RIGA - To commemorate the decade gone by since the 2001 list of millionaires was published in Latvia, we take a look back at the lives and business models of those fortunate enough to be on the list. Some of these names are familiar tabloid fodder (Julijs Krumins, Vilnis Vitolins, Valentins Kokalis, Valerijs Kargins), while others exist in tacit affluence, choosing to give back to the community and expand business abroad.
In the ten years since 2001, the country’s top millionaires’ list has shifted radically. In fact, only the Lembergs family has remained on the list for the full decade. This is not much of a surprise considering all the events that have transpired since the list was made. Latvia, along with ten other countries, joined the European Union in 2004, opening up the upper north corner of Eastern Europe to more international business. The region was collectively known as the Baltic Tigers, with the fastest growing economies in Europe until the global financial crisis of 2008-2010.
With the global financial crisis starting to subside, many wonder what’s next for the future of business in Latvia and the Baltic States. This section outlines how the millionaires making the top ten list have coped with the financial crisis, their outlook for future business, as well as a look at the lifestyles and non-business activities of some of the most successful men in Latvia.
Dealing with the crisis
The global financial crisis took many victims down along with it, as well as millions of lats. The most notable victim was Parex Bank, which underwent a nationalization in 2008 after the Latvian government initially bought 51 percent of the bank’s shares for the ultra low price of 2 lats (a symbolic purchase).
Vasilijs Melniks (#5 on the list in 2001) in 2008 made a very accurate prediction on the show ‘900 sekundes,’ saying “I cannot say anything positive. I don’t think that the crisis will end after one year. An economic crisis, as always, lasts about 2-3 years. I think that [these are the] results as a whole, not just in the Latvian economy. We will not come out of the crisis sooner than two years.”
Using that pinpoint accuracy as a solid measure of business acumen, Melniks’ advice on getting through the crisis, in addition to the much parodied advice of Finance Minister Atis Slakteris to be “pretty taupigi (frugal)” was in line with the government line.
“The regime of frugal spending is a very correct system,” Melniks explained at the time, and sure enough, Baltijas Holdings (transit company) is beginning to bounce back economically.
In November of 2008, Parex Bank was nationalized, a side effect of the world-wide financial crisis and both Kargins and Krasovickis were forced out of their leadership roles. However, as far back as 2000, before joining the EU, Krasovickis had developed a partnership model with Western banks, something which led in large part to success for the bank. This model became an example for other local businesses to follow, a cooperation which led to an explosion of the Baltic Tigers, influencing international trade developments and economic integration with the rest of the European Union.
But how did the crisis affect those millionaires who fell from the list in the last ten years? The majority of the “more pleasure, less business” on the list, who lived less than frugaly, saw themselves losing money by the bucketful in 2008.
In fact, from 2008-2009, approximately 300 people fell from the long list of Latvian millionaires.
Aldis Ozols, a millionaire victim of the housing market crash, gave up his opulent lifestyle (complete with Rolls Royce Phantom limousine, Porsche Cayenne and Cadillac Escalade).
“I get around the city on foot now. I don’t use public transportation, but sometimes friends will drive me around with their cars. On weekends these days my son and I spend time walking in Riga’s parks, feeding the pigeons and ducks,” said Ozols.
“I no longer attend those cream-of-society balls. Now I attend other events, which enrich my spiritual world, and are not binges with an expensive display of clothing,” continued the former millionaire.
At the time of the start of the crisis, millionaire Irena Pulkinena, also in the real estate business, said that the actual number of Latvian millionaires is much smaller than the lists would have the public believe. “In recent years, it was the style to make all sorts of lists of millionaires. In my opinion, only a tenth of these people were really millionaires. Most people who are featured on the lists were the so-called ‘credit millionaires.’ I know several who have never been in such lists, are not and never will be, although they really are millionaires,” Pulkinena explained.
Pulkinena’s point remains firm even now in 2011, and the non-credit millionaires seem to be faring the best coming out of the crisis.
Julijs Krumins (head of the company “Man-Tess”), himself affected by the crisis, was forced last year to fill in his swimming pool at his Baltezers complex, a cost he said was just not worth it. “Why do I need to throw out 800 lats per month!? That pool was totally unnecessary,” Krumins explained to national news portal Kas Jauns. For now, he is optimistic. “We are not planting any kinds of flowers. Let the grass grow green for the time being, but sometime in the future, possibly, we will set up a beautiful fountain.” This attitude is common with most millionaires, who viewed the economic downturn as something temporary from which they would bounce back.
In comparing the two lists (2001 and 2010), and the businesses associated with each millionaire, the following changes may be noted. The millionaires not on the list in 2001, at least not in the top ten, are now reaping the benefits of following the global trend of the pharmaceutical business explosion (Vadims Telica, the Lipmans family, Josifs Apts). Those millionaires (Lembergs, Mihails Ganevs, Olegs Stepanovs) associated with the transit and logistics industry have weathered the rough economic times better than those industries that no longer make the top ten list (retail- Mihails Ulmans and textiles - Vasilijs Melniks).
