Despite it all, Russian firms do well
The economy is in shambles, but devaluation has helped many companies compete at home and abroad.
The evidence is still scattered and sparse, but amid Russia's blizzard of economic woes, a few rays of light might just be breaking through.Skip to next paragraph
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Just watch Masha Ratinova, a graphic artist use her computer to put the final touches on a new label design for an old brand of Russian cooking oil.
The label, which includes Van Gogh's "Sunflowers," a crispy head of lettuce, and a smiling housewife, is a part of a new marketing pitch by an agricultural enterprise hoping to compete against imported cooking oil.
The imports were highly favored after the collapse of the Soviet Union, when foreign goods flooded Russia. But in August, imports suddenly became expensive when the Russian currency fell to barely a third of its previous value. Now Russian products have a chance to compete.
"Russian sunflower oil was considered too dark and heavy for cooking and was just sold in bulk for industrial purposes," says Ms. Ratinova.
Half the price
Now, with a little dash of Western marketing style - provided by Ratinova - plus a whooping great price advantage, the home-grown product may do well. The Russian product can now be bought in local shops for less than half the price of its foreign-made competitors.
Currency devaluation has also proved an unequivocal boon for a few key Russian exports, which are produced in rubles but sold on the international market for dollars, such as oil, gas, and steel.
But most companies producing for the domestic market have been sorely buffeted by bank failure, inflation, and the uncertainty that swept in with the August crisis. After nearly a decade of economic depression and political turmoil, few today feel like looking on the bright side.
"It's reasonable to expect benefits from the massive devaluation of the ruble last summer," says Andrei Neschadin, an economist with the Union of Industrialists and Entrepreneurs, a private-sector group.
"But in fact we see very few domestic producers actually making any headway," he says. "We seem to have a worst-of-all-possible-worlds scenario unfolding here."
The Soviet Union is usually depicted as a vast industrial rust bucket that churned out tanks and machine tools, and little else. But its factories also produced a vast array of consumer goods, from hairpins to automobiles - often, admittedly, of atrocious quality.
Post-Soviet hopes dashed
Many Russians hoped the post-Soviet transition would bring investment, new technology, and better management to enable domestic companies to take their place as competitors on the global economic stage.
Instead, they lost most of their home market to aggressive foreign imports. Mr. Neschadin estimates that by the middle of this year, about 60 percent of the consumer goods on sale in Russia were foreign made. In wealthier markets, like Moscow, the figure reached 80 percent.
Russia's gross domestic product has plummeted to about half its 1991 level, and the Finance Ministry recently forecast that it will slip again by 3 to 9 percent next year. "Most Russian industries did not reform themselves," says Vilen Perlamotrov, an expert with the independent Institute of Market Problems.