Latvia: Country and Foreign Investment

Latvia History, Population, Language and Culture

The forefathers of the Latvian people were the proto-Balts, who arrived in the first half of 2000 BC, although the territory had already been long inhabited by the ancient Finnic peoples. The region became a key trading crossroads, lying on a route stretching from Scandinavia to Russia and the Byzantine Empire, while amber found along the Latvian coast was renowned as far afield as ancient Greece and the Roman Empire. By the late 12th century, traders from Western Europe used the River Daudava as a trade route to Russia.

Latvia’s strategic geographic location meant it was prone to invasion from neighbouring territories, and from the 12th century onwards the country fell under German, Polish, Swedish and Russian rule. Latvia enjoyed a period of independence from August 1920, but this was short-lived as, after World War II, the country became a part of the USSR. The fall of the USSR led to Latvia once again achieving full independence in 1991.

The population was 2.17m in July 2010. Latvians make up around 59% of the population, and Russians around 28%; Belarusians, Ukrainians, Polish and Lithuanians make up the bulk of the rest.

The official language is Latvian; Russian, German and English are widely spoken.

The three main religions in Latvia are the Evangelic Lutheran, Roman Catholic and Russian Orthodox churches. However, Latvian culture is strongly influenced by folklore, and Christian rituals are often intermingled with pagan customs. Riga is home to a number of theatres, an opera, and a symphony orchestra.

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Latvia Government

Latvia is a parliamentary democracy. It has a unicameral parliament (the Saeima) with 100 members who are elected by direct, popular vote to serve four-year terms.

The President is elected by the Saeima for a four-year term; the current President is Valdis Zatlers, who was elected on May 31, 2007. The Prime Minister is also elected by the Saeima; the current Prime Minister is Valdis Dombrovskis, who was elected on March 12, 2009.

The Cabinet of Ministers is nominated by the Prime Minister, and must receive a confidence vote by the Saeima before it can start exercising its duties.

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Latvia Economy and Currency

Like most of the ex-USSR countries, Latvia has had to cope with privatisation of most of its economy, but has also had to switch many of its eastern-pointing trade relationships towards the West. The country joined the WTO in 1999, and the EU in 2004.

However, Latvia’s geographical location has helped it remain a key transit point for north-south and east-west trade flows between the USA, the EU, the Far East, Russia, and the CIS; the transit sector is therefore one of Latvia’s main industrial sectors.

Other sectors include chemicals and pharmaceuticals, electronics, timber, food processing, mechanical engineering, and textiles and clothing. GDP per head was USD14,400 (2009). The GDP growth rate was -18% in 2009, -4.6% in 2008 and plus 10.3% in 2007.

Real estate in Latvia has suffered greatly from the global recession, with prices falling 75% since 2007. The unemployment rate in 2009 was 17.1%; a rise of nearly 10% from 2008. Latvia agreed with the EU in July 2009 to keep its 2009 deficit at 10%.

The currency is the Lat (LVL), which is pegged to the Euro at a rate of EUR1 = LVL0.7028. Plans to join the Eurozone have been postponed; the Latvian central bank expects Latvia to adopt the Euro in 2014 at the earliest.

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Latvia Entry and Residence

Latvia is part of the EU's Schengen Area, meaning that there is visa-free movement within Schengen of nationals of all those EU Member States belonging to the area. Moreover, citizens of EU Member States and of a number of non-EU countries (including the USA, Australia, New Zealand, Canada, and Japan) do not require a visa for visits of up to 90 days within a six-month period from the day of arrival.

Foreigners must obtain a residence permit if they wish to remain in the country for more than 90 days within a six-month period from the day of arrival in Latvia.

For tax purposes, residency applies to anyone whose permanent place of residence is in Latvia, or who spends more than 183 days in Latvia during a year.

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Latvia Business Environment

Latvia’s strength is as a key transit point for north-south and east-west trade flows. Latvia has three main, ice-free ports – Riga, Liepaja and Ventspils – and an extensive rail network connecting Latvia with Russia, the CIS, the neighbouring Baltic States, and Poland; 90% of turnover in Latvian ports, and 75% of rail cargo, is cargo in transit. Businesses operating in the Liepaja or Rezekne Special Economic Zones, or in the Riga or Ventspils Free Ports, can qualify for tax rebates of 80%-100%.

Telecommunications are good, with a fibre optic network connected to Scandinavia and Western Europe. There is a growing and competitive mobile phone network.

Real estate in Latvia has suffered greatly from the global recession, with prices falling 75% since 2007. In September 2009, the average cost of one square metre of real estate in the secondary market in Riga was EUR455; for business class apartments in the old part of the city, this rises to EUR1,500-2,000 per square metre, and EUR800 for new buildings. While 2010 has seen an upturn in real estate prices, they are still 63.5% lower than in the boom.

The Latvian banking sector is strongly integrated into the European banking system. The central bank is the National Bank of Latvia, which was founded in 1922; there are a number of national banks, including Parex Bank, Rietumu Banka and SEB Unibanka, and a number of foreign bank branches.

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Latvia Investment Incentives

Businesses operating in the Liepaja or Rezekne Special Economic Zones, or in the Riga or Ventspils Free Ports, can qualify for tax rebates of 80%-100%.

Various state aid programmes to support science, innovation, and research and development are available via the Investment and Development Agency of Latvia, mainly in the technology and manufacturing sectors, and for small and medium-sized companies in specially supported territories.

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