current financial situation in latvia
DESCRIPTION
Presentation by Mr Kārlis Cerbulis, economics expert, Senior Vice President, NCH Advisors Inc. Baltic States at EP ECR group meeting in Riga, Latvia on September, 2010.TRANSCRIPT
Latvia
September 2010
K.Cerbulis
NCH Investment Fund
2
• PART I: Latvia – Overview
• PART II: NCH Latvia – Experience
Three Laws in Real Estate:
„Location, Location, Location.‟
Distance (km)
to Riga from:
London: 1,662
Berlin: 846
Moscow: 835
Stockholm 437
Helsinki: 360
3
Source: Central Statistical Bureau, SEB
Latvia‟s GDP (% change y-o-y)
4
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
-
5,000
10,000
15,000
20,000
25,000
2003 2004 2005 2006 2007 2008 2009 2010-Q2
Bank Loans & Inflation
Infl
ati
on
Source: Association of Latvian Commercial Banks, Central Statistical Bureau
Bank Loans
+ 533% !
Ba
nk
loa
ns,
mil
l. L
s
Inflation
5
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
-
5,000
10,000
15,000
20,000
25,000
2003 2004 2005 2006 2007 2008 2009 2010-Q2
Bank Loans & Apartment Prices
119
Ser
ies
2-r
oo
m a
part
men
t(5
5 m
2)
pri
ce, E
UR
Source: Associtaion of Latvian Commercial Banks, Ober-Haus
Apartment
price
+269%
- 73%
Ba
nk
loa
ns,
mil
l. L
s
Bank loans
+ 533% !
+32%
6
Wages and Productivity(seasonally adjusted data, per one working hour, 2004Q1 = 100)
Source: Bank of Latvia
7
Nominal wages
Productivity
Share of Manufacturing in Economy (% of GDP)
Source: SEB Bank
8
Latvia
Estonia
Lithuania
Poland
Czech
Republic
Latvia Reacts QuicklyCurrent Account (% of GDP)
Source: Bank of Latvia
9
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-Q2
Latvia Reacts QuicklyRetail Trade (growth % YOY)
Source: Latvian Association of Authorized Car Dealers, Central Statistical Bureau
Registration of
new vehicles
Retail turnover
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
10
Credit Default Swaps: Latvia / Greece / Iceland
11
Iceland
Greece
Latvia
Credit Default Swaps: Latvia / Romania / Hungary
12
Romania
Hungary
Latvia
„Swedish Occupation I‟
Estonia and Latvia (1629 – 1700)
“Positive times, during which this period also
acquired fame as golden times.”
Wikipedia
13
„Swedish Occupation II‟
(1998 - ...)
14
15
Rankings on the Ease of Doing Business
(out of 183 countries)
2010 rank Economy
1 Singapore
2 New Zealand
3 Hong Kong
4 United States
5 UK
10 Norway
24 Estonia
25 Germany
26 Lithuania
27 Latvia
72 Poland
Source: Doing Business 2010, World Bank.
16
The World‟s Best Countries(A Newsweek study of health, education, economy, and politics ranks;
out of 100 countries)
2010 rank Country
1 Finalnd
2 Switzerland
3 Sweeden
4 Australia
5 Luxemburg
12 Germany
14 UK
32 Estonia
34 Lithuania
36 Latvia
38 Bulgaria
43 United Arab Emirates
Source: Newsweek
“A crisis is a terrible thing to waste”
Latvia doesn‟t waste crisis opportunities:
Fourth crisis since re-independence in 1991;
Country stronger from each crisis
(previous crisis have been EXCELLENT buying
opportunities);
Latvia dedicated to becoming a regular Nordic / EU
economy;
International competitiveness restored with falling
wages/costs.
17
18
Part II:
NCH in Latvia –
Experience
NCH in Latvia
14+ years;
One of the biggest US-based investors in Latvia;
Initially largest investments in company privatizations
(including „Unibanka‟ – now SEB Latvia);
Financial services (largest insurance company „Balta‟ –
sold to Codan Insurance, Denmark, 2001);
~ 80% of current portfolio in real estate
(www.Domuss.lv, www.RigaPlaza.lv);
Direct equity investments
(www.Sidrabe.com, www.GroGlass.com);
Source of farming JV partners for large-scale farming
projects in Ukraine and Kazakhstan (> 200,000 ha
cropland).
19
20
Kungu Str. 1, Offices & Retail, Old Town, Owned
Basteja Str. 16, Offices & Retail, Old Town, Sold (2006)
NCH Office-building Portfolio
Baznicas Str. 20/22, Offices &
Retail, Downtown, Owned
21
„Riga Plaza‟ Retail Mall, (50% NCH Owned, with partner „Plaza Centers Europe‟)
90,000 m2 GBA, 50,000 m2 GLA
Description:
52 hectares in developing area at the
inner-Riga Ring road, at a large
intersection with heavy traffic flow.
15 hectares - excellent
location for a Retail
Project, 37 hectares - zoned
as residential and mixed-use.
NCH Land Bank Example - „Dreilini‟, Riga
23
„GroGlass‟ nano-coating glass factory
(inaugurated 2009)
www.Groglass.com
24
Latvian JV partners for farming projects in Ukraine
and Kazakhstan
25
NCH Fields in Ukraine
26
Small and open economies;
Advantageous location to bridge economies of East &
West;
Adaptable, multi-lingual workforce;
Much closer than China;
Northern European country;
Quickly adjust to crisis and „learn the crisis lessons‟;
Competitiveness being restored quickly – costs falling;
Things happen fast here (we live in „dog years‟).
Positives of Latvia and the Baltics:
27
Real estate;
Agriculture;
Forestry;
Transit (ports, logistics);
Back office (incl. „call centers‟);
„Stepping stone‟ offices/partnerships for Russia, Ukraine,
Belarus, ...
Export oriented industries;
Small manufacturing plants (closer than China);
...
Investment Opportunities
28
Karlis Cerbulis
Senior Vice President
NCH Capital, Inc.
www.nchcapital.com