effect. Last week I saw that the Associations had written to the PM for him to do something. They have short memories. I offered to help them for nothing and they refused. They deserve to fail. Reality has to be accepted sooner or later. The level of manufacturing and organisational knowledge here is low and will only be improved by purchasing skilled foreign help.

This week I am running a business forum in Riga (details on my website

www.latvia-business.com). What has amazed me is the number of my contacts who have changed jobs or their companies no longer exist. At least 60% of my business cards are now out of date and few of them are more than 2 years old. Many of the people are now abroad. It reflects a huge national change. We shall see in the coming months if this is change for the better.

Suddenly - nothing happened!

A month or more has passed since my last post. I have not written for several reasons. Firstly I have been working in Bulgaria fairly solidly, secondly not much has changed and thirdly I have seen few cameos worth recounting in print. Now I do not think that we are seeing a plateau in the crisis, more I suspect that much of the continuing movement is under the surface. There is no serious evidence of visible improvement although the international experts choose to say there is some.

So what do I see today. There are still plenty of people avoiding paying on the trams. The number of visible drunks is increasing in town as is the length of the food queue outside of the Russian Orthodox Church on K Barona. Some of those waiting are clearly more middle class than the usual crowd of last winter. I have seen a gradual reduction in cars parked outside our flats and a steady offering of parking places for rent. But these are small things. There are of course many winners in this game. Those who kept their jobs and the same wage are now much better off as clothes and food have dropped in price. The supermarkets are getting their act together and competing. That is good for all of us.

But through all this there has been a remarkable good humour. There has been no tension between the communities despite the crass language based acts of some of the politicians. I suspect the Russian speakers value the freedom in Latvia and the EU and realise that whilst there is much to be unhappy about here, there is also much to celebrate. We just have to hope that the Government finds the courage to reform badly run ministries rather than raise taxes to pay for them. But I am not sure they have the courage or the skill.

LATVIA - UPTURN OR FALSE DAWN

Last week I saw my first Porche driving through Riga for at least a year. It was as remarkable for being alone as was the tens of them that drove the roads 3 years ago.

I haven't written anything for months but quite simply, there has been so little change to report that it has simply not been worthwhile. But the signs of change are here now. The deep winter snow has disappeared leaving masses of litter, dog pooh and cigarette ends and spring has brought out the first short skirts. Riga transport is trying hard to repair the trams lines distorted by the winter snow and ice. People are eating ice creams already.

The real change is that new shops are opening up all over Riga. The price of renting property has dropped dramatically and it is now worth the gamble. The banks are also more willing to lend. The tourists and businessmen are still here and VAT is being cut for the tourist industry. The Nasty Party has left Government in a gamble to win popularity. We shall see in the October elections if they succeeded.

But not everything is going well. There are still nearly 30% unemployed, people are leaving the country in droves (or trying to), there are more beggars than ever - back to 2000 levels, and there are more flats than ever for sale and rent - at increasing cheap prices. But we have more severe cuts to come in national finances. Add to this the fact that the money from the EU and IMF has to be paid back sooner or later so we have to get more tax back to do this. But where will this money come from? Many companies I know are hurting because serious money for expansion and change is not forthcoming. Several commentators recently have highlighted the fact that there is no stimulus thinking at all in the government policies to get business moving. That is not to say they want lots of free money but just some sensible reforms to make life easier. I have been trying to open another company doing Health Tourism (www.baltichealthtourism.co.uk )and it still took 8 weeks to manage. The bureaucracy is mind numbing. Process still takes precedence over result.

The really good news is that prices have finally reached realistic levels and most of the stupid shops have gone bankrupt. But the national money is still at the wrong value, perhaps as much by 40%. I realise this completely after trips to Bulgaria and Ukraine in recent weeks. Their currency value is much more realistic than here.

We now have a long summer before the elections. I suspect a summer of nonsense. But there is no assurance that the Latvian public will vote for an honest future. Corruption is still endemic here and many people simply don't care. We shall just have to wait and see what sort of future the silent majority wants - but I will not hold my breath for a better future.

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!