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RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHRA #0275/01 1381151
ZNR UUUUU ZZH
R 181151Z MAY 09
FM AMEMBASSY RIGA
TO RUEHC/SECSTATE WASHDC 5839
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 RIGA 000275 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV ECON SOCI PHUM EIND LG
SUBJECT: EASTERN LATVIA - ECONOMIC WOE, SOCIAL ACCEPTANCE 
 
(U) 1. Summary: Latgale, the region of Latvia bordering Russia, 
suffers a particularly dire economic situation.  While some 
higher-value-added industries have weathered the economic crisis, 
the predominant sectors have declined.  Unemployment is 
significantly higher than the Latvian average, and many young people 
leave the region upon finishing school.  Despite the economic pain, 
social integration in the region is relatively good, and the 
political establishments in various towns are experimenting to try 
to turn their economic fortunes around.  No political party holds 
particular sway in the region, but opinions on whether this might 
change in the upcoming election were mixed. End Summary. 
 
(U) 2.  In March and April, 2009, Pol-EconOff visited cities across 
Eastern Latvia, discussing political, economic, and social trends in 
the region.  We spoke with municipal governments, NGOs, businesses, 
and high-school students in Daugavpils, Rezekne, Kraslava, Balvi, 
and Dagda. 
 
-------------------- 
Economy in Bad Shape 
-------------------- 
 
(U) 3. The most prominent, if unsurprising, feature of the region is 
an economy that continues to lag behind much of the rest of Latvia. 
Local registered unemployment reaches as high as 23% in the region 
surrounding Rezekne.  The construction industry that had once 
provided a boost to the region's economy has almost completely 
collapsed.  However, more advanced manufacturing continues at an 
only slightly diminished rate.  For example, prominent employers 
like a large train repair and maintenance shop, a forensic 
instrument producer, and French-owned electronic cable maker 
continue their relatively labor-intensive activities in Daugavpils 
at only slightly reduced levels. 
 
(U) 4. The cities of the region are trying a variety of approaches 
to ease economic pain, but so far results are limited.  Local 
government in Daugavpils, by far the largest population center in 
the region, is focused on using large public works to boost 
employment.  Among other plans, they have just announced a tender to 
renovate a Soviet-era military airport to build a commercial 
facility.  Like most nearby cities, Daugavpils' leaders charge that 
the national government directs too much public money to Riga, to 
the unfair exclusion of other regions. 
 
(U) 5. Other cities have taken more market-based approaches. 
Rezekne, for example, has a Special Economic Zone featuring 
significant tax breaks for businesses started there.  However, few 
businesses have built facilities in the zone, and those that have 
are local businesses that see the tx breaks as a bonus, not as the 
driver of their decision to locate in the area.  Although NGOs are 
still relatively scarce in Latvia, residents of Balvi have started a 
project that offers free adult-education classes in English and 
bookkeeping to help spark entrepreneurship in the area. 
Nevertheless, many high school students plan to leave the region 
upon graduation, unlikely to return. 
 
-------------------------- 
Politics in Less Bad Shape 
-------------------------- 
 
(U) 8. Latgale is perhaps the most diverse region of Latvia, which 
large groups of ethnic Latvians and Russians share with smaller 
populations of Belarusians, Poles, Lithuanians, and others.  Unlike 
in Riga, where Latvian-Russian ethnic tensions are running high, 
most in Latgale see ethnicity as a non-issue.  The vast majority of 
Latgale's Russian-speaking residents are citizens (their families 
having lived in the area long before the Soviet occupation), and the 
largest cities have cultural centers or civic organizations 
representing each of the minority groups. 
 
 
(U) 8. The political landscape in Latgale remains splintered.  The 
towns in this region are not large, and the politics is largely 
driven by personality rather than party.  Rezekne is a perfect 
example, where the 13 seats on the town council are held by 11 
parties.  With even more parties having announced their intentions 
to field candidates in the upcoming June 6 election, few observers 
are willing to speculate on who will come out ahead.  While many of 
our interlocutors expressed concern about the potential closure of 
schools for budgetary reasons, few seemed to think it was going to 
motivate many voters in the region.  While the national parties 
stand to gain or lose standing in these elections, losses or gains 
in most of Latgale will probably be modest. 
 
¶9.  Inga Goldberga, Head of the Daugavpils Econcomic Development 
department, expressed concern that the difficult economic conditions 
may drive many of the city's ethnic-Russian majority to vote for 
PCTVL, a far-left party identified with a more aggressive advocacy 
for Russian residents' interests. 
 
¶10. Comment:  Eastern Latvia is suffering the brunt of Latvia's 
economic woes.  While Latgale's political leaders seem energetic and 
are trying a variety of approaches to get the economy on track, it 
 
RIGA 00000275  002 OF 002 
 
 
is not clear that they are up to this monumental task.  However, the 
survival of high-tech manufacturing and the relatively harmonious 
ethnic relations in Daugavpils show that there are still lessons 
Riga could learn from Latvia's second city. 
 
WASER