Located in the Baltic region of northeastern Europe, Latvia is a member of the EU, Eurozone, NATO, Organization for Economic Cooperation and Development (OECD), and the World Trade Organization (WTO). The Latvian government recognizes that, as a small country, it must attract foreign investment in order to foster economic growth, and thus has pursued liberal economic policies and developed infrastructure to position itself as a transportation hub. According to the latest World Bank’s Doing Business Report, Latvia remains ranked 19th out of 190 countries in terms of ease of doing business. As a member of the European Union, Latvia applies EU laws and regulations, and, according to current legislation, foreign investors generally possess the same rights and obligations as local investors. Any foreign investor is entitled to establish and own a company in Latvia and may acquire a temporary residence permit.
Latvia implemented a major overhaul of its tax code in 2018. To encourage investment, the tax reforms eliminated corporate taxes on all reinvested profits. Profits distributed or disbursed as dividends, or used for purposes not directly related to business development are taxed at a rate of 20 percent, up from 15 percent.
There is a perceived lack of fairness and transparency in the public procurement process in Latvia. A number of 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. Foreign investors have praised the reforms in the area of taxation and education, but remain concerned about corruption and a non-transparent or non-responsive bureaucracy and judiciary. Nonetheless, Latvia provides several advantages to potential investors, including:
Regional Hub: Despite ongoing tensions between Russia and the European Union, Latvia remains a bridge 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 (RIX)]. Latvia is connected to both European and Central Asian road networks. The 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 4th lowest in the EU.
Competitive Tax system: Latvia ranked 2nd in the OECD 2018 International Tax Competitiveness Index. To further boost its competitiveness, the Latvian government has abolished taxes on reinvested profits and has established special incentives for both 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. Latgale Special Economic Zone covers a large part of Latgale, which is the most economically challenged region in Latvia, bordering Russia and Belarus.
Latvia’s GDP grew by 4.8 percent in 2018 – its fastest growth rate since 2011 and among the highest in the European Union. Commentators attributed the increased growth rate to rising global economic growth, which contributed to increased demand for Latvian exports, and increased investment from both the private sector and EU structural funds. The most competitive sectors in Latvia include woodworking, metalworking, transportation, IT, green tech, health care, life sciences, food processing, and finance. Recent reports suggest that some of the most significant challenges investors encounter in Latvia are demography, access to labor, and healthcare.
The non-resident banking sector has come under increased regulatory scrutiny in recent years because of inadequate compliance with anti-money laundering (AML) provisions. In the last three years, Latvia’s Financial and Capital Markets Commission has cancelled one bank’s operating licenses and has levied large fines against other banks for failure to comply with AML requirements. On February 13, 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 cutting the bank off from the U.S. financial system. On August 23, 2018, MONEYVAL, a Council of Europe agency that assesses member states’ compliance with AML standards, issued a report that found Latvia deficient in several assessment categories. The Government of Latvia has been working to restore confidence in its financial institutions and has proposed several pieces of reform legislation. MONEYVAL plans to assess this progress by the end of 2019.
The chart below shows Latvia’s ranking on several prominent international measures of interest to potential investors.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||41 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2018||19 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||34 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2017||USD 71 million||U.S. Bureau of Economic Analysis|
|World Bank GNI per capita||2017||USD 14,740||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD?locations=LV|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Latvian government actively encourages foreign direct investment (FDI) and works with investors to improve the country’s business climate. To strengthen these efforts, the Latvian government introduced the POLARIS process ( ), a mechanism designed to create an alliance between the public sector (including national and local governments), the private sector (including national and international companies), and major Latvian academic and research institutions to encourage FDI and spur economic growth. The Latvian government also meets annually with the Foreign Investors Council in Latvia (FICIL), which represents large foreign companies and chambers of commerce, with the express purpose of improving the business environment and encouraging foreign investment. The Coordination Council for Large and Strategically Important Investment Projects is chaired by the Prime Minister. In January 2019, FICIL published its Sentiment Index 2018 – a survey of current foreign investors on the investment climate in Latvia. It is available at: .
Limits on Foreign Control and Right to Private Ownership and Establishment
In March 2017, Latvia passed legislation that, on the basis of national security concerns, requires governmental approval prior to transfers of significant ownership interests in the energy, telecommunications, and media sectors. Latvia reserves the right to enact policies and legislation that discriminates against foreign investors in the following areas: control of defense industries; manufacturing and sale of narcotics, weapons and explosives; control of newspaper, television and radio broadcasting stations, or news agencies; recovery of all renewable and non-renewable natural resources including resources found on the continental shelf; fishing; hunting; air transportation services and port management; ownership and control of land; brokerage or real property; gambling and lotteries; private security and surveillance services; auditing services; the cross-border provision of banking and financial services; and the cross-border provision of insurance and private pension services.
