NYT: Resilient Romania Finds a Currency Advantage in a Crisis
November 5th, 2012 - nytimes.com
BUCHAREST, Romania — When German de Marco’s work dried up in beleaguered Spain earlier this year, the high-powered civil engineer never imagined that Romania, the European Union's second-poorest country, would provide his economic lifeline.
But after the Spanish government ran out of money and halted construction of the high-speed railway he was working on, Mr. De Marco, a 34-year-old Spaniard, found a job here supervising the building of a $90 million tramline. The rent on his apartment in an elegant neighborhood in the Romanian capital is half what it was in Barcelona, helping him save an extra $1,300 a month.
“When my boss suggested transferring me to Romania, I initially thought, ‘You must be kidding,’ ” Mr. de Marco said. Yet, after eight months here, he does not want to leave.
Mr. de Marco’s unlikely pilgrimage eastward underscores how many of the European Union’s former Communist states are proving remarkably resilient in weathering the crisis. Those newcomers to the union have been conditioned by decades of hardship under the Kremlin’s rule. But as the euro crisis has deepened, it has also helped that Romania and the others have kept their own currencies.
That has given these still-developing countries a host of advantages, while many economists believe the euro zone’s one-size-fits-all monetary policy has hampered Ireland, Greece and Spain in restarting their moribund economies. Indeed, many of the post-Communist states are having strong second thoughts about their long-running goal of joining the euro.
Mugur Isarescu, the governor of the National Bank of Romania, said in an interview that maintaining its own currency had given Romania the flexibility to set interest rates, control liquidity and allow the currency to depreciate to help rein in the deficit. In the absence of control over monetary policy, he noted, euro zone countries like Greece are forced to rely primarily on fiscal policy: taxing and spending.
“Of course there is a backlash and disappointment because E.U. accession was seen as a panacea,” he said. “The dreams were too high.”
In Romania’s case, maintaining its cheaper currency, the lei, has made its exports — two-thirds of which go to the euro zone — more competitive and given it a lower cost of living that has made the country a sudden draw for highly qualified workers from struggling euro zone countries.
Though millions of Romanians were streaming into Spain and Italy in search of economic opportunity only a few years ago, today Spanish unemployment hovers near 25 percent, while in Romania it is about 7 percent.
Seven of the 10 former Communist countries in the European Union have yet to adopt the euro. The Czech Republic, which uses the koruna, wants a referendum before joining and has cited 2020 as the earliest target date. Hungary has stuck with its currency, the forint, and said it would not adopt the euro before 2018. In Poland, Prime Minister Donald Tusk recently deemed the euro “completely unattractive.”
Romania’s previous target for joining the euro zone, in 2015, is now “out of the question,” Mr. Isarescu said. Nevertheless, he argued that trying to meet the criteria to join — including keeping budget deficits below 3 percent of gross domestic product — was good discipline.
Though buffeted by the crisis, some countries in Eastern and Central Europe are holding up better than their neighbors to the west that have been joined at the hip by the euro. Poland’s economy was the only one in the European Union to grow in 2009, the year the financial crisis exploded. The Baltic states of Latvia and Lithuania, which underwent painful austerity, are booming again. Even in growth-starved countries like the Czech Republic, the social upheaval has been tame compared with the likes of Greece, with Czechs far more likely to vent their frustrations in the pub than on the street.
"We in this region are used to living through difficult times,” said Tomas Sedlacek, a leading Czech economist who was an adviser to former President Vaclav Havel. “We still remember Communism when we were poor and miserable and far worse off than Greece.”
Of course, Romania has hardly been immune from crisis. Successive governments have grappled with a backlash against austerity. And the political turmoil that ensued when the government of Prime Minister Victor Ponta pressed, and failed, to impeach President Traian Basescu this summer shook investor confidence. It also called into question the future of a $26 billion rescue package from the International Monetary Fund, the European Union and the World Bank that Romania obtained in 2009 in exchange for drastic spending cuts.
The I.M.F. has since made available the latest tranche of about $650 million. Economists said Romania had avoided the profligacy that has unhinged the Greek economy, thanks in part to tough austerity measures beginning three years ago. Romania slashed public sector wages by 25 percent and raised its value-added tax to 24 percent from 19 percent, helping stave off budgetary shortfalls.
Romania’s budget deficit amounted to about $2 billion, or 1.2 percent of gross domestic product, in the first nine months of the year, compared with $17 billion, or 5 percent of gross domestic product, in Greece. (Growth this year in Romania is expected to be about 1 percent, according to the government, compared with an expected contraction of more than 6.5 percent in Greece.)
