Located in the Baltic region of northeastern Europe, Latvia is a member of the EU, Eurozone, NATO, OECD, and the World Trade Organization (WTO). The Latvian government recognizes that, as a small country, it must attract foreign investment to foster economic growth, and thus has pursued liberal economic policies and developed infrastructure to position itself as a transportation and logistics hub. As a member of the European Union, Latvia applies EU laws and regulations, and, according to current legislation, foreign investors possess the same rights and obligations as local investors (with certain exceptions). Any foreign investor is entitled to establish and own a company in Latvia and apply for a temporary residence permit.
Latvia provides several advantages to potential investors, including:
Regional hub: Latvia is a transportation and logistics hub between West and East, providing strategic access to both the EU market and to Russia and Central Asia. Latvia’s three ice-free ports are connected to the country’s rail and road networks and to the largest international airport in the Baltic region (Riga International Airport). Latvia’s road network is connected to both European and Central Asian road networks. Railroads connect Latvia with the other Baltic States, Russia, and Belarus, with further connections extending into Central Asia and China.
Workforce: Latvia’s workforce is highly educated and multilingual, and its culture promotes hard work and dependability. Labor costs in Latvia are the fifth lowest in the EU.
Competitive tax system: Latvia ranked second in the OECD’s 2021 International Tax Competitiveness Index Rankings. To further boost its competitiveness, the Latvian government has abolished taxes on reinvested profits and has established special incentives for foreign and domestic investment. There are five special economic zones (SEZs) in Latvia: Riga Free Port, Ventspils Free Port, Liepaja Special Economic Zone, Rezekne Special Economic Zone, and Latgale Special Economic Zone, which provide various tax benefits for investors. The Latgale Special Economic Zone covers a large part of Latgale, which is the most economically challenged region in Latvia, bordering Russia and Belarus.
Despite the continued COVID-19 pandemic, Latvia’s GDP increased by 4.8 percent in 2021, rebounding from the 3.6 percent contraction in 2020. According to the government, growth in manufacturing and services sectors contributed to the economic growth. The most competitive sectors in Latvia remain woodworking, metalworking, transportation, IT, green tech, healthcare, life science, food processing, and finance. Recent reports suggest that some of the most significant challenges investors encounter in Latvia are a shortage of available workforce, demography, quality of education, and a significant shadow economy.
Latvia has made significant progress combatting money laundering since its non-resident banking sector first came under increased regulatory scrutiny in 2018 because of inadequate compliance with international AML standards. In late 2019 and early 2020, MONEYVAL and the Financial Action Task Force (FATF) concluded that Latvia had developed and implemented strong enough reforms for combating financial crimes to avoid inclusion on FATF’s so-called “grey list.” The Government of Latvia continues work to restore confidence in its financial institutions and has passed several pieces of additional reform legislation. Latvia also became the first member state under the MONEYVAL review to successfully implement all 40 FATF recommendations.
Some investors note a perceived lack of fairness and transparency with Latvian public procurements. Several companies, including foreign companies, have complained that bidding requirements are sometimes written with the assistance of potential contractors or couched in terms that exclude all but “preferred” contractors.
The chart below shows Latvia’s ranking on several prominent international measures of interest to potential investors.
|TI Corruption Perceptions Index||2021||36 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2021||38 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2021||219 EUR*||https://statdb.bank.lv/lb/Data/128/128|
|World Bank GNI per capita||2020||USD 17,880||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
*These figures significantly underestimate the value of U.S. investment in Latvia due to the fact that these do not account for investments by U.S. firms through their European subsidiaries.
1. Openness To, and Restrictions Upon, Foreign Investment
The Latvian government actively encourages foreign direct investment (FDI) and works with investors to improve the country’s business climate. Latvia has a dedicated investment promotion agency – Latvian Investment and Development Agency – to provide a full scope of investment services to prospective investors: https://www.liaa.gov.lv/en . As of April 2022, the agency has two dedicated representatives based in the United States (San Francisco, CA and Boston, MA). The Latvian government meets annually with the Foreign Investors Council in Latvia (FICIL), which represents large foreign companies and chambers of commerce, to improve the business environment and encourage foreign investment. The Prime Minister chairs the Coordination Council for Large and Strategically Important Investment Projects. In January 2021, FICIL published its Sentiment Index 2020 – a survey of current foreign investors’ assessments about the investment climate in Latvia. It is available at: https://www.ficil.lv/sentiment-index/ .
