Latvia by Juris Dreifelds Capital: Riga Population: 2.1 million GNI/capita, PPP: US$19,090 Source: The data above are drawn from the World Bank’sWorld Development Indicators 2013. Nations in Transit Ratings and Averaged Scores 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Electoral Process 1.75 1.75 1.75 2.00 2.00 2.00 2.00 1.75 1.75 1.75 Civil Society 2.00 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 Independent Media 1.50 1.50 1.50 1.50 1.75 1.75 1.75 1.75 1.75 1.75 Governance* 2.25 n/a n/a n/a n/a n/a n/a n/a n/a n/a National Democratic Governance n/a 2.25 2.00 2.00 2.00 2.50 2.50 2.25 2.25 2.25 Local Democratic Governance n/a 2.50 2.50 2.50 2.25 2.25 2.25 2.25 2.25 2.25 Judicial Framework and Independence 2.00 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 Corruption 3.50 3.50 3.25 3.00 3.00 3.25 3.25 3.50 3.25 3.00 Democracy Score 2.17 2.14 2.07 2.07 2.07 2.18 2.18 2.14 2.11 2.07 * Starting with the 2005 edition, Freedom House introduced separate analysis and ratings for national democratic governance and local democratic governance to provide readers with more detailed and nuanced analysis of these two important subjects. NOTE: The ratings reflect the consensus of Freedom House, its academic advisers, and the author(s) of this report. The opinions expressed in this report are those of the author(s). The ratings are based on a scale of 1 to 7, with 1 representing the highest level of democratic progress and 7 the lowest. The Democracy Score is an average of ratings for the categories tracked in a given year. 334 Nations in Transit 2013 Executive Summary atvia was hit hard in the early days of the global economic crisis, experiencing a greater decline in growth than any other member of the European Union L (EU). The economy has since stabilized, thanks largely to a package of austerity measures introduced by successive governments. While some economists and politicians have praised Latvia’s recovery model, citing strong growth of the past two years, others believe Latvia may have sacrificed more than it gained, pointing to still-high unemployment, painful cutbacks to the public sector, and other social impacts of government policies. Latvia’s current government came to power after snap elections in the fall of 2011. For the first time in recent memory, parties associated with Latvia’s so-called “oligarchs”—a handful of powerful businessmen who have exerted influence on the country’s politics for many years—have extremely limited representation in the parliament. At the same time, the rhetoric and actions of one of the governmental coalition partners, the National Alliance, and the largely Russophone opposition party, Harmony Center, have increased the polarization levels between the country’s ethnic Latvian and Russian populations. The ruling coalition weathered several political tests with relative ease in 2012 and continued to pursue policies aimed at cutting public spending and securing economic growth. The parliament enacted important policy reforms, including public funding for political parties and tax breaks for some civil society groups. The state also introduced new mechanisms for combatting corruption in areas ranging from asset ownership to public purchasing to political appointments. National Democratic Governance. The three-party ruling coalition formed after the elections of September 2011 continued to implement austerity policies, which have improved Latvia’s economic growth but also exacted a social toll, resulting in an exodus of young people from the country and polls showing public discontent. The coalition grappled with Latvia’s persistent ethnic polarization, including the rejection via referendum of Russian as a second official language, and will likely face new challenges as it endeavors to adopt the euro and raise the pension age in the face of popular opposition. Potential fault lines also appeared within the government over a government minister’s suspension of oligarch Aivars Lembergs as mayor of Ventspils and the balance of power among coalition members. Latvia’s national democratic governance rating remains unchanged at 2.25. Electoral Process. In January, the government introduced public funding for political parties that pass a 2 percent threshold of votes in parliamentary elections. Parties also agreed that in future elections, no television advertising will be allowed Latvia 335 30 days prior to voting. The year saw the successful conclusion of a drawn-out case against Lembergs’s Union of Greens and Farmers pertaining to campaign finance transgressions in Latvia’s 2006 elections. Municipal elections are scheduled for 2013, and parliamentary (Saeima) elections for 2014. Latvia’s electoral process rating remains unchanged at 1.75. Civil Society. Politicians showed increasing interest in the work of nongovernmental organization (NGOs), asking them for input in public policy and offering some NGOs tax breaks and other financial