"EU WILL SOON WANT TO JOIN ARMENIA": BUSINESS IS TRYING TO FIND POSITIVE THINGS IN DOLLAR EXCHANGE FALL

Regnum, Russia
Aug. 9, 2006

The process of impetuous US dollar devaluation in Armenia has
negatively affected business of local manufacturers. For the last
ten days, US dollar lost about 20 points in Armenia and by August
9 it can be sold for 390 dram and bought for 400 dram at Yerevan
currency exchanges.

Talking to a REGNUM correspondent, MP, head of MAP Company (agriculture
produce processing) Alik Petrosyan noted that dollar devaluation,
first of all, affects negatively cost of the goods. "We buy grapes
at the national currency and export our brandy for dollars, so we
have been suffering significant losses," the businessman says noting
he sees no way out of the situation. "We cannot stop production and
continue buying raw stuff. In case, dollar exchange rate reaches
the supposed 350 dram, the company will have to raise the price,
but our produce will become noncompetitive. We are facing a dilemma:
either we continue production or stop functioning.

I even do not know what to do," he notes.

According to an expert who preferred to stay anonymous, Armenia’s
Central Bank is unable of influencing the situation, as it has no
tools for it. "Armenia’s Central Bank has been pursuing a wrong policy
in many cases, but it would be incorrect to put the full blame on
it in this situation. The Central Bank should pursue a policy of
targeting inflation, but not imitating it," he said. It is worth
mentioning, the Armenian Central Bank pursues a policy of floating
dollar exchange rate. According to many experts, strengthening of
Armenian dram is caused by huge dollar flows into Armenia, which is
particularly connected with large amounts of construction as well as
with the tourist season.

According to economist Eduard Agadzhanov, for the first half of
2006 US dollar has devaluated almost by 10%, and for the last three
years by 40%. "Strengthening of the national currency has resulted
in forcing out domestic manufacturers from the domestic market,"
the economist notes adding that each year the foreign trade deficit
has been increasing. In the first quarter 2006 only the showing was
over $0.5 billion.

Talking to the REGNUM correspondent, one of Armenia’s prominent
businessmen, who preferred to keep incognito, probably, because of
the original nature of his comment, said that the "dollar-dram story"
will end in "leveling of the national currency exchange rate to the
US dollar, one to one." "In this case, it will turn out that salary
of 150,000 dram ($350-400) will automatically grow to $150,000, and
Armenia will become the best country in the world. If it happens,
we shall meet the most important standards for entering the European
Union. Or, to be more precise, the EU will want to join us," the
businessman notes.