Sunday, May 31, 2009

On driving in Latvia, present and recent past

I have started driving more again as summer arrives and I go back and forth to the family summer place in Carnikava for various reasons. I get the feeling that recent habits, which seem to have faded(slightly but noticeably) in the last few years, are re-emerging. Another striking fact is that at  almost every red light in central Riga, you can see around  three to five SUVs (sports utility vehicles, Latvians tend to call them jeeps) among the 10 to 15 cars that usually line up at an intersection. This seems like a high proportion, especially since I was at a gathering recently where a Swedish businessman said that his Latvian partner had driven around 1000 kilometers in Sweden and was surprised to have seen only a handful of Porsche Cayennes. Still another person who runs an auto parts and repair business said that one should look at the tires of the Latvian SUVs. Many still have winter tires because they cannot afford new summer tires at 200 LVL per tire. 
I think the high proportion of SUVs is a sign that the middle classes (who own "ordinary" cars) are driving substantially less than before. For those driving the "jeeps" it may also be a last gasp and a badge of economic success that will not be given up until the bank comes for it. Latvia already is said to be a buyer's market for late model, high-end repossessed vehicle.
I also found the draft of an article that was published in Tallinn' s (now defunct?)  City Paper  four years ago. There have been some changes for the better since, but a lot is still true.


Building a new road for the insane

by Juris Kaza


            If it were only the statistics that counted, I would say Latvia has a come a bit of a way from 1991, when more than 900 people were killed on the roads, with far fewer cars than are registered currently. Today, with luck, the annual contribution of Latvia’s highways and byways to cemetery tenancy will be considerably less. However, for the visitor to Latvia, it is what one sees in day-to-day behavior and not abstract figures that count.

            If you have to drive in this country, then you will be among the most savage, barbarian drivers in Europe. Boorish, too – and this, as one would say of perverted computer software, is a feature and not a bug.

             I kid you not. Do not drive into Latvia with a loaded automatic weapon or even a baseball bat on the “death seat” next to the driver. You will not only be tempted, but also probably morally justified to use one, either or both on many of your fellow drivers.

            There is no typical Latvian driver –rather a varied menagerie of the reckless, loutish, egotistical and thoughtless. You can watch them zooming, whizzing, passing in three different directions – to the right, to the left and some improvised direction in between (this can, perhaps, be done on a S-curve where you start the overtake on one side and finish on the other). 

            Inevitably the moment comes when some huge Scania or Volvo truck appears looming in the rearview mirror. You may notice an imitation license plate in the cab window with a name like “TARMO” embellishing it. As the juggernaut grows still larger in the mirror – tailgating is also a Baltic truckers’ hobby – you face the imposing menace of the Estonian monster truck. These things simply go. It is you and other drivers with an exaggerated attachment to life and limb who move. Tarmo, for all we know, is an inflatable propped on the seat of a machine driven by satellite guidance.

            However, once you subtract the trucks from the wheeled zoo on Latvia’s roads, you are sort of left with the world as it was when the dinosaurs were on the decline. All that other traffic, swirling and parting as Tyrannosaurus Estonicus lumbers along at a relatively lethargic 100+ kph is the furry mammals that supposedly scampered at the feet of the great lizards. But that comparison breaks down – the smaller vehicles and their drivers are nothing like the predecessors of the many warm and cuddly species we enjoy in the contemporary animal kingdom. Drivers in Latvia are the creatures from the Gremlins movies of the 1980s, the screeching rat-bat mutants who took a satanic delight in malicious mischief.

            Alas, even that comparison breaks down, because the average Latvian driver (male) is almost as expressionless –either stone-faced or shitfaced (your guess is as good as mine)—as our pal Inflatable Tarmo. The women – often sleek trophy wives piloting combat-vehicle-sized SUVs with horsepower four times the woman’s kilogram weight – have a bit more written on their visages, along the lines of “I’m dumb, blonde and shouldn’t be driving a left-foot roller skate”.

