General Overview

Since regaining independence Latvia has rapidly advanced towards restoring a market economy with steady economic and financial reforms paving its way. Latvia may be a small country with its 2.5 million inhabitants, but it is a potentially attractive market for American IT equipment and services, capital machinery and equipment, and consumer products. Located at the center of the three Baltic States, Latvia provides a strategic location as a commercial, financial and transportation hub for the Nordic/Baltic region.

Commercial Environment

The commercial environment is generally friendly to foreign companies. There are no controls on import, export, or use and conversion of foreign currencies, which facilitates investment and repatriation of profits. The Latvian government has adopted modern laws establishing copyrights, patents and trademarks and the means for enforcing their protection. Telecommunication services have been modernized and the real estate market looks promising with both modern housing and reasonably priced business venues available. English is the West European language of choice in government and business.

Economy

The Latvian economy grew at a healthy pace from 1995 until the Russian economic crisis hit in 1998, which slowed growth temporarily. This resulted in negative fiscal and external account developments and noticeable contractions in GDP and industrial production. Towards the end of 1999 the economy picked up again, as the budget cuts recommended by IMF started to show their effect, and trade and FDI figures improved. In 2002, Latvia showed a rather enviable GDP growth rate of 6.1 per cent. Even stronger growth has occurred in the first quarter of 2003 (8.8 per cent). Current forecasts show a GDP growth of 7 per cent expected for the year 2003. If this growth rate is realized, Latvia will have posted one of the highest GDP growth rates in all of Europe.

The Latvian economy is based on service industries including transportation and financial services and on light industry, e.g., wood, textiles, food processing. Most of the light industry sectors suffered due to the Russian crisis and turned Latvian trade increasingly towards Western Europe. In 1997 Latvia's exports to the CIS area were almost 30 percent of the total. By 2000, only 8.7 percent of Latvia's exports went to the CIS area but trade is expected to grow if Latvia joins the EU next year.

Market for U.S. Products

American products face strong competition in the Latvian market from the EU and CIS. Due to historical trade relations, companies from Norway, Sweden, Germany and Finland approach the Latvian market with great confidence. The U.S. hosts the largest Latvian immigrant community in the world, and several Latvian-Americans have returned to Latvia and assumed leading roles in the business community. Latvia became a member of WTO in 1999 and plans on EU accession next year. They have free trade agreements with 26 countries, including European Union, EFTA, several CEFTA countries and Ukraine. Latvia has also concluded bilateral investment agreements with the majority of European and CEE countries and the United States, some of which are being renegotiated to meet EU requirements.

Most U.S. companies doing business in Latvia rate the business environment among the best in Eastern Europe. The courts, the legal system, trade and other regulations and tax structures are slowly being modified towards the industrialized west. Government bureaucracy, corruption and organized crime, typical of the old Soviet Bloc countries, have been the main impediments to U.S. trade and investment also in Latvia. While these obstacles have sometimes made it more complicated to do business in Latvia than in the west, very few U.S. companies have abandoned the Latvian market because of them.

Latvia Country Commercial Guide 2007

All the above information is a part of an Executive Summary of the Country Commercial Guide.

The guide features:

• Economic Trends and Outlook
• Political Environment
• Marketing U.S. Services and Products
• Leading Sectors for U.S. Products and Investments
• Trade Regulations, Customs and Standards
• Investment Climate Statement
• Trade and Project Financing
• Business Travel
• Economic and Trade Statistics
• U.S. and Country Contacts

To read the whole report, you can download it as a pdf file from the right site of this page (below the picture).

Documents

Latvia Country Commercial Guide 2008