RIGA, Latvia — What do you do when your country’s economy is disintegrating before your eyes — all around you businesses are closing down and tens of thousands are being hurled into unemployment?
If you are Valery Matsulevich or his business partner Vladimir Fonarev — two middle-aged textile entrepreneurs — you might think it is the perfect time to open a boutique selling hip American clothes to 20-something Riga club-goers.
On a winter night not long ago, the two men opened the doors of “Extreme,” their venture into the world of youth fashion. While temperatures in Riga plunged well below zero, and empty storefronts along Alexandra Caka Street reinforced the chill that enveloped the city, Extreme's windows burned bright. Patrons sipped champagne and grooved to the sounds of a hip-hop DJ next to a semi-psychedelic wall mural while perusing T-shirts and distressed jeans with labels like “Smet,” “Kowboys and Co.” and “Bejeweled.”
The disparity with what was happening around them could not have been more striking. Latvia’s economy — as well as its overall confidence — is in a free fall. Gross domestic product is now expected to drop 13 percent this year, the biggest contraction in the European Union. A 7.5 billion euro rescue program instituted by the International Monetary Fund has forced the Latvian government to slash its budget and introduce extreme austerity measures. Official salaries have shrunk by about 20 percent, and all across the ex-Soviet Baltic nation of 2.3 million, people are tightening their belts and hunkering down for what appears to be a long economic freeze.
None of this fazes Matsulevich. While he acknowledged that it is perhaps incongruous to open a business on a street where half the stores seem to be shuttered (“Strange, isn’t it?” he simply remarked), he insisted that his timing could not be more perfect. Even in an economic crisis, there are those who want to live life to the fullest — and party on weekends. He said his store offers something completely different, and therefore will attract buyers.
“Clothing is like art — and aren’t great works produced during crises and even war?” Matsulevich asked. “We live such gray lives. My clothing is for those people who have not lost their interest to live.”
Truth be told, he hardly looks the type who would be sensitive to the ever-shifting tastes of those who go to discotheques and all-night raves. Dressed plainly in jeans, sensible shoes, a blue work shirt and worn gray cardigan, he appears more like a guy who would be running a hardware store — not selling fashionably ripped, skull-emblazoned T-shirts. But this 50-something Latvian — who has also lived in Pittsburgh — has worked for 27 years in the clothing business, working his way up to directing a Riga textile mill with 1,500 employees.
The inspiration to open a trendy retail store came in November, just as the world financial crisis was sinking in. “We were sitting in my kitchen in Pittsburgh and decided that we needed to do something — we were sick of life,” laughed partner Fonarev, 53, who also runs a second business providing optical sensors for the steel industry. Both men decline to reveal how much they have actually invested in their venture, but said the money is entirely theirs, without any bank loans or outside backers.
The challenges, and seeming contradictions, abound: Two days after the opening, the store was empty. Nevertheless, Matsulevich insisted that he is in the clothing business for the long run. “The crisis won’t pass for another year or two,” he said. “You can get used to a crisis — live with it like with a snake which can bite you at any moment.”
Fittingly, Extreme’s symbol is a white chameleon. A journalist asked Matsulevich if it represents him. "What do you think?" he said. "Maybe I’m not as innocuous as one, but I’m going to survive."
More GlobalPost dispatches on businesses during the downturn:
The secret to one Brazilian town's financial success: lingerie
The Wal-Mart of India