Beyond the advantages of being outside the euro zone, Romania also benefited from the exodus of nearly three million Romanians after it joined the European Union in 2007, said Daniel Daianu, professor of economics at the National School of Political and Administrative Studies in Bucharest and a former finance minister. The manpower drain kept unemployment relatively low and lessened the financial strain on the state. Even with the crisis engulfing southern Europe, few Romanians have returned home.
Though dilapidated tenement houses and poor people hawking scrap metal remain a feature of daily life here in the capital, designer shops, hip sushi restaurants and disco clubs now compete with the stray dogs and street children that have long blighted Romania’s image abroad.
In Timisoara, a Transylvanian Silicon Valley about 100 miles from Bucharest, about 5,000 foreign companies, including Alcatel-Lucent, Microsoft and Oracle, have invested, drawn by the country’s talented pool of engineers, relatively low wages and a strategic location between east and west.
While the recent political instability has caused major jitters, foreign investors said they were here for the longer term.
Dacia, owned by the French carmaker Renault, is one of the largest investors in the country. Currently employing 8,000 people, it has invested more than $2.6 billion since 2000.
Jerome Olive, Dacia’s general manager, noted that the competitive cost of doing business in Romania was helping somewhat to offset the punishing downturn. The cost of an entry-level engineer in Romania is about $1,925 a month — about half that of a similarly qualified engineer in France. “In Romania our factories never stop,” he said.
Mr. de Marco, the Spanish engineer, also praised the Romanian work ethic, though he conceded that it was awkward that he earned 10 times as much as Romanian managers.
“It is easier here to manage a team,” he said. “In Spain, people talk back.”
According to EU accession treaty since 2014, foreigners can buy agricultural land in Romania.
November 14th, 2012 - capital.ro
Romanian soil is of the best quality and very cheap, it is easy to predict that the demand will be huge. Romanian authorities have given up making arrangements to defer liberalization of the land market, as did those in Poland, Hungary, Czech Republic and Slovakia. Although the Treaty establishes a transitional period of seven years after accession, allowing Member States to maintain restrictions on the acquisition of agricultural land and forests by individuals and businesses in other countries in recent years, large areas of arable land of Romania have got owned by foreign entities.
According to current legislation, theoretically, no foreigner can buy land in Romania. Practically, however, it only takes a company registered in Romania, appearing as a company, and one may be in possession of agricultural land. Valeriu Tabara, former Agriculture Minister, told Capital that the figures provided by the current government are not real and that, at present, not only 700,000 ha but around 800,000 ha, ie, about 10% of Romania's arable land is already owned by foreigners. As a result, Romania ranks first in Europe and the tenth in the world in the percentage of land owned by foreign companies.
Among the foreign companies that have large areas of land in Romania are Prio Foods of Portugal (25,200 ha), Agro Trading Chirnogi and Mary, Lebanon (25,000 ha), DN Agrar Group from the Netherlands (11,000 ha), First Farms and Ingleby Company, both of Denmark (9,500 ha, 8,600 ha respectively), Germanagrar, Germany (8,000 ha), Assigurazioni Generali, Italy (4,600 ha), etc. Altogether, at an average price of 2,000 euro / ha, foreign companies have agricultural land in Romania worth 1.6 billion Euros.
Constantine: "We put some conditions"
Daniel Constantin, the current Minister of Agriculture, said several times in recent days that according to EU accession treaty, we cannot make such changes, because any amendments should be ratified by all other 26 Member States. "We have no guarantee that they can do so until 2014, when it will come into operation a new agricultural policy" - says Constantine. However MARD has a set of measures to protect the land market in Romania after liberalization and to ensure competitiveness in the market for Romanian farmers in relation to foreign investors. "This document will be submitted to public debate in 2013, we talk to producer associations and all those interested so we can reach a formula acceptable to everyone," said Constantin. A measure envisioned by the authors of the document is to limit the surface sold to foreigners. "We'll see how much this area would limit: 300, 500 or 700 hectares, as this will emerge from the debate," says Constantine. Another measure would be trying the experience of potential buyers in agriculture. "We'll see how many years of experience have those that want to buy land in Romania - three, five or seven years - because we must ensure that the land is used for agriculture, not for real estate projects or other purposes, "Agriculture Minister told us.
