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Andris Deniņš: being neighbours with someone has a certain limit

Andris Deniņš/ekonomika.lv.
Supporters of the idea to issue residence permits in exchange for purchase of property often mention the large sums of money Latvia gains from it, whereas people who oppose this practice say this may lead to a dangerous situation in which Latvia’s economic development will rely heavily on residence permit trade, says Prof. Andris Deniņš of the University of Latvia.

Residence permits are not a wishing well

For years there has been a great deal of interest for the option to receive residence permits in exchange for purchases of real estate property in Latvia. Foreigners most often pick apartments in Riga and Jurmala and their surrounding areas, says the professor.

He continues: «In this context, MEP Roberts Zīle says it is a myth that foreign buyers’ activity on the real estate market has a positive effect on municipal budgets. For example, buyers in Jurmala provide smaller revenue also because of their maintenance habits, because they spend no more than a couple of weeks in their new home. This means they do not spend a lot of money in the city.»

He also says municipal infrastructure around those homes has to be secured either way. Such new residents are also economically unviable for communal service providers – it is necessary to invest major funds with small returns, because foreigners’ consumption of water, electricity and heating is very low.

Dividing Latvia between the wealthy and locals

Deniņš says claims from real estate lobbyists about how residence permit trade only affects the most expensive properties and that residents’ ability to find affordable housing also does not hold water.

Data shows that the average piece of real estate property is a new middle-class apartment with a total area of 65-100 m2, which does not bode well for local residents in Riga and Jurmala. Unfortunately, exaggeration of economic benefits is not the only problem.

Unclear origin of cash

«In cases when real estate property in Latvia by non-residents it is hard to trace the origin of finances. This is why situations when properties in Latvia are bought using illegally obtained finances became very real. We almost be certain about open money laundering activities in such cases – right under our noses and under the guise of bringing economic benefits to the national economy,» says Deniņš.

He also comments: «If many Latvian residents do not like loud tourists that flood the streets in Jurmala during the summer season, I propose we think about what kind of people buy apartments and houses using illegally obtained finances? I doubt anyone would ever want such neighbours, but it is the current state policy creates a very fertile soil for Latvia to become a platform for financial crimes.»

The professor also says that development of modern technologies allows them to manage a business from anywhere in the world, and this also applies to illegal businesses. Latvia with its convenient residence permits order will likely become very attractive for such ‘businessmen’.

What kind of neighbours do we want?

What is there standing in the way of purchasing beautiful houses in Jurmala if no one actually checks the origin of the money used for the purchase? On top of that, having a piece of land also opens the way for all kinds of illegal activities intended to acquire even more money to afford some other piece of property, or invite other ‘colleagues’ to try their luck in Latvia. «If getting a residence permit is so simple, this practice can be easily abused by criminals to continue organizing their criminal activities from their newly entered country and create more work for local law enforcement institutions,» says the expert.

He adds that the list of the most dangerous places in Europe was published last year, and Latvia had the dubious honour of getting 8th place. It is mentioned in the report that this is largely because of the level of crime and prostitution in the country.

«I believe any Latvian resident would agree that this is not the kind of top list we should compete to get first place in. It is exactly the opposite – we must do everything we can to get Latvia off that list. If crimes are committed in other countries, but are coordinated from Latvia, using our country as a headquarters, it would deal a very serious blow to our image. Do we really want others to consider Latvia place where criminal organizations feel like home?!» comments Prof. Deniņš.


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