Latvian legislation, on the basis of national security concerns, requires governmental approval prior to transfers of significant ownership interests in the energy, telecommunications, and media sectors. The government is considering expanding this list of sectors. Detailed information is available here: https://investmentpolicy.unctad.org/country-navigator/118/latvia.
With these limited exceptions, physical and legal persons who are citizens of Latvia or of other EU countries may freely purchase real property. In general, physical and legal persons who are citizens of non-EU countries (third-country nationals) may also freely purchase developed real property. However, third-country nationals may not directly purchase certain types of agricultural, forest, and undeveloped land. Such persons may acquire ownership interest in such land through a company registered in the Register of Enterprises of the Republic of Latvia, provided that more than 50 percent of the company is owned by: (a) Latvian citizens and/or Latvian governmental entities; and/or (b) physical or legal persons from countries with which Latvia signed and ratified an international agreement on the promotion and protection of investments on or before December 31, 1996; or for agreements concluded after this date, so long as such agreements provide for reciprocal rights to land acquisition. The United States and Latvia have such an agreement (a bilateral investment treaty in force since 1996). In addition, foreign investors can lease land without restriction for up to 99 years. The Law on Land Privatization in Rural Areas allows EU citizens to purchase Latvia’s agricultural land and forests. Other restrictions apply (to both Latvian citizens and foreigners) regarding the acquisition of land in Latvia’s border areas, Baltic Sea and Gulf of Riga dune areas, and other protected areas.
In May 2017, the President of Latvia promulgated amendments to the Law on Land Privatization in Rural Areas to simplify and clarify the process for local farmers to purchase land. The law, however, also prohibits foreigners who do not have a working knowledge of the Latvian language from purchasing agricultural land. On June 11, 2020 the Court of Justice of the EU found that the law violated European law, but the Latvian government has yet to amend the law.
The Latvian constitution guarantees the right to private ownership. Both domestic and foreign private entities have the right to establish and own business enterprises and engage in all forms of commercial activity, except those expressly prohibited by law.
The Organization for Economic Cooperation and Development (OECD) published the latest Latvia Economic Snapshot in March 2022 ( http://www.oecd.org/economy/latvia-economic-snapshot/ ). Although there have been no trade policy reviews specifically involving Latvia, the WTO completed its latest review of the European Union in February 2020. ( https://www.wto.org/english/tratop_e/tpr_e/tp495_e.htm ). Additionally, in October 2017, the World Bank published a review of Latvia’s tax system ( http://documents.worldbank.org/curated/en/587291508511990249/Latvia-tax-review ).
A new business can be registered in Latvia in one day. The Latvian Investment and Development Agency has prepared a guide on starting a business in Latvia: https://www.liaa.gov.lv/en/invest-latvia/business-guide/operating-environment.
The official website of the Latvian Commercial Register provides detailed information in English on business registration process in Latvia: https://www.ur.gov.lv/en/ .
Latvia has implemented special legislation to encourage startup ventures through favorable tax treatment. For more information, please see here: http://www.liaa.gov.lv/en/invest-latvia/start-up-ecosystem and here: https://labsoflatvia.com/en/resources .
Using the European Commission definitions of micro, small, and medium enterprises (MSMEs), Latvia has established a special tax regime for microenterprises. This special tax regime is available to foreign nationals. Changes introduced as of January 2022, including an increased microenterprise tax rate, now make the tax regime less attractive for most small companies. For additional details on the microenterprise tax regime, see: https://www.fm.gov.lv/en/micro-enterprise-tax
Latvia joined other OECD countries in July 2021 in agreeing to a new framework for global tax reform and a global minimum corporate tax rate of 15 percent for multinational enterprises with annual revenue exceeding $868 million. Further detailed technical guidance can be found here: https://www.oecd.org/tax/beps/oecd-releases-detailed-technical-guidance-on-the-pillar-two-model-rules-for-15-percent-global-minimum-tax.htm
The Latvian government does not incentivize outward investment nor restrict Latvians from investing overseas.