            Since I spend my summers in Carnikava just north of Riga,  I experience most of the antics of Latvia’s highway Huns (speaking of whom, we’ll get to the Germans later) on the stretch of one of Latvia’s laboratories of the “let’s dig something up every summer” school of experimental highway building, the so-called Via Baltica. Mostly it is the segment between Adazi and the posh, by Latvian standards, suburb of Baltezers.

            Here on any day, you can see all the vices of the Latvian road – reckless passing, high speeds, sudden, startling unsignalled lane shifts and the favorite sport of tailgating. Apparently such things as the physics of stopping a vehicle aren’t taught in the driving school classrooms, or if taught, simply dismissed and forgotten. The reassuring thing about Latvian tailgaters is that they probably won’t hit and run should something happen, they’ll hit and sit (next to you, the driver in the front car) after flying in though your rear window.

            I want to interject here that I, who learned to drive in the reputedly bad-road manners Boston (USA) area, sincerely believe that I drive as one of the few who are sane. I do sometimes express my opinions of the other drivers until my wife says that I shouldn’t say “monkey brained moron” and the like when our nine-year-old is in the car.  I actually think, but do not articulate, far worse things: Yo, motherfucker, your Lexus SUV is very fast and yes, only your funeral will be bigger than your fucking car.

            The strange thing is that the often brand new and extravagant vehicles drag racing down the Adazi-Baltezers stretch are probably not, for the most part, purchased by the quick and shady big money that rolled through Latvia in the early 1990s  like a tsunami from the burst bellyful of ownerless post-Soviet assets. A lot of them are bought on the installment plan, leased and otherwise financed from some kind of regular employment or steady business and an above-average income.

            So what we have here are middle and upper income folks Mr. Hyde-ing it as soon as they put the key in the ignition of that BMW. Sudden, apparent prosperity, a caricatured Soviet presumption of how “capitalists” should consume, and the lingering, paranoid inferiority complex of the post-Soviet personality all, perhaps, come into play. It is not possible for all of us to simply drive to work, trusting and respecting other drivers. It is so much easier to hit the gas pedal, come what may and pretend that the entire commute, from home driveway to dumping the monster SUV in a handicapped space to buy cigarettes to the final parking spot by the office is one big thrill-ride.

            When I lived in Germany in the late 1970s, I observed something similar. On the Autobahn, there was always someone flashing super-nova bright high-beams and tailgating at 180 kph until you moved over and let the Teutonic schaefer-hellhound whiz by. Then I thought that Fritz (as Latvians sometimes call Germans) was getting a little Macht Frei (very loosely translated as “making/taking liberties) after three decades of post-war Arbeit (labor). It was also a time when more and more Germans could afford big, fast cars, and the no-speed limit Autobahn was a place to act out being a berserker in contrast to the Ordnung of the workplace and everyday life. Somehow, too, the traces of the totalitarian experience (especially since they largely brought it on themselves, voting for Adolf in ’33) were then still part of the German mentality. Things have probably improved – though I haven’t driven the Autobahn recently– but it took decades.

            For drivers in Latvia, I wonder if some kind of victimhood in reverse is behind this behavior. It is self-assertion on methedrine from a bad and dirty drugs lab. I also suspect it spills over into other aspects of life – the ugly, raving, sometimes Bible thumping mob that wanted to assault Latvia’s first gay and lesbian pride march. They literally wanted to beat and tear these people apart for Christ (who, when I last looked, was called the Lamb, not the Wolverine of God). Put these people in fast cars, and they’ll attempt a few killings for their own personal wolverine, which takes over their brain as soon as the tires start turning.

            This is the really scary aspect. Though I’m no sociopsychiatrist, mob-shrink or whatever they call those who diagnose diseases of the spirit affecting large parts of a society, I see links between the behavior on the roads and the dark undercurrents of homophobia, racism, xenophobia and what is wonderfully described in Latvian as karojoša tumsonība – crusading ignorance (though tumsonība has a pernicous twist, it ain’t just being dumb…)


   In late summer, they closed down and detoured the mad raceway segment of the Via Baltic that runs past Adazi north of Riga. When, eventually, a sign is put up explaining to what purpose (but not why), yet again, this segment of Latvian highway is being torn up and rebuilt, I would vote for having the text say, “Building a new road for the insane.”


