Geert Bekaert and Campbell R. Harvey's


Chronology of Economic, Political and Financial Events in Emerging Markets




Major Political and Economic Events


Banking crises: largest bank and nine other banks (accounting for 40% of total banking system assets) were involved in the banking crisis. Causes: (1) deficient bank management; (2) inadequate supervision and regulation; (3) fraud. Government's resolution mechanism: (1)Bank Baltija taken over by government, with $260 million in losses as of July 1993. 3 other banks in the process of being closed. Overall change in macro policy: fiscal reform aimed at tighter policy.a2


The requirement of cabinet approval for FDI above $1 million was eliminated.a3


The law on land privatization in rural regions was passed, allowing juridical persons registered in Latvia to purchase  rural land when more than one-half of the paid share capital of the company belongs (1) to citizens of Latvia or to citizens of countries with which Latvia has an agreement on promotion of foreign investment; (2) to a group of the previous categories; and (3) it is a public joint-stock company, shares of which are quoted on the stock exchange.a3


Amendments to the Investment Law passed in 1996 removed virtually all restrictions on foreign investment. Securities markets are regulated by the 1996 Law on Securities and some other laws.pp


Regulations of the cabinet of ministers with the power of the law on privatization and expropriation of urban land of Republic of Latvia were passed. The Regulations allow persons registered in Latvia to purchase urban land when more than one-half of the paid share capital of the company belongs to the citizens or a group of citizens of Latvia, or of the countries with which Latvia has an agreement to promote foreign investment, or  it is a public joint-stock company, quoting shares on the stock exchange.a3


(Controls on real estate transactions) Persons registered in Latvia were allowed to purchase urban land when more than belongs to citizens or a group of citizens of Latvia or of countries with which Latvia has an agreement to promote foreign investment, or a public joint-stock company, quoting shares on the stock exchange.a3(first entry)


ADR effective date. (Company=UNIBANK - 144A, Exchange=PORTAL)a11


(Provisions specific to institutional investors) Private pension funds are not allowed to invest more than 15% of their pension capital.a3


IFC announced the launching of the IFCG Latvia Index. Frontier market indexes were calculated on a monthly basis, and were not included in the IFC Global Composite Index. The Latvian index had fourteen stocks, dominated by Unibanka, which represented about 43% of market capitalization.


Russia threatened trade sanctions against Latvia in response to political disputes.


The domestic markets were seriously affected by financial crisis in Russia since Latvian companies had large exposures to Russia.


The pro-business party People's Party won the election.


Parliament approved the country's new minority coalition government. The new government promised to speed up the country's integration into the EU and to improve its relationship with Russia.


(Controls on direct investment) Investment by nonresidents in securities firms is restricted to 49% of shares.a3


Hansapank is the first foreign issuer listed on the Riga Stock Exchange.qq


(Provisions specific to institutional investors) Insurance companies may invest, without authorization, a maximum of 10% of their technical reserves.a3


The exchange suspended Rigas Komersbanka following the central bank's decision to start bankruptcy procedures.


Prime Minister Vilis Krishtopan dismissed Economy Minister Ainars Schleser for the slow pace of privatization.


The nationalist Fatherland and Freedom Party (FFP), one of the three members of a parliamentary minority coalition, signed an agreement with the main opposition People's Party. Prime Minister Krishtopans immediately resigned, effectively dissolving the current cabinet. A new majority coalition of People's Party, FFP, and Latvia's Way formed a strong government.


The parliament implemented measures aimed at reducing the 1999 budget deficit.


Latvia and the IMF agreed on a new economic policy program aimed at stimulating growth and supporting the lat. However, the current account gap jumped to 9.7% of GDP.


The securities commission began requiring purchasers of 50% stake in a listed company to offer to buy out minority shareholders.


(Controls on direct investment) The foreign investment law was amended to allow foreign ownership in excess of 49% in radio and television.a3


Third quarter GDP showed zero growth.


(Controls on direct investment) Nonresidents were allowed to invest more than 49% in companies operating in gambling and lotteries.a3


EU extended a formal candidacy invitation and IMF approved $45 million credit line.


GDP rose by 5.3% in the first quarter. The state sold nearly 27% of Latvian Gas on the Tiga Stock Exchange (RSE) for US$47.4 million, the largest cash public offering in Latvia. The central bank increased banking supervision and minimum capital requirements to comply with EU standards. The Baltic list was launched.