3. Legal Regime
The Latvian government has amended its laws and regulatory procedures to bring Latvia’s legislation in compliance with the EU and WTO GPA requirements. The Latvian government has developed a good working relationship with the foreign business community (through FICIL) to streamline various bureaucratic procedures and to address legal and regulatory issues as they arise. Additional information on the regulatory system in Latvia is available here: http://rulemaking.worldbank.org/en/data/explorecountries/latvia.
The public finance and debt obligations process is transparent. Detailed information on the national budget process is available on the Latvian Ministry of Finance’s website: https://www.fm.gov.lv/en/s/budget/ .
As an EU member, Latvia has incorporated European norms and standards into its regulatory system. As an EU member, Latvia is a signatory to the WTO Trade Facilitation Agreement. As a WTO member, Latvia has the duty to notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade.
Latvia has a three-tier court system comprising district (city) courts, regional courts, and the Supreme Court. In addition, the Constitutional Court reviews the compatibility of decrees and acts of the President of the Republic, the government, and local authorities with the constitution and the law. Unless otherwise stipulated by law, district courts are the courts of first instance in all civil, criminal, and administrative cases. Regional courts have appellate jurisdiction over district court cases and original jurisdiction for certain cases specified in the Civil Code, such as cases on the protection of patent rights, trademarks, and geographic indicators, as well as cases on the insolvency and liquidation of credit institutions. The Supreme Court is the highest-level court in Latvia and – depending on the origin of the case – has either de novo review of both factual and legal findings or, in instances where it is the second appellate court reviewing a case, cassation review of only legal findings. In March 2021, Latvia established a specialized Economic Court to handle cases of corruption, economic crimes, and complex commercial disputes.
City and regional courts are administered by the Ministry of Justice (https://www.tm.gov.lv/en ), while the Supreme Court and Constitutional Court are independent.
Observers have voiced concerns about the length of criminal and civil cases in Latvia, and the nature and opacity of judicial rulings have led some investors to question the fairness and impartiality of some judges. These concerns are not specific to foreign or local investors, however, and the court system is generally viewed as applying the law equally to the interests of foreign and local investors. Although the Ministry of Justice has enacted reforms designed to reduce the backlog of cases in the lower courts, improvements in the judicial system are still needed to accelerate the adjudication of cases, to strengthen the enforcement of court decisions, and to upgrade professional standards. The Economic Court’s creation was part of an effort by the government to accelerate and improve adjudication of commercial cases and financial crimes.
Incoming foreign investment in Latvia is regulated by the Commercial Law. The Latvian Investment and Development Agency’s website is a helpful resource for navigating the rules and procedures governing foreign investment. (http://www.liaa.gov.lv/en/invest-latvia/investor-business-guide/operating-environment ).
Competition-related concerns are supervised by the Competition Council. Council’s decisions can be appealed to a court in Latvia. More information can be accessed at: http://www.kp.gov.lv/en.
In July 2021, the Competition Council imposed about $18 million in fines on 10 construction companies for entering into long-term prohibited agreements related to participation in public and private procurement in Latvia. This was one of the all-time largest cartel cases in Latvia. More detailed information about the so-called “construction company cartel” case is available here: https://www.kp.gov.lv/en/article/competition-council-fines-10-construction-companies-participating-cartel .
Cases of arbitrary expropriation of private property by the Government of Latvia are extremely rare. Expropriation of foreign investment is possible in a very limited number of cases specified in the Law on the Alienation of Immovable Property Necessary for Public Needs: (https://likumi.lv/ta/en/en/id/220517-law-on-the-alienation-of-immovable-property-necessary-for-public-needs ). If the owner of the property claimed by the government deems the compensation inadequate, he or she may challenge the government’s decision in a Latvian court.
