LATVIA: Useful Info

For several centuries, Latvia was an agricultural economy, with some minimal trade from seafaring, fishing and forestry. When it was absorbed by the Soviet Union, it underwent heavy industrialisation—which gave it an excellent advantage once it declared independence. Armed with technology and a skilled workforce, its economy grew at an excellent pace. Though it was hit hard by the Russian economic crisis of 1998, it has since rebounded. Latvia’s GDP growth rate hit 6.1% in 2002, peaking at 8.8% in the first quarter of 2003, and closing the year at 7%. As such, Latvia has the distinction of having the highest GDP growth rate in all of Europe.

Latvia’s phenomenal economic growth opens fantastic opportunities to do trade and business. It has successfully embraced a market economy, and the government has steadily instituted economic and financial reforms to sustain its growth and attract investors. The UK is also Latvia’s 10th largest investor; total direct investments have reached approximately GBP 51.7m—2.4% of Latvia’s total foreign investment.

Quick Facts

Population: 2.3 million (Source: UN, 2005)
Capital: Riga
Area: 64,589 sq km (24,938 sq miles)
Major languages: Latvian, Russian
Monetary unit: 1 lats = 100 santims
Main exports: Timber and wood products, fish and fish products
GNI per capita: US $5,460 (Source: World Bank, 2005)

Economic Background

The UK-Latvia trade relations have improved dramatically in the last decade. UK exports to Latvia have doubled in the last four years alone, and is considered one of Latvia’s biggest export partners (receiving 9.8% of its goods in 2004). The Latvian service industry has performed particularly well, including transportation and financial services; light industry (e.g., wood, textiles, food processing) is also a major component of its economy, despite setbacks suffered during the Russian economic crisis.

One reason behind the burst of trade activity and overall investment is Latvia’s strategic location in the center of the three Baltic states. Many firms see it as a commercial, financial and transportation hub for the Nordic/Baltic region— particularly because both its government and business organisations have consciously worked to create a commercial environment that is friendly to foreign companies.

Latvia does not put any controls on import, export, or use and conversion of foreign currencies, making investment and repatriation of profits much easier than in other countries. It has modern telecommunication services, while the reasonable price of business venues (due to a healthy real estate market) keep cost of operations low. The government has also adopted modern laws for copyrights, patents and trademarks, and measures have been taken to strictly enforce them. And since English is the dominant language for government and business, UK firms investors encounter no problems with communication.

One of the problems encountered while doing business in Latvia is its slow legal system, government bureaucracy, and corruption—commonly seen in former members of the Soviet Bloc. Steps have been taken to remove these obstacles, including reforms in the courts and legal system, and review of regulations and tax structures.

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