A major roadblock to be surmounted is the need to qualify for a certificate called the International Standards Organization (ISO) 9000 requiring production updates that can delay exports to European Union and other Western countries for months.
"Getting the ISO international certification is the only way to get into these markets. It is the way to go, but it covers everything - production, supplies, management and shipping," Ave Lat Marketing Director Ainars Lodzins said. "It costs a fortune and takes a long time. Getting into these markets is not a question of one week or one month," Lodzins said.
Ave Lat companies such as alcoholic beverage maker Rigas Vini, with exports cut from 40 percent last year to 20 percent of its product this year, have been exporting to the United States, Germany and Denmark already without the ISO 9000. How can that be? Lodzins has the answer.
"If a company is selling without its label, as through a chain store, then the trading company has the certification responsibility.
If we want to sell under our own labels, we must have an ISO 9000," he said. Money is the difference. "We have to take very low prices if we sell bulk without our labels," said Lodzins. "It is a miserable percentage. It takes thousands and thousands of tons to make any profit." Lodzins said that Russian producers will begin to get certification in three to five years, offering competition in western markets.
A dairy products company, Rigas Piensaimnieks, is half way to getting its ISO 9000, which will increase its export potential to the Netherlands, Germany and Scandinavia, spokesman Arnis Zacmanis said. The company is one of a few that is still exporting to Russia under special arrangements. To move products like yogurt, processed cheese, and butter, RP is selling to Russian partners on a "cash and carry" basis, Zacmanis said. "That's why at the moment there is no company money frozen in Russia," he said. "Compared to the pre-crisis period, there is still considerable export of traditional production, especially on a prepayment basis which the company considers the only way to work with Russia at the moment."
Fish canner Salagriva Ô95, which used to sell almost all its goods to Russia, is on the hunt for new markets but in the duration is still selling a limited amount of fish to Russia in barter transactions. The company has set up a marketing division to sell more products in Latvia, Lithuania and Hungary with test shipments abroad.
Latvian exports to Russia dropped 10.6 million lats ($18.2 million) during the second quarter compared to 1998, according to Ministry of Economy figures.
The situation is worse since the ruble crisis, the ministry said Sept. 21, but analysts have not completely compiled the figures for July and August, spokeswoman Ruta Bierande said.
The export bottleneck has led to employee layoffs as in Daugavpils Motor Chain Works where almost 400 of 1,300 employees will have to leave work in the next month. The textile company Lauma in Liepaja halted production for three weeks beginning Sept. 14 and will reduce its 2,300 employees by 60 before the end of the year.
Fish have been especially hard hit. The fish processing plant Kursa, which usually exports to Belarus and Russia, is fishing only for the domestic market this season. Deteriorating Latvian-Russian relations, followed by the Russian currency crisis, have reduced the company's profits for the first half of 1998 over last year's period by almost 70 percent.
Some companies have modified products to appeal to new customers. Kaija fish canners have turned out 53 percent more "fast fix" prepared fish products in 1998 than the comparable period last year. The company told the Baltic News Service that it still has a wholesale base in St. Petersburg where Kaija products sell for hard currency.
Lodzins hopes that government help promised by the Ministry of Economics comes through.
"We at least have promises from our government. We need short term loans and tax relief," he said
The Minister of Economics Laimonis Strujevics has sent a proposal to Prime Minister Guntars Krasts with measures to mitigate the effects of the Russian crisis on Latvian companies. These include short-term assistance and extended credit guarantees, export insurance and direct financing to exporters.
"In our view, the export volumes to Russia will not be decreasing any more. The most important thing to consider now is restoring previous trade relations and how much time that will take," Strujevics said. "We hope that the new Russian government will do everything necessary in order that the financial situation in Russia will improve step by step."
Strujevics earlier this month told reporters that Latvian businessmen should explore markets in other CIS countries as Kazakhtstan or Central Asia to keep their hands on the eastern markets and return to Russia when its markets improve.
Getting ISO 9000 certificates will help even out balance sheets, Lodzins said, but in a few years, the Baltics will face new competition from Russia in Western and EU markets.
"In three to five years, we will all be under the same ISO requirements as Western markets. We will have to fight the Russian producers then," he said. "Primakov has said that one of the things he will emphasize in the economic recovery is Russian exports."