Ventspils EIB loan delayed

RIGA - Representatives from the European Investment Bank and Ventspils Free Port signed an 8 million euro ($8.7 million) loan agreement, but the Ministry of Finance has thus far refused to sign a state guarantee because it says it has no control over how the money will be spent.

The EIB, the long-term financing arm of the European Union, agreed to finance expansion and improvement of the Ventspils Port, including dredging of the Port's river channel that will allow it to accommodate larger vessels.

But for more than two months, the ministry says it has not had a representative on the port's board, which is supposed to be manned with representatives from Ventspils and the state government.

Latvia's law on ports mandates that a Finance Ministry official sit on the board of each port. Baiba Melnace, a spokeswoman for the ministry, said that money will not be released until an agreement is reached, which she said should happen in the near future.

"It has to happen and it will happen," she said.

Officials from Ventspils Port, as well as Ventspils Mayor Aivars Lembergs, said they support having a Finance Ministry representative on the board, but Melnace said that until now, the port has been slow to respond to the ministry's concerns.

Grammatiki Papadopetrou-Tsingou, head of the EIB's Central and Eastern Europe division, said agreements between the state and the loan recipient are a discussion for the Latvian authorities.

She said Ventspils Port is a crucial link between Russia and Western Europe and a major contributor to Latvia's GDP, thus a worthy destination for financing.

In 1997, the EIB advanced an initial 20 million euros to Ventspils for deepening sea access. The new loan means the EIB has financed 140 million euros worth of projects in Latvia since 1994.

"We have an on-going cooperation with Latvia, and every day it becomes wider and more intensive, and that cooperation has been very good from the beginning," Tsingou said.

This new loan comes on the heels of the European Commission's progress report, released Oct. 13. Latvia was ranked as a fully functional market economy and one of the best prepared candidate countries in the second wave of applicants.

"In a way, it is a test for Latvia," said Roberts Idelsons, managing director of Suprema Securities in Riga. "But any loan from international institutions is, in some way, a test."