Thursday, May 28, 2009

Latvia will devalue-- Swedish press

The Swedish business newspaper Dagens Industri reports that a devaluation of the Latvian lat is drawing ever closer and that the Swedish central bank, Sveriges Riksbank was borrowing 100 billion SEK to bolster its foreign currency reserves ahead of the likely move by the Latvian central bank, which would probably be followed by devaluations in Estonia and Lithuania.
Latvia's central bank governor gave a bizarre hint at a devaluation by saying that if Latvia didn't get international loans, it would have to issue some kind of scrip (taloni--literally, coupons) instead of paying salaries to public sector employees. This would effectively be a second currency with which to buy food and pay rent and would undermine the current legal tender, the lat.
According to Dagens Industri, a devaluation would hit hardest at Swedbank, which has SEK 217 billion in lending to Baltic borrowers, most of it in the form of euro-based loans. The level of distressed debt has been rising even without a devaluation (or because of the domestic devaluation due to drastic salary cuts). The newspaper says Swedbank may have to raise at least SEK 10 billion in new capital. Both Swedbank and SEB (Baltic exposure SEK 186 billion) share fell on the Stockholm Stock Exchange, but SEB is seen as sufficiently capitalized for the moment.
A devaluation in the near future will effectively subject Latvia to the worst of both worlds -- wage cuts and mass unemployment that have slashed purchasing power to the minimum, and a further cut in living standards when the inflationary effects of a devaluation are passed along.

Wednesday, May 27, 2009

Bank of Latvia governor's bizarre "coupons" idea -- to scare the government?

Bank of Latvia governor Ilmārs Rimšēvics recent suggestion that the Latvian government would have to issue debt "coupons" instead of paying salaries was intended to "scare" the government into pursuing spending cuts so that it can get international loans.
The head of the central bank was essentially saying that the country would have to adopt a dual legal tender system amounting to a murky quasi-devaluation of the lat, but many people saw it as an alarming warning that the ration coupons of the late 1980s would return.
Rimšēvics said that if Latvia doesn't get  funding from the International Monetary Fund (IMF), the government would have no money to pay wages later this year and would have to issue debt paper that he called by the ambiguous Latvian term taloni (the plural of talons, a term most people in Latvia associate with ration coupons issued when certain consumer goods were scarce in the last years of the Communist system in the late 1980s).
There are anecdotal reports that people who misunderstood what was meant by taloni in the present day context have been hoarding salt, flour and the like. During the late 1980s, ration coupons were issued for a number items, including soap, laundry powder, milk for infants etc.
What Rimšēvics meant was that instead of depositing salaries to employee bank accounts (as is the normal practice) state and municipal agencies short of funds would issue IOUs that could be used as legal tender for purchasing goods and services (assuming merchants accepted them or were force to accept by some emergency law or regulation). In effect, Latvia would have a dual currency system with the lat circulating in parallel to lat-denominated debt paper issued in lieu of salaries. Inevitably an exchange rate would arise between "real lats" and taloni. It is difficult to believe that taloni would not be deeply discounted in a free market. Tens of thousands of public sector employees would try to unload their government-printed paper for "real" currency rather than test the local grocery store's or their landlord's readiness to accept taloni as payment.
A simple guess on the value of taloni can be made by comparing them to, say, a two or five year (non-Latvian :) ) treasury bill. If the debt instrument has a maturity value of, say 100 EUR, then it's present value can be calculated (i.e. the sum one would have to put in the bank to have 100 EUR, including accumulated interest, in two or five years). That could be, say, 95 or 90 EUR, but since, unlike the fixed maturity of the treasury bill, no one knows when an insolvent Latvian public sector would recover, the discount would have to  be very deep --anywhere from a substantial double-digit figure to -- worthless
 At the same time, confidence in the lat would be undermined and may have been undermined even if the whole mention of taloni was a bluff. It is, nonetheless, a signal that the Bank of Latvia is entertaining the idea of altering the value of the lat. Is it a hint of the devaluation that many serious analysts have been speculating about? The fact that the central bank governor floats wacko ideas about dual legal tender systems is also a sign that probably nobody really knows what to do next. The informal unwritten nod by the IMF to a 7 % of GDP deficit has already been undermined by calculations that even with the drastic spending cuts currently proposed (and likely to wreck the education, health care and law enforcement systems) will create an 11 % deficit.
As things now look, Latvia may well be heading for a double-devaluation in the form of an internal devaluation by drastic public sector salary cuts (and their impact on purchasing power, the domestic private sector and tax revenues) followed later this year by a real devaluation (letting the lat float and printing more of them to cover public sector expenditures and somehow make it through the winter)

