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. According to the 2020 World Bank’s Doing Business Report, Latvia is ranked 19th out of 190 countries in terms of ease of doing business, which is the same as the previous year. 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 has the opportunity to acquire a temporary residence permit.
Latvia provides several advantages to potential investors, including:
Regional hub: Despite ongoing tensions between Russia and the European Union and challenges of Covid-19 pandemic, Latvia remains a transportation and logistics 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). Latvia’s road network 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 fourth lowest (tied with Hungary) in the EU.
Competitive tax system: Latvia ranked second in the OECD’s 2020 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.
Due to the COVID-19 pandemic, Latvia’s GDP contracted by 3.6 percent in 2020. However, this contraction was less severe than what most other Eurozone countries experienced during the crisis.
According to the government, growth in manufacturing and construction and increased government spending helped offset the decline in services caused by COVID-19-related restrictions in transport, tourism, and entertainment and leisure industries. 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.
The non-resident banking sector has come under increased regulatory scrutiny in recent years because of inadequate compliance with international AML standards. 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 continued its work to restore confidence in its financial institutions and has passed several pieces of reform legislation.
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 increased monitoring via the so-called “grey list.” While it will continue enhanced monitoring under MONEYVAL to continue strengthening the system, Latvia became the first member state under the MONEYVAL review to successfully implement all 40 FATF recommendations.
Despite these advantages, 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.
*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
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. 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 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/ .
Limits on Foreign Control and Right to Private Ownership and Establishment
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 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, also prohibits foreigners who are not permanently residing in Latvia from purchasing agricultural land and required that any person wishing to purchase agricultural land must speak Latvian and be able to present plans for the future use of the land for agricultural purposes 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.
Using the European Commission definitions of micro, small, and medium enterprises (MSMEs), Latvia has established a special tax regime for microenterprises. Under the microenterprise tax, qualifying businesses (those employing up to five employees and with less than 25,000 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. Changes introduced in 2021, including an increased microenterprise tax rate, now make the tax regime less attractive for most small companies. For additional details on the microenterprise tax, see: https://www.vid.gov.lv/en/node/57223
The Latvian government does not incentivize outward investment nor 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 to bring Latvia’s legislation in compliance with the EU and WTO GPA requirements. Several legislative changes were aimed at increasing the transparency of the Latvian business environment and regulatory system. At the same time, 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: 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/.
International Regulatory Considerations
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.
Legal System and Judicial Independence
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.
City and regional courts are administered by the Ministry of Justice (www.tm.gov.lv), while the Supreme Court and Constitutional Court are independent.
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, 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 newly established Economic Affairs Court began operating on March 31. This is an effort by the government to accelerate and improve adjudication of economic and financial-related cases.
Competition-related concerns are supervised by the Competition Council. More information can be accessed at: http://www.kp.gov.lv/en
Expropriation and Compensation
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.
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 courts 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 by U.S. investors under the Bilateral Investment Treaty against Latvia.
On December 22, 2017, the ICSID ruled that Latvia had violated its bilateral investment treaty with Lithuania and ordered Latvia to pay $1.9 million 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: https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/478/uab-v-latvia
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 68 arbitration institutions registered in Latvia (https://www.ur.gov.lv/lv/registre/organizaciju/skirejtiesas/skirejtiesu-saraksts/). In most commercial agreements, parties opt to refer their disputes to arbitration rather than to the Latvian courts.
The Civil Procedure Law contains a section on arbitration courts. This section was drafted on the basis of the United Nations 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: https://likumi.lv/ta/en/id/50500-civil-procedure-law
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. To tackle the issue, the Latvian government has partnered with the European Bank for Reconstruction and Development and in September 2019 launched a project “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 (http://liaa.gov.lv/contacts/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: 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.
Foreign Trade Zones/Free Ports/Trade Facilitation
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.
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 a 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: http://workinlatvia.liaa.gov.lv/
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 .
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
Ms. Ilona Petersone
Director of Copyright Division, Ministry of Culture of the Republic of Latvia
+371 6733-0240 Ilona.Petersone@km.gov.lv
Contact at Industrial Property Offices:
Ms. Baiba Graube
Acting Director of the Patent Office of the Republic of Latvia
+371 670 99 600 firstname.lastname@example.org
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 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.” While it will continue enhanced monitoring under MONEYVAL to continue strengthening the system, 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.
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 website: https://www.ecb.europa.eu/stats/exchange/eurofxref/html/index.en.html.
Sovereign Wealth Funds
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.
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/ .
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 250 million euros 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 2022-2023.
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/).
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 2020 Corruption Perception Index by Transparency International, Latvia ranks 42nd 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 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, 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, 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 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 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 here: https://www.knab.gov.lv/en/knab/consultative/public/.
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.
Resources to Report Corruption
Contact at government agency responsible for combating corruption:
Corruption Prevention and Combating Bureau
Citadeles iela 1, Riga, LV 1010, Latvia
+371 67356161 email@example.com
Contact at “watchdog” organization:
Delna (Latvian affiliate of Transparency International) Citadeles iela 8, Riga, LV-1010 +371 67285585 firstname.lastname@example.org
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 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 2021, according to Eurostat, was 8.5 percent (https://ec.europa.eu/eurostat/statistics-explained/index.php/Unemployment_statistics). The Latvian State Employment Agency reported 8.2 percent unemployment at the end of February 2021. 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.
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.
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. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs
Due to the fact that Latvia is a high-income country as defined by the World Bank, it only qualifies for DFC’s programs for energy infrastructure projects.
Latvia is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA), which also provides risk insurance.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source*
USG or international statistical source
USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Host Country Gross Domestic Product (GDP) ($M USD)