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Country Commercial Guides FY 2000: Latvia Report prepared by U.S. Embassy Riga, released July 1999 Note*

CHAPTER I. Executive Summary

This Country Commercial Guide (CCG) presents a comprehensive look at Latvia's commercial environment, using economic, political and market analysis. The CCGs were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. Country Commercial Guides are prepared annually at U.S. embassies through the combined efforts of several U.S. Government agencies.

Latvia has since regaining independence rapidly advanced towards restored market economy with steady economic and financial reforms paving its way. Latvia may be a small country with its 2.5 million inhabitants, but nevertheless a potentially attractive market for American IT equipment and services, capital machinery and equipment, and consumer products. Being the middle one of the three Baltic States gives it a perfect location as a commercial, financial and transportation hub for Russia/Baltic region.

The commercial environment is very friendly to foreign companies. There are no controls on import, export, or use and conversion of foreign currencies, which makes investment and repatriation of profits easy. The Latvian government has adopted modern laws establishing copyrights, patents and trademarks and enforcing their protection. Telecommunication services have been modernized, 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.

The Latvian economy grew at a healthy pace until the Russian economic crisis hit in 1998 and slowed the growth down considerably, with negative fiscal and external account developments and noticeable GDP and industrial production contractions. Towards the end of 1999 the economy seemed to be picking up again, as the budget cuts recommended by IMF started to show their effect, and even trade and FDI figures looked promising. The Latvian economy is based on service industries like transportation and financial services and light industry, e.g., wood, textiles, food processing. Most of the light industry sectors suffered due to the Russian crisis and made Latvian trade turn increasingly towards Western Europe.

American products face strong competition in the Latvian market from the EU and CIS. Due to historical trade relations, companies from for example 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 has 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.

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 to the old Soviet Bloc countries, have been the main impediments to U.S. trade and investment even in Latvia. While these obstacles have sometimes made it more elaborate to do business in Latvia than in the west, very few U.S. companies have abandoned the Latvian market because of them.

U.S. exporters seeking general export information/ assistance and country specific commercial information should contact the U.S. Department of Commerce, Trade Information Center by phone sat 1-800-USA-TRAD(E) or by fax at 202-482-44730.