There are two laws governing bankruptcy procedure: the Law on Insolvency and the Law on Credit Institutions (regulating bankruptcy procedures for banks and other financial sector companies).
The business community has expressed concerns over inefficiency and allegations of corruption in Latvia’s insolvency administration system. One way Latvia has addressed the issue was partnering with the European Bank for Reconstruction and Development on the September 2019 launch a project entitled “Support for Debt Restructuring in Latvia.” More information is available here: https://www.ebrd.com/news/2019/support-for-debt-restructuring-in-latvia-project-launched.html.
4. Industrial Policies
Latvia does not offer tax incentives. The Cross-Sectoral Coordination Center of Latvia is the main agency in charge of National Development Planning. In accordance with the Law on the Development Planning System (https://likumi.lv/doc.php?id=175748 ), national development planning documents are prepared for a long-term (up to 25 years), medium-term (up to seven years) and short-term (up to three years). More information available here: https://www.pkc.gov.lv/en/national-development-planning.
In addition, Latvia has identified the following sectors as having the highest potential for new investment: woodworking, metalworking and mechanical engineering, transport and storage, information technology (including global business services), green technology, health care, life sciences, and food processing. The information is disseminated to the general public and potential investors via the Latvian Investment and Development Agency’s official website ( http://liaa.gov.lv/invest-latvia/sectors-and-industries ), and through its representative offices ( LIAA representative offices abroad | Latvijas Investīciju un attīstības aģentūra ).
Because the Latvian government extends national treatment to foreign investors, most investment incentives and requirements apply equally to local and foreign businesses. Latvia has three special economic zones and two free ports in which companies benefit from various tax rebates (real estate, dividend, and corporate income) and do not pay VAT. The full list of investment incentives is available here: https://www.liaa.gov.lv/en/invest-latvia/business-guide/business-incentives .
Latvia does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.
Latvia has the third highest share of renewables in total energy consumption (42.1 percent) within the European Union only behind Sweden and Finland. In Latvia, renewable electricity generation is promoted through a support system based on feed-in tariffs, but the current support mechanism is being revised due to concerns of lack of transparency and abuse of the system. Latvia’s National Climate and Energy Action Plan 2021-2030 is available here: https://www.em.gov.lv/en/national-energy-and-climate-plan-2021-2030 .
There are five free trade areas in Latvia. Free ports have been established in Riga and Ventspils. Special economic zones (SEZ) have been created in Liepaja, a port city in western Latvia; Rezekne, a city in eastern Latvia; and an additional SEZ in Latgale, the poorest region in Latvia, which borders Russia and Belarus.
Somewhat different rules apply to each of the five zones. In general, the two free ports provide exemptions from indirect taxes, including customs duties, VAT, and excise tax. The SEZs offer additional incentives, such as an 80-100 percent reduction of corporate income taxes and real estate taxes. To qualify for tax relief and other benefits, companies must receive permits and sign agreements with the appropriate authorities: the Riga and the Ventspils Port Authorities, for the respective free ports; the Liepaja SEZ Administration; the Rezekne SEZ Administration; or the Latgale SEZ Administration. The SEZs are expected to be in place until 2035.
Except for specific requirements for investors acquiring former state enterprises through the privatization process, there are no performance requirements for a foreign investor to establish, maintain, or expand an investment in Latvia. In the privatization process, performance requirements for investors, both foreign and domestic, are determined on a case-by-case basis.
Under Latvian Immigration Law, foreign citizens can enter and reside in Latvia for temporary business activities for up to three months in a six-month period. For longer periods of time, foreigners are required to obtain residence and work permits. The Latvian Investment and Development Agency has created a guide to help third-country nationals interested in working in Latvia obtain work permits: https://investinlatvia.org/assets/upload/Relocation%20Guide-web.pdf .
A third-country national may obtain a five-year temporary residence permit if he or she has made certain minimum equity investments in a Latvian company, certain subordinated investments in a Latvian credit institution, or purchased real estate for certain designated sums, subject to limitations in each case. More information is available here: https://www.liaa.gov.lv/en/invest-latvia/business-guide/operating-environment .