Tuesday, May 26, 2009

It is not f**king Copenhagen, dear Riga cyclists

Bad times and a bit of green consciousness are making more and more people in the Latvian capital ride bikes. At my workplace, the security guard, who is responsible for locking up bikes in a downstairs storeroom, says there are at least 25 and almost no room for them. Last year there were just a few. Two of my department colleagues ride to work. Good for them, sort of...
The problem is that most bike riders I encounter whizz by on the sidewalk, no bell, no horns, no warning. This is often scary, about one near miss every day Almost no one wears a helmet, so that a collision with a pedestrian would hurt both parties.
There is no other place for them to ride. Bike paths have been built here and there, for some ridiculous but typically Latvian price. They are still few and far between.
The street and the highway are no place to ride. A few years ago, the answer would have been simple. A great many Latvian drivers simply are animals. Period. Now, of course, the animal count has fallen, maybe due to self-elimination by fatal accidents (these have also declined). But the average driver is still a borderline asshole, talking on a mobile phone and driving with one hand while turning  a street corner  where pedestrians are crossing. Just a few days ago a big jeep tried to pass me on a curved access ramp and nearly collided with a car on the main highway. Typical. And one reason why I will feel some emotional satisfaction if and when social unrest expresses itself in the burning of SUVs. To quote the Bloodhound Gang : "burn, motherf**ker, burn!" 
To sum up, the main reason I have mixed feelings about the increase in cycling in Riga and Latvia generally is that this society is not civilized enough for this development to be safe and beneficial to all. Riga is not Copenhagen or Amsterdam. The society here is not the Dutch, it is a a semi-savage (when it comes to road habits), alienated, reckless rabble. And it is not likely to change in the foreseeable future. So cycle at your own risk and at risk to pedestrians (I have seen cyclists talking on their mobiles, weaving with one hand down a sidewalk with shopping bags on each of the handle bars)

Monday, May 25, 2009

A slight look on the bright side...

I went for a walk with my video camera on Sunday, May 24 and recorded some ordinary stuff in Riga. This is just to show that the impending economic collapse is not very visible when the weather is fine and people still take to the streets and parks. The charity event that I mention at the start of the video raised some LVL 270 000 for a group of kids in need of special medical care, mainly from small contributions using phone-ins and collections on the street.
Othewise, even the Foreign Investors Council in Latvia (FICIL) has been saying that the economy could shrink by 20 % (the most recent figure was 18 %). Ilmars Rimševics, the governor of the Bank of Latvia, said in an interview that if international loans do not come through, there could be some kind of ration coupon system by the end of the year (!?). Rationing usually happens when there is a shortage of good, no sign of that. However, some towns in Latvia are providing social welfare in kind by allotting small gardens and vegetable seeds to the poor instead of cash payments. The idea is kind of reasonable, but also a symptom of the impending collapse of the social safety net in this country.
Anyway, here is the relatively happy video:

Wednesday, May 13, 2009

Q1 GDP down 18 %, collapse draws closer

Latvia's GDP fell by 18 % in the first quarter of 2009 compared to Q1 2008. Industrial output as a component of GDP fell by 22 %, retail sales were down 25 % and the hotel and restaurant sector declined by 34 %. This is further evidence that the country is on its way to economic collapse, with a complete disruption of public services now determined no longer by demands of the International Monetary Fund (IMF), but by a shrinkage of the tax base that will make even the drastic budget cuts now being proposed insufficient -- because even that level of public spending will be unsustainable. More in this video commentary

Tuesday, May 12, 2009

The final countdown continues...

