Latvia to help local producers

  • 1998-10-29
  • Anastasia Styopina
RIGA - The Latvian government is the last of the three Baltic states to launch measures to help local producers survive the Russian crisis.

Estonia has dropped penalty fines for companies that cannot pay taxes on time. Lithuania is buying piled up goods from local producers and barters them for oil, gas or other resources.

At its Oct. 27 session, the Latvian Cabinet of Ministers will look into the Economics Ministry's proposition on how to support ailing companies.

Latvian companies lost their traditional export market because of the financial crisis that crashed the Russian market. Many companies, which exported most of their products to Russia, have halted production. About 4,000 people have been laid off their jobs, and the Welfare Ministry estimates the crisis may affect about 10,000 people.

Even if the Economics Ministry's propositions will fall through, the government will give a helping hand only to companies that are being privatized or have been partially privatized.

Spokesman Janis Brende said the ministry proposed companies should get interest-free credit from the government. The Latvian Development Agency will chose the companies and a Finance Ministry committee will allocate the money based on the companies' business plans.

The Economics Ministry said all money for state support should come from privatization revenues, but the privatization fund is unlikely to have free means for that.

Only 21.5 million lats ($38.4 million) have been collected as of Sept.1, while the Finance Ministry planned yearly revenues of 51.2 million lats. Low privatization revenues also endanger other Economics Ministry propositions, including one that would have the government promote exports to new markets by covering the company's expenses when it participates in international exhibitions and by paying for a new market analysis.

Finance Minister Roberts Zile, however, has been reluctant to sanction a full-scale bailout operation for companies in crisis.

"The state is not a creditor. There are normal mechanisms with which the state can help in case of short term difficulties," Zile said, referring to extending terms of tax payment.

In October, the Finance Ministry's speical committee extended terms of tax payment for eight companies.

While the government will be deciding on how to help companies in this crisis situation, the state agency Latvijas Eksportkredits blamed Riga for neglecting the structure that has been there to help exporters since 1995.

Latvijas Eksportkredits is a state agency that provides state export support policy, but President Dainis Dille said the government does not allocate enough money.

"Our share capital had to increase to 5 million lats in five years after the agency was founded, but our share capital now is only 520,000 million lats and the reserve capital is 200,000," Dille said.

The agency provides guarantees, finances companies and insures against the failure of buyers to pay for exported goods. It now has liabilities of 2.9 million lats. Dille said the agency cannot continue to issue guarantees or finance companies because its liabilities are already nearly four times greater than its share capital.

The government allocated 6 million lats Oct. 20 from the emergency fund to Latvijas Eksportkredits in case the agency will have to pay off its liabilities.