Latvia’s Law on Personal Data Processing, implementing the EU’s General Data Protection Regulation, entered into force in July 2018. Full text of the Law available here: https://likumi.lv/ta/en/en/id/300099-personal-data-processing-law.
More information is available here: https://www.dvi.gov.lv/en/.
5. Protection of Property Rights
Latvia recognizes the full spectrum of property rights, including mortgages and liens. Latvia does not have significant problems with unclear legal titles. More information: http://www.globalpropertyguide.com/Europe/Latvia/Buying-Guide .
To harmonize its legislation with EU and WTO requirements, Latvia has established a legal framework for the protection of intellectual property rights (IPR), including legislation to protect copyrights, trademarks, and patents. The Law on Copyrights strengthens the protection of software copyrights and neighboring rights. Foreign owners may seek redress for violation of their IPR through the appellation council at the Latvian Patent Office, as well as through private litigation. In copyright violation cases, aggrieved parties can request that the use of the pirated works be prohibited, pirated copies be destroyed, and that violators compensate them for losses (including lost profits). The criminal law stipulates penalties for copyright violations.
The United States has signed a Trade and Intellectual Property Rights Agreement with Latvia. Latvia is a member of the World Intellectual Property Organization (WIPO) and party to the Paris Convention, the Berne Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, and the Geneva Phonograms Convention. In addition, the Latvian government has amended all relevant laws and regulations to comply with the requirements of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to which Latvia acceded by joining the WTO.
The business community has occasionally raised concerns regarding the enforcement of IPR in Latvia. Digital piracy is still a concern in Latvia, as it is in much of Eastern and Central Europe. Latvian law enforcement authorities have the authority to investigate IPR infringement cases. The Government of Latvia is working to tackle online/digital piracy, and has drafted respective policy guidelines: https://www.iem.gov.lv/en/article/tackle-copyright-infringements-digital-environment-more-effectively .
Every year, the European Commission publishes a report describing the customs detentions of articles suspected of infringing IPR. These statistics are available here: https://ec.europa.eu/taxation_customs/business/customs-controls/counterfeit-piracy-other-ipr-violations/ipr-infringements-facts-figures_en .
Latvia is not listed in USTR’s Special 301 Report or included in the Notorious Market List.
For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .
Economic Officer, U.S. Embassy Riga, Latvia
List of Attorneys in Latvia, compiled by the Consular Section of the U.S. Embassy in Riga: https://lv.usembassy.gov/u-s-citizen-services/attorneys/
American Chamber of Commerce of Latvia: http://www.amcham.lv/en/home
Contact at Copyright Offices
Ms. Ilona Petersone
Director of Copyright Division, Ministry of Culture of the Republic of Latvia
Contact at Industrial Property Offices
Mr. Agris Batalauskis
Director of the Patent Office of the Republic of Latvia
+371 670 99 600
6. Financial Sector
Latvian government policies do not interfere with the free flow of financial resources or the allocation of credit. Local bank loans are available to foreign investors. The NASDAQ/OMX Riga Stock Exchange (RSE) (www.nasdaqomxbaltic.com ) operates in Latvia, and the securities market is based on the continental European model. Latvia, Estonia, and Lithuania have agreed to create a pan-Baltic capital market by creating a single index classification for the entire Baltic region. Latvia is currently rated by various index providers as a frontier market due to its small size and limited liquidity. https://www.fm.gov.lv/en/article/latvia-passes-ebrd-supported-covered-bond-law
Latvia’s retail banking sector, which is composed primarily of Scandinavian retail banks, generally maintains a positive reputation. Latvian banks servicing non-resident clients, however, have come under increased scrutiny for inadequate compliance with anti-money laundering standards. In 2018, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) identified Latvia’s third-largest bank as a “foreign bank of primary money laundering concern” and issued a proposed rule prohibiting U.S. banks from doing business with or on behalf of the bank. The Latvian bank regulator has also levied fines against several non-resident banks for AML violations in recent years.