While the realty sector crashed hard in 2008, a few millionaires managed to use their business sense to come out on top again. One of the realty millionares, Justs Karlsons (#6), succesor to the Bergs fortune (of Berga Bazars fame), has spent time in the United States as a lawyer and practices in Latvia as well. After Latvia became independent again in 1991, Karlsons and sister Ieva Laukers moved back to Latvia to restore their family’s property and, in doing so, created one of the most successful and high-end shopping areas in Riga, Berga Bazars, whose restaurant Bergs was included on the list of The European 50 Best Restaurants. Karlsons explains his business model as thinking long term. “I do not invest in something that doesn’t pay,” said Karlsons earlier this year, admitting that much of the return on the investment of millions of lats will not come back to him in his lifetime, but will go to his children. Another reason for his stability on the millionaires list is the fact that much of his time during the crisis was spent in San Francisco, despite his net worth decreasing by 14 million from 2009 to 2010.
In the end, whether the top millionaires in Latvia weathered the crisis and came out on top, or slipped to the bottom, board member of Lursoft, Daiga Kiopa, whose software assists in making the yearly millionaire’s list, had this to say on the matter: “In my opinion, we are all in a single chain. If a company becomes insolvent, then the workers remain unemployed. The worst thing is when people leave the country to live and earn elsewhere, as they are no longer consumers of the product produced by the remaining establishments. This creates problems in other businesses, because the number of consumers is also falling. It is clear that the proprietors, who work in Latvia, are aware of this problem and feel it every day.”
Lifestyle and Philanthropy
It would be easy enough to give an overview of the business dealings and successes of the top millionaires, but a look at their lifestyles, their philanthropy and way of life could almost be more telling than their shrewd business practices.
Unlike in much of the Western world, where millionaires are a mix of celebrities, sports stars, businessmen and entrepreneurs, the majority, if not almost all of the millionaires in the Baltic States, are business owners/operators.
Interestingly enough, some of the biggest earners on the top ten millionaires list are also some of the biggest debtors. Kirovs Lipmans (11.3 million lats), Sergejs Zaharjins (16.4 million lats), Justs Karlsons (8.2 million lats), Guntis Ravis (28.1 million lats) are all on Latvia’s biggest debtors list.
Philanthropy
Millionaires and philanthropy go hand in hand in most cases, and Latvia and the Baltics are no exception. Earlier this year, an unemployed 55-year-old man sent out a letter to 22 Estonian millionaires asking for a job or a boat so he could fish. Several replied, saying they were not able to give him a job, but one millionaire, Galina Ignatenko, purchased a boat for him. That kind of accessibility to millionaires is not uncommon in this region, and should the millionaires of the area choose to live in their respective countries, their lives are fairly normal.
A prime example of extreme philanthropy is Guntis Ravis, head of Skonto Buve. Number eight on our list of Latvian millionaires, with an estimated wealth of 34 million lats, Ravis devotes his time and money to a huge variety of causes. A patron of both arts and sports, Ravis donates both time and funds to the Latvian National Opera’s ballet troupe, contributes to the issuing of art books, contributed to the restoration of the Riga Cathedral of the Nativity of Christ. He also founded the Dinamo hockey club, supports the Skonto football club and is the president of the Latvian Gymnastics Federation.
On top of all that, Ravis still enjoys the simple life of hunting and fishing. “When I catch a fish, I take care of it myself—I clean it and prepare it so I can cook it and eat it,” Ravis said in an interview last year.
His business model is simple and conservative, and supports the idea of the government being run like a business. “Earlier the entire world was of the mindset that the market would even itself out. But now the big, strategic matters have to be led. The only countries that currently are more or less well off are those that have brought order to strategically important areas on their own. Like China. Theoretically, a country as small as Latvia should be able to operate efficiently, quickly, and correctly with all its potential, such as taxes. Small countries have to be rich. All they need to do is wisely redirect their entire income toward development,” explained Ravis in an interview with Baltic Outlook.
Lifestyles
There tends to be a strong divide between the millionaires of Latvia as well, with many choosing a life of opulence and extravagance, and others instead opting for a simple life. Ravis, despite all his success, has neither the Internet nor a computer at home, living a simpler, more conservative life. In a recent interview Ravis said: “Much of what surrounds us is plastic, but I like real things — wood, metal, concrete. Movies don’t interest me, and I try to distance myself from huge public events. Massive groups of people that can give way to a mob effect don’t interest me.”
Viktors Krasovickis, formerly of Parex Bank, admits his weakness for expensive automobiles: The situation is such that if I want something, and that theoretically could be sold, the question is, is it on the market?” Both the Krasovickis and Kargins family (estimated 2010 net worth of 30 million lats each), formerly of Parex Bank are close, and have undergone similar trials, both financially and legally in recent years.
However, Valerijs Kargins is less forthcoming on his extravagance and has said cryptically: “I am a man of enough means.”