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. In 2014 changes in the Law on Land Privatization in Rural Areas allowed 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 the 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, prohibits foreigners who are not permanently residing in Latvia from purchasing agricultural land. It additionally requires that any person who wishes to purchase agricultural land must possess knowledge of the Latvian language at a level sufficient to present their plan for the future agricultural use of the land in Latvian.
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.
Other Investment Policy Reviews
The Organization for Economic Cooperation and Development (OECD) published an Economic Survey of Latvia in September 2017 ( ). Although there have been no trade policy reviews specifically involving Latvia, the WTO completed its latest review of the European Union in July 2017. ( ). Additionally, in October 2017, the World Bank published a review of Latvia’s tax system ( )). Previously, the World Bank carried out a similar review of Latvia’s port infrastructure in 2013 ( ).
The official website of the Latvian Commercial Register has been fully revised and now provides detailed information in English on business registration process in Latvia – . The World Bank’s Doing Business project has performed a detailed review of the business registration process in Latvia, which is available here: .
In addition, the Latvian Investment and Development Agency has prepared a guide with step-by-step information on starting a business in Latvia: . The agency prides itself on the fact that a business can be registered in Latvia in a single day.
Using the European Commission definitions of micro-, small-, and medium- enterprises (MSMEs), Latvia has established a special tax regime for micro-enterprises. Under the micro-enterprise tax, qualifying businesses (those employing up to five employees and with less than 40,000 euros in revenue) pay a single tax that covers social security contributions, personal income tax, and business risk tax for employees, and includes corporate income tax if the micro- business taxpayer is a limited liability company. This special tax regime is available to foreign nationals. For additional details on the micro-enterprise tax, see:
The Latvian government does not incentivize outward investment or restrict Latvians from investing overseas.
2. Bilateral Investment Agreements and Taxation Treaties
Latvia and the United States share a bilateral investment treaty that came into force in December 1996. Latvia has also concluded bilateral investment agreements with Armenia, Austria, Azerbaijan, Belarus, BLEU (Belgium-Luxembourg Economic Union), Bulgaria, Canada, China, Croatia, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India, Israel, Kazakhstan, Korea, Kuwait, Kyrgyzstan, Lithuania, Moldova, Netherlands, Norway, Poland, Portugal, Romania, Singapore, Slovakia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, Uzbekistan, and Vietnam.
Latvia has concluded the Treaty on Avoidance of Double Taxation with the United States, which entered into force on December 30, 1999.
3. Legal Regime
Transparency of the Regulatory System
The Latvian government has amended its laws and regulatory procedures in an effort to bring Latvia’s legislation in compliance with the EU and WTO GPA requirements. A number of legislative changes aimed at increasing the transparency of the Latvian business environment and regulatory system. However, the massive legislative changes carried out in a short period of time have led to some laws and regulations that could be subject to conflicting interpretations. 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: .
International Regulatory Considerations
As a member state of the EU, Latvia has incorporated European norms and standards into its regulatory system. As a WTO member, Latvia has the duty to notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade. As an EU member, Latvia is a signatory to the WTO Trade Facilitation Agreement.
Legal System and Judicial Independence
Under the 1993 Law on Judicial Power, 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 geographical indications, 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 – either has 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.
Many observers have voiced concerns about the length of 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, the judicial system could benefit from additional measures to accelerate the adjudication of cases, to strengthen the enforcement of court decisions, and to upgrade professional standards.
Laws and Regulations on Foreign Direct Investment
Foreign investment in Latvia is regulated by the Commercial Law. The website of the Latvian Investment and Development Agency is a helpful resource for navigating the rules and procedures governing foreign investment ( ).
Competition and Anti-Trust Laws
Expropriation and Compensation
Cases of 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 Expropriation of Real Property for Public Interest. 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.
ICSID Convention and New York Convention
Latvia has been a member of the International Center for the Settlement of Investment Disputes (ICSID) since 1997 and a member of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1992. Judgments of foreign arbitral tribunals that are made in accordance with either can therefore be enforced in Latvia. The Civil Procedure Law stipulates that the judgments of foreign non-arbitral courts can be enforced in Latvia.
Investor-State Dispute Settlement
There have been no claims to date against Latvia by U.S. investors under the Bilateral Investment Treaty.
On December 22, 2017, the World Bank’s International Center for Settlement of Investment Disputes (ICSID) ruled that Latvia had violated its bilateral investment treaty with Lithuania and ordered Latvia to pay 3.7 million euros to a Lithuanian energy company in a dispute over the nationalization of a heating and hot water supply system. According to a local law firm, this is the first decision on the merits in an ICSID case against the Republic of Latvia. More information is available here:
International Commercial Arbitration and Foreign Courts
On January 1, 2015, the Law on Arbitration Courts came into force to regulate the establishment and operation of local arbitration courts in Latvia. According to the information available in the register, there are 72 arbitration institutions registered in Latvia ( ). In most commercial agreements, parties opt to refer their disputes to arbitration rather than to the Latvian courts.
