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

CHAPTER IV. Marketing U.S. Products and Services

Distribution and Sales Channels

Marketing consumer products in Latvia has previously been inhibited by the lack of large distributors or wholesalers, but the situation has changed rapidly over the past few years. Food and grocery import, wholesale and retail operations are handled by private food wholesale companies, such as Interpegro, Prodimpex and Hanzas Uznemums.

Seasonal agriculture and food products are still sold at farmers markets located in largest cities, although there is a growing network of small grocery and produce stores. Traditionally, most grocery shopping has been done in small, specialized stores, such as a dairy store or a corner bakery but several large supermarkets have opened in the past years. The grocery/dry goods situation changed substantially with the entry of the Norwegian-Latvian joint venture Varner Baltija, which has brought the Norwegian retail chain "Rimi" to Latvia. The group has opened several modern supermarkets and transformed the Soviet style department store in the center of Riga into a modern grocery and department store.

Use of Agents/Distributors

At present, there are no laws that regulate the relationship between a foreign company and its distributors or agents in Latvia. A distributor relationship can be terminated according to the provisions stipulated in each specific distributor agreement.

A common practice is to appoint one distributor/agent to cover the entire country. Due to the small size of the Latvian market, one importer may carry products from several industry sectors.

U.S. companies looking for agents or distributors in Latvia should contact the nearest U.S. Department of Commerce Export Assistance Center for Agent/Distributor Service, Latvian Development Agency for a list of Latvian importers or the Commercial Office in the U.S. Embassy in Riga.

Franchising

Franchising has not been a very popular or well understood and regulated form of business arrangement in Latvia, but is gradually growing in popularity. Franchising arrangements are regulated under the Law on Competition.

Joint Ventures/Licensing

A joint venture with a local partner can be a significant help for a U.S. company with little or no experience of the East European business practices. A good choice can be a company that is already registered with the Latvian Chamber of Commerce and Industry. However, it is highly advisable to find out as much as possible about potential partners. Basic information on a local company as well as its credit rating can be obtained from Latvian business information companies.

Steps to Establishing an Office

If a foreign company decides to set up a subsidiary in Latvia, there are three forms of legal entities available

-- limited liability company (SIA)
-- joint stock company (AS)
-- representative (branch) office of a foreign company

Limited liability and joint stock companies are established upon registration with the Latvian Enterprise Register. A limited liability company has the rights of a juridical person and may be established with a minimum statutory capital of 2,000 Lats (approximately $3,400 at the current exchange rate of 0.585 Ls per dollar) by a physical person or another company. A limited liability company may have up to 50 shareholders.

Companies with more than 50 shareholders, as well as companies that make public offerings of securities, or are formed by privatizing state enterprises using privatization certificates must be established as joint stock companies. This is a less popular form of organization for foreign investors since the structure and legal requirements for registration are more complicated than for limited liability companies. A joint stock company also has the rights of a juridical person. The minimum statutory capital is 5,000 Lats (higher amounts are required to establish banks, insurance companies, currency exchanges and pawnshops). In five years, the minimum legal capital of a joint stock company will be increased to Ls 25,000. Establishment of a foreign bank branch is subject to the approval of the Bank of Latvia.

Representative offices of foreign companies may be established for an initial period of five years. The fee for opening a representative office is $800; extensions cost $100. Non-profit organizations and branch operations without an office in Latvia may be established for $50.

Representative offices of foreign companies are not allowed to carry out commercial activities (business for profit) in Latvia. Such offices should be registered with the Register of Enterprises. These representative offices do not have a status of a separate legal entity. At present, the Register of Enterprises also has a separate procedure for registration of permanent representative offices that have the right to engage in commercial activities. This option, however, is expected to be revoked in near future.

Advertising and Trade Promotion

Advertising may be conducted freely in any printed or electronic media. The leading newspaper in Latvia is "Diena" (Day), which is published in both Latvian and Russian. The leading business newspapers are "Dienas Bizness" (Business of the Day), published in Latvian, and "Biznes i Baltiya" (Business and the Baltics), published in Russian. "Vakara Zinas" is a popular tabloid. "SM-Segodnia" is widely read by the Russian-speaking population.

Applications for the grant of a patent or registration of a trademark can be made in Latvian, English, Russian, or German to the Latvian patent office, either directly or through a legal representative. Any patent or trademark may be invalidated by a court if it does not meet the legal requirements for granting a patent or the substantive provisions for registering a trademark. Intellectual property rights may be enforced through Latvian court action.

Consultation with a Latvian attorney is recommended before establishing a business or an intellectual property right in Latvia. While an attorney must be a Latvian citizen to be admitted to the bar, a number of practicing attorneys in Riga are dual-national immigrants who have received their entire legal education in the United States or Canada. The U.S. Embassy can provide upon request a list of U.S. lawyers practicing in Latvia.