Latvia is a member of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a Financial Action Task Force (FATF)-style regional body. On August 23, 2018, MONEYVAL issued a report finding that Latvia’s AML regime was in substantial compliance with only one out of eleven assessment categories, was in moderate compliance with eight areas, but in low compliance with two areas. In late 2019 and early 2020, MONEYVAL and the FATF concluded that Latvia has developed and implemented strong enough reforms for combating financial crimes to avoid increased monitoring via the so-called “grey list.” With this decision, Latvia became the first member state under the MONEYVAL review to successfully implement all 40 FATF recommendations. The most recent MONEYVAL report can be found at: https://rm.coe.int/anti-money-laundering-and-counter-terrorist-financing-measures-latvia-/16809988c1 .
According to Latvian banking regulators, Latvia’s regulatory framework for commercial banking incorporates all principal requirements of EU directives, including a unified capital and financial markets regulator. Existing banking legislation includes provisions on accounting and financial statements (including adherence to international accounting), minimum initial capital requirements, capital adequacy requirements, large exposures, restrictions on insider lending, open foreign exchange positions, and loan-loss provisions. An Anti-Money Laundering Law and Deposit Guarantee Law have been adopted. An independent Financial Intelligence unit (FIU) operates under the supervision of the Ministry of Interior. Some of the banking regulations, such as capital adequacy and loan-loss provisions, reportedly exceed EU requirements.
According to the Finance Latvia Association, total assets of the country’s banks at the end of 2021 stood at 25.34 billion euros. More information is available at: https://www.financelatvia.eu/en/industry-data/ .
Securities markets are regulated by the Law on the Consolidated Capital Markets Regulator, the Law on the Financial Instrument Market, and several other laws and regulations.
Latvia does not have a sovereign wealth fund.
7. State-Owned Enterprises
State-owned enterprises (SOEs) are active in the energy and mining, aerospace and defense, services, information and communication, automotive and ground transportation, and forestry sectors. Private enterprises may compete with public enterprises on the same terms and conditions with respect to access to markets, credit, and other business operations such as licenses and supplies.
The Latvian government has implemented the requirements of the EU’s Third Energy Package with respect to the electricity sector, including opening the electricity market to private power producers and allowing them to compete on an equal footing with Latvenergo, the state-owned power company. The country’s natural gas market has also been liberalized, creating competition among privately owned gas suppliers.
Latvia, as an EU member, is a party to the Government Procurement Agreement within the framework of the World Trade Organization, and SOEs are covered under the agreement.
In 2015, the OECD published a review of the corporate governance of Latvia’s SOE and found that Latvia’s SOE sector relative to the size of the national economy was larger than the OECD average. The full report is available here: http://www.oecd.org/daf/ca/oecd-review-corporate-governance-soe-latvia.htm .
Senior managers of major SOEs in Latvia report to independent boards of directors, which in turn report to line ministries. SOEs operate under the Law on Public Persons Enterprises and Capital Shares Governance. The law also establishes an entity that coordinates state enterprise ownership and requires annual aggregate reporting. Detailed information on Latvian SOEs is available here: http://www.valstskapitals.gov.lv/en/ .
For additional information please see here: http://www.oecd.org/latvia/corporate-governance-in-latvia-9789264268180-en.htm .
The Law on Privatization of State and Municipal Property governs the privatization process in Latvia. State joint stock company “Possessor” (https://www.possessor.gov.lv/ ) uses a case-by-case approach to determine the method of privatization for each state enterprise. The three allowable methods are: public offering, auction for selected bidders, and international tender. For some of the largest privatized companies, a percentage of shares may be sold publicly on the NASDAQ OMX Riga Stock Exchange. The government may maintain shares in companies deemed important to the state’s strategic interests. Privatization of small and medium-sized state enterprises is considered to be largely complete.