The Civil Procedure Law, which came into force on March 1, 1999, contains a section on arbitration courts. This section was drafted on the basis of the United Nationals Commission on International Trade Law (UNCITRAL) model, thus providing full compliance with international standards. The law also governs the enforcement of rulings of foreign non-arbitral courts and foreign arbitrations. The full text of the law in English can be found here:
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. The Foreign Investors Council in Latvia has prepared a position paper on the system, which is accessible here:
4. Industrial Policies
Latvia has established a National Industrial Policy (NIP), which aims to promote structural changes in the economy, to foster the manufacture of goods and services with higher added value. More information on the NIP is available here: .
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. Relevant information is publicized via the Latvian Investment and Development Agency’s official website ( ), and through its representative offices ( ).
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: .
Foreign Trade Zones/Free Ports/Trade Facilitation
There are five free trade areas in Latvia. Free ports have been established in Riga and Ventspils, and special economic zones (SEZ) have been created in Liepaja, a port city in western Latvia, and Rezekne, a city in the middle of the eastern Latvian region that borders Russia. Latvia has also established an additional SEZ in part of Latgale, an economically challenged 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.
Performance and Data Localization Requirements
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 any six-month period. For longer periods of time, foreigners are required to obtain residence and work permits. The Latvian Investment and Development Agency, together with the Office of Citizenship and Migration Affairs, has created a guide to help third-country nationals interested in working in Latvia obtain work permits:
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: .
5. Protection of Property Rights
Latvia recognizes the full spectrum of property rights, including mortgages and liens. According to the latest World Bank Doing Business Report, Latvia is ranked 25th out of 190 countries in terms of ease of registering property. Latvia does not have significant problems with unclear legal titles. More information: and .
Intellectual Property Rights
In an effort to harmonize its legislation with EU and World Trade Organization (WTO) requirements, Latvia has established a legal framework for the protection of intellectual property, 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 intellectual property rights (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, that pirated copies be destroyed, and that violators compensate them for losses (including lost profits). The criminal law stipulates penalties for copyright violations.
In July 1994, the United States signed a Trade and Intellectual Property Rights Agreement with Latvia. Latvia has been a member of the World Intellectual Property Organization (WIPO) since January 1993, the Paris Convention since September 1993, the Berne Convention since August 1995, and the Geneva Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of their Phonograms since August 1997. In addition, the Latvian government has amended all relevant laws and regulations to comply with the requirements of the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, to which Latvia acceded upon joining the WTO.
The business community has raised concerns regarding the enforcement of IPR in Latvia. As in many places in eastern and central Europe, piracy rates are relatively high. Latvian law enforcement authorities have the authority to investigate IPR infringement cases.
Every year, the European Commission publishes a report describing the customs detentions of articles suspected of infringing IPR, such as trademarks, copyrights and patents. These statistics are available here: .
Latvia is not listed in USTR’s Special 301 Report or the Notorious Markets List.
Resources for Rights Holders
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/.
Contact at Copyright Offices
Ms. Linda Zommere
Director of Copyright Division, Ministry of Culture of the Republic of Latvia
Contact at Industrial Property Offices
Mr. Sandris Laganovskis
Director of the Patent Office of the Republic of Latvia
+371 670 99 608
6. Financial Sector
Capital Markets and Portfolio Investment
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.
Money and Banking System
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 increasing scrutiny since late 2015 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 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. Latvia’s implementation of MONEYVAL’s recommendations will be re-assessed in late 2019. The most recent MONEYVAL report can be found at: .
According to Latvian banking regulators, its regulatory framework for commercial banking incorporates all principal requirements of EU directives. A unified capital and financial markets regulator has been established. 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 anti-money laundering 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.
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.
The NASDAQ/OMX Riga Stock Exchange (RSE) ( ) began operations in 1995, and the securities market is based on the continental European model. Latvia, together with Estonia and Lithuania have agreed to create a pan-Baltic capital market by creating a single index classification for the whole Baltic region. Latvia is currently rated by various index providers as a frontier market due to its small size and limited liquidity. More information is available here:
Foreign Exchange and Remittances
The currency of Latvia is the euro. There are no restrictions on exchanging currencies or capital movement and foreign investors are allowed to extract their profits in any currency with no restraints. As of March 29, 2019, one euro is worth USD 1.1235. Details available here:
Latvian law provides for unrestricted repatriation of profits associated with an investment. Investors can freely convert local currency into foreign exchange at market rates, and have no difficulty obtaining foreign exchange from Latvian commercial banks for investment remittances. Exchange rates and other financial information can be obtained at the European Central Bank web site: .
