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Wednesday 23.08.2017 | Name days: Valgudis, Ralfs, Vitālijs

Economic diary. Latvia defends against foreigners

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThere were two major events in Latvia this week. Both demonstrated the intentions of Latvian authorities to defend the country’s domestic market from the influence of foreign investors.

Saeima’s Economic, Agricultural, Environmental and Regional Policy Committee supported amendments to the Law on Land Privatisation in Rural Areas in the second reading. These amendments are meant to make sure that a single legal or private person is only allowed to buy no more than 2,000 ha of agricultural land. Changes to regulations are meant to prevent speculations with arable land.

The bulk of debates in the parliament revolved around two important matters – maximum allowed area of land to be allowed to be bought by interested parties regardless of their citizenship and place of registration and the introduction of restrictions on land transactions for citizens of other EU countries. According to Deputy Chairwoman of the Farmers’ Saeima, Maira Dzelzkaleja, the latter would allow authorities to sort out Latvia’s legislation in order not to allow speculations to take place after May 1st, when the moratorium on the procurement of agricultural land is set to end.

It should be added that the associations present in this sector do not have the same views on this matter. The Farmers’ Saeima and Latvian Association of Agricultural Cooperatives believe the restriction should be set at 3,000 ha, as it was previously proposed by the Agriculture Ministry. Executive Director of Latvian Association of Agricultural Cooperatives Evija Gunika explains that there are already 22 agricultural enterprises in Latvia that own areas as large as 2,000 ha. The current redaction of the law practically closes off any and all development roads for these enterprises.

Chairwoman of the Latvian Farmers Federation Agita Hauka believes that by approving these amendments, deputies are trying to lobby interests of oligarchs who work in accordance with the American scheme of large farms that own 2,000 – 6,000 ha of arable land. According to the expert, given the current rural farming model in the country, Latvian farmers need 250-300 ha or land to be competitive. This is why the organization had initially offered to set the maximum area at 500 ha, as it is in Lithuania. Agriculture Ministry has made it its priority for 2014-2020 to develop small and medium farms.

According to data from the Latvian Farmers Federation, there are currently 64,000 agricultural enterprises in Latvia. Only 400 of them own areas of arable land larger than 500 ha.

Too many people around

Another legislative initiative came from the National Alliance this week. This political power offered to temporarily stop the issuing of residence permits to investors from third countries. The alliance explained that it is in the interest of state security. Amendments to the Immigration Law have been handed in for review.

According to Romans Naudins, Environmental Protection and Regional Development Ministry and member of the National Alliance, people who receive residence permits in Latvia are usually wealthy people. Therefore, such people can have a potential influence on politics in Latvia. Not by the means of armoured tanks, but by the means of mass media.

Meanwhile, according to information from Office of Citizenship and Migration Affairs, Latvia’s economy has already received EUR 97 million over the past three months from foreign investments in real estate and business in exchange for residence permits.

According to deputy manager of the office, Maira Roze, the number of people who are interested in acquiring residence permits in Latvia has recently increased. People are aware of the upcoming changes, so they hurry to make it before then. The office has been receiving an average of 190 applications every month since the beginning of the year.

Investment and Development Agency of Latvia believes the situation in Ukraine presents some degree of opportunity for Latvia. Investments continue to pour into the country from the east. This is mostly because the situation in Latvia is far more predictable than it is in Ukraine. This is why foreign enterprises often decide to relocate their production to Latvia, says the head of the agency, Ainars Ozols.

President of Latio, Edgars Sins, believes Latvia’s real estate market does not have an alternative driving engine other than residence permits in exchange for investments. Banks are reluctant to issue loans, export remains unstable and the transport sector lacks cargo to handle.

At least we have a place to live

This week, Swedbank Institute for Private Finances presented a survey on budgets of households in Baltic capitals. As it turns out – households in Riga are the poorest in the region. Results show that households in Riga typically have only EUR 660 left after paying for utilities and living expenses. This amount is equal to 53% of their monthly income. In Tallinn, on the other hand, this figure is EUR 1266 (71% of monthly income). That of Vilnius is EUR 670 (56%).

This makes households in Tallinn more financially capable of spending money on other things – clothes, household goods, medicine, education, entertainment and other things. Households in Vilnius and Riga are required to plan their expenses more carefully, so that they can allocate money on immediate necessities.

There is some good news as well. Most Baltic residents, according to Eurostat, live in private or family homes – 72% in Latvia, 85% in Lithuania and 64% in Estonia. Living in a private apartment is much cheaper in comparison with rented apartments or apartments bought in credit.


Leave a reply

  1. W. says:

    I think the benefits of foreign investors in real estate far outweigh the disadvantages. They bring money to the economy, and even if they leave their apartments empty they pay property tax every year.

    With farm land it is of course different. It is not good if some giga corporation buys up all the land and make monster farms. On the other hand, can the situation on the country side be any worse than it is now? Poor and abandoned :(

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