The week kicked off with a scandal: management staff of the largest Latvian state enterprises Latvenergo and Latvijas dzelzceļš decided to increase salaries for top-managers. What makes this situation even more “delicate” is the fact that the reform of their salaries was carried out while the Economy Minister was away on vacation.

Society will not support

Nonetheless, the Cabinet of Ministers indirectly provoked this scandal with its last year’s decision that was supposed to officially mark the country’s overcoming of the crisis. With that, the management staff of large state enterprises (with turnover of over 40 million LVL) were allowed to combine posts and, as a result, increase their wages. However, it is clear that even the members of the government did not expect that the rise in salaries would be so significant. As it become known to the Latvian television, the total salary of the head of Latvijas Dzelzsceļš Ugis Magonis grew from 2.6 thousand to 8.5 thousand LVL. Salaries of members of the Board – from 2.4 to 6.8 thousand LVL. Monthly salary of the head of Latvenergo Aris Zigurs reached 8.7 thousand LVL per month, that of members of the Board – 7.5 thousand.

PM Valdis Dombrovskis ordered ministers of transport and economy to determine how justified (if justified at all) were the actions of the management staff of state companies. According to him, even though the law allows the increase of salaries of top managers, society will never accept this kind of increase. Furthermore, the head of the government said that a similar situation may be present in enterprises under Agriculture and Healthcare ministries.

Economy Minister Daniels Pavluts has already responded to the signal: he requested the the state secretary of the ministry Juris Puce provide explanations to the reasons why Latvenergo changed its organizational structure (salaries went up because of the introduction of new jobs) and salaries of top managers. According to Pavluts’ press secretary, the salary reform was carried out while he was away on his leave.

Sometimes it goes down

The index of Latvia’s annual inflation, on the other hand, brought good news this week: according to results of 2012, it was 2.3% – nearly twice as low as the index of 2011 (4.4%). The main factors that affected consumer price dynamics remain the same. Among external factor – global prices on energy sources and food. Among domestic – state of demand on the market and administratively regulated prices. Inflation expectations also play a vital role. They prepare consumers and allow the side of supply to increase prices.

How will these factors act in the next 12 months. “The global market has seen a rapid reduction of prices on energy sources and food in the last several months. The price on crude and diesel fuel has been rather downward oriented the past nine months. This could mean the end for the increase of tariffs on gas and heat,” – says senior economist of Citadele Bank Zigurds Vaikulis.

Experts expect that inflation will remain stable in the coming year. They do expect, on the other hand, that consumer prices may go up in 2014.

Officials have a lot of work

New year has come, and legislators once again have work to do. The Saeima’s winter session began this week, which includes a total of 174 draft laws.

It is expected that discussions will heat up around the Law on Euro Adoption in Latvia. The document is marked urgent: its was approved in the first reading in the middle of December. It is planned to approve it in the final, second, reading on January 31. Opposition officials previously voted against the law and threatened to initiate a referendum on the dates of Euro adoption. According to PM Valdis Dombrovskis, Latvia will not receive an invitation to join Eurozone while the issue of a possible referendum is open.

As part of the winter session, the long suffering amendments to the Law on Construction, which have been under fire for the last eight years.

Also, officials will be working on the Law on Public Procurement. The planned changes will relieve entrepreneurs from the necessity to personally prove the non-existence of unfulfilled obligations before the state budget.

Furthermore, during the winter session will include reviews of different proposals on the changes to the Insolvency Law. The amendments currently at the parliament propose the reduction of the terms of the bankruptcy procedure of individuals from the current 1.5-4 years to 1-1.5 years.

The Chinese to come to Latvia to raise children

Finally, some details of the program on offering temporary residence permits in exchange for investments became known this week. So far this program has been fairly popular among Russians: they form 72.4% of the total interested parties. They are mostly owners of small and medium business, as well as top-managers of large companies. Most of them are not interested in Latvian residence permit. However, some of them relocate to Latvia.

The most impressive dynamics are shown by the Chinese. While there were only 11 applicants from China that wanted to receive residence permits in Latvia in 2011, in 2012, this number increased to 118. Their interest towards Latvia can be explained with demographic reasons. In China, they are only allowed to have one child. A second passport, however, gives them the chance to have more children.

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