Sovereign Wealth Funds
Latvia does not have a sovereign wealth fund.
7. State-Owned Enterprises
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.
SOEs are active in the energy and mining, aerospace and defense, services, information and communication, automotive and ground transportation, and forestry sectors.
Latvia as a member of the EU is a party to the Government Procurement Agreement within the framework of the World Trade Organization, and SOEs are covered under the agreement.
Senior managers of major SOEs in Latvia report to independent boards of directors, which in turn report to the line ministries. Since January 2015, SOEs are operating 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: .
The Law on Privatization of State and Municipal Property governs the privatization process in Latvia. The Latvian Privatization Agency (LPA), established in 1994, 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 (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), Lattelecom (Information and Communication), Latvian Mobile Telephone (Information and Communication), Conexus Baltic Grid (Energy). While Latvia sold a 20 percent stake in national carrier airBaltic to a private investor in early 2016, the government to date has not been successful in finding a strategic investor for the airline.
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 has also taken an active part in promoting CSR. Several initiatives have been particularly active on CSR, including the Institute for Corporate Sustainability and Responsibility ( ) the Corporate Social Responsibility Platform ( ), and the
Latvia adheres to the OECD Guidelines for Multinational Enterprises. Latvia’s National Contact Point for the Guidelines can be contacted through this website: . Latvia also promotes the United Nations Guiding Principles on Business and Human Rights, endorsed by the UN Human Rights Council in 2011.
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 2018 Corruption Perception Index by Transparency International, Latvia ranks 41st out of 180 countries (in order from the lowest perceived level of public sector corruption to the highest).
In an effort to strengthen its anti-corruption programs, the Latvian government has adopted several laws and regulations, including the Law on Money Laundering and the Law on Conflicts of Interest. 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. Latvia became a member of the OECD Anti-Bribery Convention in 2014. In line with OECD recommendations associated with Latvia’s accession process, the government is working to strengthen anti-corruption enforcement and improve the functioning of its independent agency, the Anti-Corruption Bureau (KNAB).
Under Latvian law, it is a crime to offer or to accept a bribe, or to facilitate an act of bribery. Although the law stipulates heavy penalties for bribery, a very limited number of government officials have been prosecuted and convicted for 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 passed a Whistleblower Law that, effective May 1, 2019, will require all government agencies and large companies to establish protocols to accept whistleblower complaints and protect whistleblowers from reprisals.
KNAB is the institution with primary responsibility for combating corruption and carrying out operational activities in response to suspected or alleged corruption. The Prosecutor General’s Office also plays an important role in fighting corruption.
KNAB has 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 here: .
There is a perceived lack of fairness and transparency in the public procurement process in Latvia. A number of 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 regulation of the Cabinet of Ministers provides for public access to government information, and the government generally provided citizens such access. There have been no reports that noncitizens or the foreign media have been denied access.
Resources to Report Corruption
Contact at government agency or agencies are 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 internal political issues, there have been rare 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, as 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 February 2019, according to Eurostat, was 7.2 percent ( ). The Latvian State Employment Agency (LSEA) reported 6.6 percent unemployment at the end of March 2019. 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 in Russian and English, among Latvian workers. However, there is a shortage of mid- and senior-level managers with western-style management skills.
Companies must keep wages above the legally specified minimum of 430 euros per month, as of April 2019. 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: .
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, despite the relatively high unemployment rate by Western standards, 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 the needed, specialized skills. To address this problem, the government of Latvia has approved a list of highly skilled professions that employers may use to recruit professionals from abroad to work in Latvia: .
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.
12. OPIC and Other Investment Insurance Programs
Overseas Private Investment Corporation (OPIC) political risk insurance coverage was previously available for U.S. investments in Latvia. However, since Latvia recently graduated to the list of High Income countries (defined as countries with a nominal GNI per capita of USD 15,000 or greater), OPIC coverage is no longer available for new projects in Latvia.
Latvia is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA), which also provides political risk insurance.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Table 3: Sources and Destination of FDI
|Direct Investment From/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||17,467||100%||Total Outward||1,902||100%|
|“0” reflects amounts rounded to +/- USD 500,000.|
*Cyprus is considered a tax haven and it is believed that the ultimate source of this inward FDI is primarily Russia.
Table 4: Sources of Portfolio Investment
|Portfolio Investment Assets|
|Top Five Partners (Millions, US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||15,906||100%||All Countries||3,075||100%||All Countries||12,825||100%|
|International Organizations||5,526||34.74%||Luxembourg||1,583||51.47%||International Organizations||5,490||42.80%|
*Luxembourg is considered a tax haven and it is believed that the ultimate source of this portfolio investment is primarily Russia.
14. Contact for More Information
Samnera Velsa iela 1, Riga, Latvia, LV-1510
+371 6710 7000