Political Aspects
It would be hard to write about the millionaires of Latvia without mentioning politics. Both the number of millionaires involved in politics as well as the effect of politics on Latvia’s millionaires, both during the crisis and presently. “The political alliance “For a Good Latvia” (Par labu Latviju - PLL) enjoyed the support of many millionaires in Latvia who hoped that PLL would limit the impact of the economic crisis on their companies. We must add that some of them had built their capital from public procurement, the attribution of which was extremely biased – this led to bitter criticism on the part of experts and the public alike,” according to a policy paper by Sandra Kalniete (MEP in the European Parliament for Latvia).
In fact, Kalniete holds criticism for the number one person on the list of millionaires, the Ventspils mayor, Aivars Lembergs.
“The mayor of Ventspils, in the last twenty years he has become a multi-millionaire. There is proof that Aivars Lembergs has indirect control over several major companies including Neatkariga Rita Avize (The Daily Morning Independent). Aivars Lembergs bitterly criticizes liberal values accusing a network of ‘sorosists,’ of threatening national interests and pretending that Latvia’s cooperation with the Western states is not beneficial,” wrote Kalniete.
“Andris Skele, who has been prime minister three times. Just like Lembergs and Slesers, he accumulated one of Latvia’s greatest fortunes in rather troubled circumstances. However, in the 1990s, at the beginning of his political career he was relatively popular and enjoyed a good reputation, which enabled him to lead his party to victory in the elections of 1998. But in 2010 scandals linked to his name and his policy of the appropriation of state property have made him the most unpopular politician,” explained Kalniete.
While not as ghastly of a situation as some areas of Eastern Europe and Russia, the oligarchic political participants are seen as a concern. The oligarchs most widely mentioned are also on the top millionaires list: Aivars Lembergs (#1) and Ainars Slesers (lower on the list) and Andris Skele (#5).
Business of Millionaires and the Future
How does the future look for the growing number of Latvian millionaires? According to early data from Lursoft, one of the lists of 2011 top millionaires includes an interesting addition. Valentins Kokalis, Arnis Burmistris and Janis Vinters are in the tentative top three places this year as “farmer millionaires”. Lato Lapsa, Latvian investigative journalist who has compiled several lists of millionaires since the beginning, has recently published a book, along with Kristine Jancevska, titled, “Secrets of Latvia’s Millionaires.” Having faced threats from people who wish to not be mentioned on the list of millionaires and bribes from those who wish to be included on the list, Lapsa has delved deep into the mind of the Latvian millionaire. Some on the list say that their wealth has been largely exaggerated, according to Lapsa.
“Interestingly, it appears that fiscal restraint has been very successful for the Baltic nations. After suffering a steep downturn, economic growth has returned. Amazingly, Estonia is even back to having a budget surplus,” said Daniel Mitchell of Forbes, who advocates the Baltic model for the United States to get out of the crisis.
“Unlike the United States, these nations didn’t follow the Keynesian policy of more deficit spending. Lawmakers in the Baltic nations recognized, to borrow the words of Dan Hannan, that “you cannot spend your way out of recession or borrow your way out of debt,” Mitchell continued.
The fact that, despite corruption and misuse of government funds, those millionaires in the government may have known what they were doing after all, and, by implementing these budget cuts not only for government spending, but also for their own personal wealth and businesses, those on the millionaires list in 2010 may remain there for many years to come.
Those with large debts continue to take in money, even despite the economic downturn. Those without debts have continued a model of frugal spending and have, so far, fared just fine.
Whether the economic situation for these lucky millionaires will return to the pre-crisis level of buying expensive cars and houses at will is hard to say. For now, though, Latvia’s millionaires’ heads are above water and businesses are swimming along once again.
10 richest in 2001
1 – 2 . Valērijs Kargins and Viktors Krasovickis (Finance - Parex bank)
3. Mihails Uļmans (Retail - Mono group)
4. Vilis Vītols (Realty)
5. Vasilijs Meļņiks (Textile industry, ports - Baltijas holdings)
6. Pēteris Smidre (Telecommunications - ex-Baltkom GSM)
7. Leonīds Esterkins (Finance - Rietumu bank)
8. Guntis Indriksons (Transit, logistics - Skonto group)
9. Tonijs Levins (Finance - Rietumu bank)
10. Aivars Lembergs (Transit, logistics)
10 richest in 2010
1. Lembergs family (Aivars Lembergs, Anrijs Lembergs and Līga Lemberga) (Transit, logistics)
2. Lipmans family (Kirovs Lipmans and Anna Lipmane) (Pharmacy (Grindeks)
3 - 4. Sergejs Zaharjins (Liepājas metalurgs)
3 - 4. Leonīds Esterkins (Rietumu bank)
5. Šķēle family (Andris Šķēle, Kristiāna Lībane–Šķēle, Madara Dobrāja un Anete Šķēle–Pētersone) (Diverse businesses)
6. Justs Karlsons (Realty)
7. Arnis Riekstiņš (IT&T – Mikrotikls)
8 - 9. Guntis Rāvis (Construction - Skonto būve)
8 - 9. Vadims Telica (Pharmacy - Recipe/Sentor)
10. Josifs Apts (Pharmacy - Recipe/Sentor)
Source: Lato Lapsa