support. Meanwhile, civil society provided a foundation upon which citizens could protest government and EU policy. Latvia’s rating for civil society remains unchanged at 1.75. Independent Media. Though a wide array of media is available in both Latvian and Russian, news outlets are struggling economically. In 2012, declining advertising revenues propelled new ownership and consolidation among newspapers, including the country’s three main Russian-language dailies. The Swedish holding company Modern Times Group (MTG) acquired one of Latvia’s main TV channels, adding it to a growing list of MTG’s holdings in the country. The popularity of the internet continued to grow, as evidenced by advertising revenues and users, but an access divide remained between urban and rural areas. An attack on an investigative journalist, reportedly for his sensitive work, drew criticism from media freedom advocates. Moreover, tensions between ethnic Latvians and Russians played out in debates over political programming. Latvia’s rating for independent media remains unchanged at 1.75. Local Democratic Governance. Despite lobbying, local governments were not successful in raising their share of Latvia’s income tax receipts from 80 to 85 percent. This strained relations within the Association of Local and Regional Governments (LPS)—a powerful organization with the authority to represent municipalities in negotiations with the Cabinet of Ministers—as well as interactions between local bodies and the central government ministry tasked with overseeing regional affairs. This same ministry made more news by proposing to reduce the number of elected municipal officials in an effort to improve local efficiency and accountability. Populations also began preparing for the next local elections, scheduled for June 2013. Latvia’s rating for local democratic governance remains unchanged at 2.25. Judicial Framework and Independence. Latvia’s court system is slowly modernizing. However, it has not resolved its backlog of cases, which is the product of inefficient procedures, funding shortfalls, and the growing popularity of litigation. Although competition for judgeships has increased, corruption cases against some judges have tarnished the prestige of the courts. Although the ombudsman’s office is becoming increasingly visible, human rights violations remain a problem in the judicial system. Conditions in the country’s old and inefficient prison network are 336 Nations in Transit 2013 inhumane, and the system is criticized for not promoting rehabilitation. Latvia’s rating for judicial framework and independence remains unchanged at 1.75. Corruption. With support from several anticorruption advocates in the Saeima and other institutions, the government introduced policies and directives to enhance transparency and accountability in wealth acquisition, public procurement, campaign finance, and appointment procedures. The Corruption Prevention and Combatting Bureau (KNAB) uncovered several high-profile scandals and recommended prosecution against business figures and public officials implicated in the wrongdoing. Owing to the enhancement of anticorruption mechanisms, Latvia’s rating for corruption improves from 3.25 to 3.00. Outlook for 2013. Latvia’s economic recovery will continue, despite the persistence of high unemployment. The flow of outmigration has slowed, but remains a source of concern. Russia’s entry into the World Trade Organization may expand the market for Latvian products. The oligarchs, who have recently seen their power diminished, will seek to regain their previous political standing. However, strong forces of anticorruption in state institutions may help keep them at bay. Latvia 337 Main Report National Democratic Governance 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 n/a 2.25 2.00 2.00 2.00 2.50 2.50 2.25 2.25 2.25 October 2012 marked the end of one full year in power for Latvia’s new government. Contrary to widespread expectations, the ruling coalition remained stable in 2012, despite disagreements over the balance of power among coalition members. Unemployment remained high throughout the year, and the government continued to implement austerity measures on the heels of painful cuts to a wide range of state services, employment, and salaries in 2009–10. Latvia’s new government came to power after President Valdis Zatlers dissolved the Saeima (parliament) in May 2011—the first parliamentary dissolution in the country’s history. The Saeima voted Zatlers out of power in June, but a popular referendum the following month confirmed the parliament’s dissolution. In the ensuing elections, the predominantly Russophone Harmony Centre won more seats than any other party, but proved unable to build a governing coalition. The right to do so fell to ex-president Zatlers’ center-right party (Zatlers’ Reform Party, ZRP), in tandem with Unity, the center-right party of incumbent prime minister Valdis Dombrovskis.