Identifier
Created
Classification
Origin
06MINSK1142
2006-10-24 13:16:00
CONFIDENTIAL
Embassy Minsk
Cable title:  

HOSIERY, HYPERMARKETS AND HOT RODS; ECONOMIC

Tags:  ECON PGOV BO 
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DE RUEHSK #1142/01 2971316
ZNY CCCCC ZZH
R 241316Z OCT 06
FM AMEMBASSY MINSK
TO RUEHC/SECSTATE WASHDC 5265
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUEHBS/USEU BRUSSELS
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RUEHVEN/USMISSION USOSCE 1318
C O N F I D E N T I A L SECTION 01 OF 02 MINSK 001142 

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/23/2016
TAGS: ECON PGOV BO
SUBJECT: HOSIERY, HYPERMARKETS AND HOT RODS; ECONOMIC
MINI-MIRACLES IN MINSK

REF: MINSK 1117

Classified By: Ambassador Karen Stewart for reason 1.4 (d).

Summary
-------

C O N F I D E N T I A L SECTION 01 OF 02 MINSK 001142

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/23/2016
TAGS: ECON PGOV BO
SUBJECT: HOSIERY, HYPERMARKETS AND HOT RODS; ECONOMIC
MINI-MIRACLES IN MINSK

REF: MINSK 1117

Classified By: Ambassador Karen Stewart for reason 1.4 (d).

Summary
--------------


1. (C) The first-time visitor to Minsk will quickly notice
pockets of conspicuous consumption belying tour book
descriptions of Belarus as a museum of all things Soviet. On
the road from the airport one will pass new multi-story
dachas, a Porsche dealership and a billboard advertising
designer lingerie. These monuments to capitalism demonstrate
that while the average Belarusian still lives modestly on
average wages of USD 260 per month, entrepreneurs
successfully cater to a small emerging upper-middle class.
It remains unclear, however, how this segment of the
population fits into Lukashenko's attempts to justify his
rule based upon a supposedly socially oriented economic
policy. End summary.


2. (SBU) Emboffs spoke to executives in several of the most
visible firms in Minsk catering to clients at the upper end
of the economic spectrum: Viktor Petrovich, Director and
partner in the holding company Tabak Invest, which opened
Minsk's newest hypermarket; Inna Maslennikova, General
Director of Merlintour, a travel agency specializing in
individualized foreign tours; Sergey Kusonovskiy, Deputy
Director of Milavitsa, a lingerie manufacturer and retailer
focusing on the middle class and "middle class plus" market
segments; Aleksey Dunayevskiy, Director of Sales and
Marketing for Mir Fitnessa, the only gym in Minsk in a
purpose built facility; Igor Razumovskiy, the General
Director of Avtosalon-AV, the exclusive dealer in Belarus for
Audi and Porsche; and Vladimir Lopanik, Chair of the Board of
Aresa Service Construction Firm.

Let the Good Times, and Good Sales Figures, Roll
-------------- ---


3. (SBU) Each executive who discussed sales figures described
solid growth. Sales of Audis are up 23 percent at
Avtosalon-AV, and this year's entire allotment of 30 Porsche
Cayennes (SUVs retailing for 110,000 Euros) has been sold.
Milavitsa's sales in Belarus have increased fifteen percent
this year, with high-end designer lingerie and swimwear
accounting for an ever-greater proportion of its sales.

Merlintour has seen sales increases each year since opening
in 1995. Sales projections for the next year are higher for
all the firms as well. To take one case, Mir Fitnessa plans
to expand its membership from the current 3,000 to 4,000
people by the end of 2007.

Who Can Afford This Stuff?
--------------


4. (SBU) The success of businesses targeting high-end
clientele does not indicate that the average Belarusian is
about to join the middle class, whatever the definition. A
survey in August (reftel) revealed that only four percent of
Belarusians said they could comfortably afford large
purchases such as furniture, a car or an apartment. In fact,
the majority said they could barely afford new clothes.


5. (SBU) The new and still small Belarusian middle class is
largely located in Minsk. Of the firms we spoke to, only
Milavitsa has sales points outside of the capital. None of
the others plan to expand outside of Minsk, although
Avtosalon-AV found a repair shop in Gomel for Audi to
certify. While residents of other regional capitals have
come to Minsk to buy a new Audi, only one Porsche has been
sold to someone from the regions (from Gomel). Merlintour
gets some of its business from outside of Minsk, but all
clients flying out of Belarus must come to Minsk anyway,
meaning there is little reason to expand into the regions.


6. (SBU) Our interlocutors said independent entrepreneurs and
managers in mid- to senior-level positions in large companies
make up most of their client base. Accordingly, most of
those with buying power tend to be middle-aged, having built
up their own business or advanced up the corporate ladder
over the past decade. However, companies with a heavily
female customer base also seek twenty-something clientele.
For Mir Fitnessa, the female customers include many
stay-at-home mothers, judging by its full schedule of yoga
classes throughout the day and the availability of on-site
childcare. Mir Fitnessa's Dunayevskiy indicated that there
were enough students with disposable income -- at least four

MINSK 00001142 002 OF 002


percent of the student body at the main universities -- to
consider opening health clubs near campuses.


7. (SBU) A shadow economy supports at least some of those
able to afford luxuries. Aresa's Lopanik freely admitted
that given the unavailability of mortgages, few Belarusians
could afford new apartments on their official salaries. The
government recognized this, and purposely excluded real
estate purchases from legislation requiring large purchases
to be reported to the tax authorities in order not to further
hamper the real estate market.

But We're Not Talking About Moscow
--------------


8. (SBU) While buying power in Minsk exceeds newcomers'
expectations, several businessmen pointedly compared local
development negatively with that of Moscow and Russia
generally. Kusonovskiy noted Milavitsa's sales growth in
Belarus in the last two years was less than half that of its
growth in its largest market, Russia. Similarly, Dunayevskiy
estimated the level of per capita gym membership in Minsk
remained at least one-third lower than that in Moscow.
Lopanik said the local housing market remains years behind
Russia's due to the absence of mortgage legislation.


9. (C) In line with perceptions that Belarus remains more
egalitarian than its neighbor to the east, there is still no
market for extremely high-end products in Minsk. Tabak
Invest has formed a company to import personal helicopters in
Belarus, but its first customer is likely to be the
Presidential Administration. Avtosalon AV does not see a
sufficient market for cars significantly more expensive than
Porsches. Razumovskiy noted there were still only three
Bentleys registered in Belarus.

Comment: The Middle Class as a Challenge to Lukashenko?
-------------- --------------


10. (C) Most of Lukashenko's support continues to come from
the majority of Belarusians who just manage to make ends
meet: pensioners, rural dwellers, and veterans. Indeed,
despite the success of our interlocutors' companies in
dealing with the authorities, none of them seemed enamored
with the current government. The increasing visibility of a
middle class, however small by Western standards, would seem
to pose two challenges to Lukashenko. First, the average
Belarusian might begin to wonder why the sustained economic
growth often mentioned by Lukashenko has only allowed a
relative few to reap the rewards. Second, a highly mobile
middle class might theoretically begin to compare their
lifestyles unfavorably with those of their counterparts in
neighboring countries and begin to support change. However,
given the heavy reliance of the businesses and many of their
clients on the regime (septel),it would be difficult to find
room to seek independence, let alone move into the
opposition, without risking the
very foundation of their newfound wealth.
Stewart