Latvian law designates six State Joint Stock Companies that cannot be privatized: Latvenergo (Energy and Mining), Latvijas Pasts (Postal Services), Riga International Airport, Latvijas Dzelzcels (Automotive and Ground Transportation), Latvijas Gaisa Satiksme (Aerospace and Defense), and Latvijas Valsts Mezi (Forestry). Other large companies in which the Latvian government holds a controlling interest include airBaltic (Travel), TET (Information and Communication), Latvian Mobile Telephone (Information and Communication), and Conexus Baltic Grid (Energy). Due to the pandemic, the government invested EUR 250 million into airBaltic equity, thus increasing its stake in the airline to 96.14%. The airline plans to return the investment to the state, via an initial public offering, potentially in 2023-2024.
8. Responsible Business Conduct
Awareness of and implementation of due diligence principles of corporate social responsibility (CSR)/Responsible Business Conduct is developing among producers and consumers. Two of the most active promoters of CSR are the American Chamber of Commerce in Latvia and the Employers’ Confederation of Latvia. The Latvian Ministry of Welfare also promotes CSR. Several other initiatives promote CSR, such as the Institute for Corporate Sustainability and Responsibility (https://www.incsr.eu/ ), the Corporate Social Responsibility Platform ( http://www.ksalatvija.lv/en ), and the Human Development Award (http://www.cilvekaizaugsme.lv/home/ ).
Latvia adheres to the OECD Guidelines for Multinational Enterprises. Latvia’s national point of contact for the guidelines can be found here: https://www.mfa.gov.lv/en/policy/economic-affairs/oecd/latvian-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises . Latvia also promotes the United Nations Guiding Principles on Business and Human Rights, endorsed by the UN Human Rights Council in 2011.
Latvia has adopted a strategy achieving climate neutrality by 2050, which is available here: https://unfccc.int/documents/267179 . In addition, Latvia’s National Climate and Energy Action Plan 2021-2030 is available here: https://www.em.gov.lv/en/national-energy-and-climate-plan-2021-2030 .
Latvian law enforcement institutions, foreign business representatives, and non-governmental organizations have identified corruption and the perception of corruption as persistent problems in Latvia. According to the 2021 Corruption Perception Index by Transparency International, Latvia ranks 36th out of 180 countries (in order from the lowest perceived level of public sector corruption to the highest).
To strengthen its anti-corruption programs, the Latvian government has adopted several laws and regulations, including the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing and the Law on Prevention of Conflicts of Interest in the Work of Public Officials. The Conflicts of Interest Law imposes restrictions and requirements on public officials and their relatives. Several provisions of the law deal with the previously widespread practice of holding several positions simultaneously, often in both the public and private sector. The law includes a comprehensive list of state and municipal jobs that cannot be combined with additional employment. Moreover, the law expanded the scope of the term state official to include members of boards and councils of companies with state or municipal capital exceeding 50 percent. Additionally, Latvia is a member of the OECD Anti-Bribery Convention and the Council of Europe’s Group of States Against Corruption (FRECO). In line with OECD and GRECO recommendations, the government is working to strengthen anti-corruption policy and enforcement while improving the functioning of the independent Corruption Prevention and Combatting Bureau (KNAB).
Under Latvian law, it is a crime to offer, accept, or facilitate a bribe. Although the law stipulates heavy penalties for bribery, a limited number of government officials have been prosecuted and convicted of corruption to date. The law also provides the possibility of withdrawing charges against a person giving a bribe in cases where the bribe has been extorted or in cases where the person voluntarily reports these incidents and actively assists the investigation. In addition, the Latvian government has adopted a whistleblower law that requires all government agencies and large companies to establish protocols to accept whistleblower disclosures and protect whistleblowers from reprisals.
KNAB is the institution with primary responsibility for preventing and combating corruption and carrying out enforcement activities in response to suspected or alleged corruption. It is subordinated to the Cabinet of Ministers and supervised by the Prime Minister.
KNAB has also established a Public Consultative Council to help increase public participation in implementing its anti-corruption policies, increasing public awareness, and strengthening connections between the agency and the public. More information is available at: https://www.knab.gov.lv/en/knab/consultative/public/ . The Prosecutor General’s Office also plays an important role in fighting corruption.
There is a perceived lack of fairness and transparency in the public procurement process in Latvia. Several companies, including foreign companies, have complained that bidding requirements are sometimes written with the assistance of potential contractors or couched in terms that exclude all but preferred contractors.