Steps abandoned
Valeriu Tabara’s opinion is that Romanian authorities are using the wrong attitude on this issue so important to the future of Romanian agriculture. "Unfortunately, Mr. Fuia (Minister of Agriculture in the Boc government - editor's note), or Mr. Constantin have not continued efforts that we have started in 2010 to postpone the date for liberalization of the land market. I had numerous consultations with the Polish, the Hungarians, the Czechs and the Slovaks, have discussed with Germany’s Agriculture Minister and we would sign a memorandum to delay the liberalization to 2020. Then submit that document to the Commission’s approval. But I see that all these steps stopped and now only discuss on the introduction of restrictions on sale. One must know that such conditions will be negotiated and approved by the European Commission. "
MARD officials said there is no time to postpone the deadline. Culiţă Tărâţă told Capital: "It's stupid! Hungarians asked for an extension until 2014 and got it. Polish, Czechs, Slovaks, they all requested initially the extension and have obtained it or will obtain it. Why could Romania not obtain it also? "Regarding the current price of land, Culiţă Tărâţă told us that it is around 2,000 and 2,500 euro /ha for the best and irrigable land, and about 1000-1500 for euro / ha for other land.
"The important thing is how you use this land; it will be preserved to be useful to future generations. Or, for that, we will have to take steps in advance otherwise we mock the great wealth that God has endowed us. "
Foreign investors will not be allowed to buy agricultural land in Hungary
December 23th 2012 - capital.ro
Foreign investors will not be allowed to buy agricultural land in Hungary, provides a law passed by the Hungarian Parliament this week and described as historic by the government in Budapest, according to AFP.
In the future, only Hungarian citizens will be able to buy agricultural land in Hungary, it said in a statement issued by the Ministry of Development in this country. Hungarian Constitution guarantees that land is a national treasure, a common heritage of Hungarians and protects it from speculators. According to the sources, the vote in parliament is a historic decision and the beginning of a new era for agriculture. The enactment provides the prohibition for foreigners to purchase agricultural land Hungarian and commitments to protect forest and water resources of the country, according to Agerpres. Executive conservative Prime Minister Viktor Orban of Hungary argues that agricultural land should be protected from the big bankers and speculators,to assist farmers and landowners, small and medium.
A discrete fund from UK reached a portfolio of 18,000 hectares in Dolj and Teleorman
November 28th 2012 - zf.ro
British investment fund Spearhead International, an almost unknown presence in the local business environment,acquired 3,000 hectares of land in Dolj.
The value of the land aquired by the British investors amounts to 3.5 to 4 million euros, according to ZF calculations that take into account the average price of 1000-1500 euros / ha.
Following this transaction the British from Spearhead came to take-on lease or property-a portfolio of 18,000 hectares of arable land locally, in counties such as Dolj or Teleorman.
"The surfaces were taken from other investors who started a business from scratch here in the early 2000s," said sources in the mergers and acquisitions market.
Britain's Spearhead International are present in local agricultural market since 2008, when they took over 70% of Agrinatura from the businessman Eugen Pena, who served as general manager until 2003 at Hidroelectrica.
After entering Romania,Spearhead quicly became an aggressive player in the local agricultural market.
Foreign investors, who hold in Romania between 0.7 and 1 million hectares of arable land are attracted to investments in agricultural land in the local market because prices in Romania are four to five times lower than in Western European countries.
Agricultural production counted for 15 billion euros into the economy last year
January 9th 2013 - zf.ro
Agriculture, a sector that contributes every year to GDP by about 6-7%, brought 15 billion into the economy last year, down 16% from the peak recorded in 2011, shows the first official estimates of Eurostat, released earlier this year. Agricultural production declines came amid a dry year with poor grain crops and oilseeds (sunflower and rapeseed). However, the decline was held in check by soaring prices for major agricultural commodities. Moreover, agricultural production in 2012 is the average of the last six years, so minus 3 billion failed to gather sufficient weight to change the growth calculations.
"The year 2012 was not a bad agricultural year, agriculture will continue to be a growth engine for the economy, the sector retains its vigor" said Gabriel Popescu, Ph.D. Professor of Economics at the Faculty of Agricultural Environmental and from ASE Bucharest.
Gabriel Popescu says that agricultural production will be able to make each year 18 to 19 billion, as in 2011, just when the farmers will direct substantial funds in modern irrigation systems.
Losses caused by drought were evident last year in crop production. Five of the most important seven categories of crop production are lower than in 2011. The only pluses in crop production, a subcategory covering two thirds of the entire value of agricultural production were those made by wine and vegetables, pluses of 13.5% and 23.8%.