Latvia's GDP dropped 18 % in the first quarter from a year ago. That tops official guesses of some 16 %, bad enough. Unemployment hit 11 %, with many of those discovering that, because of social tax issues, they are not eligible for unemployment benefits.
It now looks like the economy may nosedive by 20 - 35 % for all of 2009. A total economic collapse, sending the country back into the 1990s.  Industrial production plummeted 22 %, the hotel and tourist business by 34 % (brilliant move boosting hotel VAT sharply to 21 %).
Unemployment will probably go past 20 %. Tax revenues will shrink drastically, undermining any sharp budget cuts. It will no longer be an issue of whether the International Monetary Fund (IMF) thinks the cuts are sufficient, it will be a matter of no revenue available for public service. The government' s tax revenues will push the public sector salary cuts beyond the 20 to 30 % already decided. 
Even the slightest glimmer of opportunity for work anywhere but Latvia will send thousands packing their bags (remember, too, the choice of governance issue). What will be left by 2010 0r 2011 is a sad basket case of a country, where the least skilled workers, through a hopelessly inefficient and understaffed tax system support a skeleton social services and pension system for the old and infirm. 
Time to really, really seriously think about a Plan B.
If you can't get it together in 20 years since independence, you probably won't...

Thursday, May 07, 2009

Tarnishing Lattelecom's image

My video comment on how the appointment of former prime minister Aigars Kalvitis to the supervisory board of Lattelecom is a symptom of state failure in Latvia and damages the brand and reputation of the telecommunications greoup.

Friday, May 01, 2009

Latvia: IMF! IMF? ...I'M F **KED??

The last day of April was a merry one for my one time journalist rival from Diena, Baiba Rulle, who broke a story that, according to  "unofficial sources", the International Monetary Fund (IMF) had agreed to let Latvia get away with a 7 % public sector budget deficit this year, retreating from earlier demands that the deficit be cut to 5 % or less.
The story appeared in Diena's internet portal -- the print rag (all due respect, that's journalist slang) carried a hockey (what else) story on page one. Within hours, the Minister of Finance, Einārs Repše, was 1) denying the Diena story and calling it journalistically irresponsible and 2) announcing that the budget, having cut most public services to ribbons and tatters, would have a deficit of 7 %.  What a coincidence!
As for 1) what journalist doesn't go over the top at one time or another or as Latvians say -- to whom does it not happen? (kuram negadās?). But 2) --without the sanction of the IMF-- is saying that the government will be bankrupt by the summer and all bets are off. In other words, woo-hoo, I'm driving the whole f**king economy over a cliff and flying back to my own planet!
UNLESS... Baiba's story is true, and our minister from the Red Planet did, in fact, get a very strong but possibly informal nod from the IMF that this time, we can get away with 7 %, get our billion (EUR?) from the IMF and keep the wolf away from the door for a few more months.
I think Baiba was right. I don't cover this stuff day to day, but some of my "channels" indicate that is what happened---the IMF, preferring to see a state collapse later rather than soon (I think the cuts needed for 7 % will destroy public services like medicine and education anyway, and hey, what did a police officer look like?) said to Repše -- go ahead, make a budget based on 7 % and assume we will look the other way and sign the check.
But that is not the end of the story, there is allegedly a bigger story, one that is not really a plan B, but follows from the " 7 % solution" which, (like Sherlock Holmes, was it, 7 % solution of cocaine, or am I wrong?) will only keep the collapsing state alert for a short time.
That is the one in which all bets are off, we do the d-word, print cash to make it through the night, and then maybe not pass Maastricht and go straight to Euroland.  Likely or unlikely??