A Cabinet of Ministers regulation provides for public access to government information, and the government generally provided citizens such access. There have been no reports the government has denied noncitizens or foreign media access to government information.
Contact at government agency responsible for combating corruption:
Corruption Prevention and Combating Bureau
Citadeles iela 1, Riga, LV 1010, Latvia
Contact at “watchdog” organization:
Delna (Latvian affiliate of Transparency International)
Citadeles iela 8, Riga, LV-1010
10. Political and Security Environment
There have been no reports of political violence or politically motivated damage to foreign investors’ projects or installations. The likelihood of widespread civil disturbances is very low. While Latvia has experienced peaceful demonstrations related to political issues, there have been few incidents when these have devolved into crimes against property, such as breaking shop windows or damaging parked cars. U.S. citizens are cautioned to avoid any large public demonstrations since even peaceful demonstrations can turn confrontational. The Embassy provides periodic notices to U.S. citizens in Latvia, which can be found on the Embassy’s web site: https://lv.usembassy.gov/.
11. Labor Policies and Practices
The official rate of registered unemployment in January 2022, according to Eurostat, was 7.3 percent (https://ec.europa.eu/eurostat/statistics-explained/index.php/Unemployment_statistics ). The Latvian State Employment Agency reported 6.9 percent unemployment at the end of January 2022. Unemployment is significantly higher in rural areas. A high percentage of the workforce has completed at least secondary or vocational education. Foreign managers praise the high degree of language skills, especially Russian and English, among Latvian workers. However, foreign managers have reported a shortage of mid- and senior-level managers with “Western” management skills.
Companies must keep wages above the legally specified minimum of EUR 500 per month, as of January 2021. Union influence on the wage setting process is limited. Trade unions do not have significant influence on the labor market. Additional information on trade unions in Latvia is available here: http://www.worker-participation.eu/National-Industrial-Relations/Countries/Latvia .
One challenge employers have faced since Latvia joined the EU is that many skilled employees can find better employment opportunities in other EU countries. Unofficial statistics suggest that more than 240,000 people have moved from Latvia to other EU countries since May 1, 2004. Despite the fact that the macroeconomic situation has stabilized, skilled and unskilled workers continue to emigrate. The government is implementing a strategy to entice people who have left Latvia to return.
According to several reports, there is a significant shortage of workers in manufacturing, wholesale and retail, transport and storage, and ICT sectors. The largest share of registered unemployment is comprised of persons with only primary or secondary education who do not possess specialized skills. To address this problem, the Latvian government has approved a list of highly skilled professions that employers may use to recruit professionals abroad to work in Latvia: https://www.em.gov.lv/en/news/18513-the-government-supports-the-application-of-simplified-conditions-for-the-attraction-of-highly-qualified-foreign-professionals .
The Labor Law addresses discrimination issues, provides detailed provisions on the rights and obligations of employees’ representatives, and created the Conciliation Commission, a mechanism that can be used in the workplace to resolve labor disputes before going to arbitration. Victims of sexual harassment in the workplace can also submit a complaint to the Office of the Ombudsman and the State Labor Inspectorate.
Full-time employees in Latvia work 40 hours a week. Normally, there are five working days per week, but employers may schedule a sixth workday without offering premium pay. Employees are entitled to four calendar weeks of annual paid vacation per year. Employers are prohibited from entering into an employment contract with a foreign individual who does not have a valid work permit.
Latvia is a member of the International Labor Organization (ILO) and has ratified all eight ILO Core Conventions.
Latvia’s shadow economy – largely driven by undeclared wages and business earnings – continues to be a major challenge. The annual Stockholm School of Economics Riga “Shadow Economy Index” shows that in 2020 the shadow economy grew by 1.6 percentage points and reached 25.5 percent of GDP. The detailed report is available here: https://www.sseriga.edu/shadow-economy-index-baltic-countries .
14. Contact for More Information
Samnera Velsa iela 1, Riga, Latvia, LV1510
+371 6710 7000