Section: BUSINESS
Page: E1

Tuesday, August 18, 1998

DROP IN RUBLE HURTS REGIONAL LINKS

Crisis potentially hampers trade exchange between area businesses and Tula

 

JO-ANN JOHNSTON Business writer

 

The devaluation of the Russian ruble Monday poses a setback to efforts to create business links between the Capital Region and the Russian city of Tula.

Area businesses have been trying for the last two or three years to establish training and exchange programs that will eventually promote trade between the two cities, said Alex Romanovich, a member of the broad-based Albany-Tula Russian Alliance, and a marketing vice president with Unified Technologies Inc., a high-tech company in the Rensselaer Technology Park. In fact, his own company, which integrates computers and networking technology, hopes to sell its services one day in Russia.

But the devaluation is apt to retard progress that private companies like his are making in Russia, he said.

``It creates a level of mistrust,'' he said. ``Americans are very practical business people . . . (who are apt) to wonder whether you should be making the investment in money and effort, though they don't say it in so many words.''

Efforts on the Russian side become more complicated too, he said. The Alliance, for instance, wants to get some Russians to come here to learn computer programming skills, but a currency devaluation is likely to make travel more expensive and stall such initiatives.

Some more established companies that are more used to doing business in Russia have been careful to protect themselves financially.

Intermagnetics General Corp., a Latham company that exports magnets used in medical diagnostics, has insisted on being paid in U.S. dollars, Chairman Carl H. Rosner said. The devaluation of the ruble was ``clearly in the cards'' because of Russia's troubled economy, he said.

Many shipments that have moved to Russia have started requiring prepayments in the last couple of weeks, said Tom Valentine, president of Team Air Express in Latham.

``No one has shipped hoping to be paid later,'' Valentine said. That would have been too risky.

U.S. travelers doing business in Russia will do best by making payments for purchases by credit card, Rosner said. The devaluation does make travel costs less expensive in Russia now.

The Russian currency devaluation follows on the heels of the devaluation of several Asian currencies, said Nicholas Perna, chief economist for Fleet Financial Group. That widens the problem in general for U.S. companies that export.

Devalued currencies make it difficult for other countries to be able to afford American-made goods. That comes back to haunt U.S. firms in the form of lower sales and profits, he said. That's especially true when devaluations move from one ailing country to another, like an economic flu.

Then American exporting companies have weaker stock prices, which is disappointing to U.S. investors, he said.

But Asia and Russia are fundamentally different economic regions, he said. In Asia, there are underlying strengths that can promote an economic rebound. American companies can now go to Korea, for example, and buy a steel or car plant and help it grow.

In Russia, with lots of natural resources, but an underdeveloped industrial base, the eventual promise isn't so clear, Perna said.

``Russia has awesome potential,'' Perna said. ``But it also has awesome problems.''