In the second quarter, the prime minister resigned after his government collapsed over a privatization dispute, and a new government headed by Prime Minister Andris Berzins took office. The new government negotiated with the IMF to reduce budget expenditures sharply. The government also established a regulatory and supervisory body for the capital markets.


(Controls on direct investment) Foreign ownership in companies engaged in logging was allowed.a3


Latvia signed a letter of intent to partner with the Baltic exchange and Norex. The Latvian Securities Markets Commission passed regulations for remote membership on the RSE.


In the third quarter, Swedish Banking group SEB announced its intention to acquire all the shares of Unibankas. The government accepted a draft budget for 2001 that provided for a deficit of 1.7% of GDP, moving toward the IMF goal of 1%.


The Riga bourse celebrated its thousandth trading session, with a promotion that included waiving brokerage commissions.


Twin bombs exploded at a popular shopping center.


Parliament adopted an amendment to the corporate income tax law providing tax breaks for large investments (above 10 million lats) in Latvia. The law provides equal provisions for foreign and local investors.


The Bank of Latvia reduced the reserve requirements for banks by 1%.


President Vaira Vike-Freiberga expressed aspirations to join NATO.


Latvia signed a memorandum with IMF and agreed to limit the deficit to less than 1% of GDP for 2002 and achieve a balanced budget in subsequent years.


The World Bank discussed the possible allocation of a second US$40 million loan tranche for Latvia's structural reform program and the IMF approved a standby loan for Lativa of US$42 million.


Latvia and Lithuania held talks with the Helsinki Stock Exchange over the possible acquisition of the Baltic nations' exchanges by HEX.


In the third quarter, S&P affirmed Latvia's ratings and stable outlook on local currency obligations. The rating agency revised the outlook on the long-term foreign currency debt from stable to positive.


Riga celebrates 800th anniversary.


Parliament votes to change election law in a bid to boost NATO membership chances. The new law omits a clause requiring parliamentary candidates to be Latvian speakers, a provision seen by human rights experts as discriminatory towards the Russian minority. b6


The government has approved the prominent lawyer Janis Jonass as the head of the newly formed Corruption Prevention Bureau. The appointment is the third such decision in the search for a suitable person to fill the post in the Bureau. b1


Einars Repse of the New Era party invited to head centre-right coalition government following elections the previous month.


The government has been forced to dismiss Andrejs Sonciks, the head of the country's State Revenue Service, after it emerged that he had given indemnity to the Dinaz Nafta company after it failed to pay millions of lats in tax.


NATO summit in Prague includes Latvia on list of countries formally invited to join the alliance.


EU summit in Copenhagen formally invites Latvia to join in 2004.


Latvia's new anti-corruption body has launched its first criminal case since being set up at the end of last year.


Parliament elects President Vike-Freiberga to a second four-year term in office. b6


Latvian referendum vote gives strong backing to EU membership.


The validity of Latvian privatization vouchers has been extended for a further year under an amendment passed by parliament.


The parliamentary legal commission has declined a proposal to prevent members of the soviet secret police, the KGB, and die-hard members of the Communist Party under the soviet regime from participating in elections to the European Parliament. b1


Protests as parliament passes law restricting the use of the Russian language in schools.


Governing coalition collapses and Prime Minister Einars Repse resigns amid personal feuding and disputes. Indulis Emsis of Greens and Farmers Union subsequently becomes prime minister in new coalition.


Latvia admitted to NATO.


Latvia will issue 400m euro (US$493.51m) of Eurobonds.


Land reform amendments have been passed by the government, lifting restrictions on the purchase of land in Latvian cities by European Union citizens and businesses. b1


Latvia is one of 10 new states to join the EU.


non-Latvians who gain the right to citizenship within another country could be deprived of the legal right to live in Latvia unless they reapply for permanent residency if they wish to return.


The coalition survived from the poor showing at the 13 June European Parliamentary (EP) elections by winning a no-confidence vote. b1


Regulations on Foreign Investors


Restrictions: Foreign investors are treated equally to domestic investors. No restrictions on repatriation of profits.

Taxation: 10% overall tax rate on revenue from securities. No capital-gain tax before Jan. 2001.a7


Taxation: Corporate tax rate decreased to 25%. b1


Taxation: Corporate tax rate decreased to 22%. gains made on immoveable property that is owned for less than 12 months are taxable as income. b1


Taxation: Corporate tax rate decreased to 19%. 9% VAT was introduced on certain goods that were previously exempt. b1


Restrictions: Foreigners and businesses now can purchase real estate. b1

Taxation: Corporate tax rate decreased to 15%. Foreign companies pay 2% tax on sales of real estate. b1