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Latvia: Country and Foreign Investment

Executive Summary

Latvia is one of the three Baltic States, the others being Estonia (to the north) and Lithuania (to the south). Latvia has 531 km of coastline with the Baltic Sea and a total land area of 64,589 sq km. The population is about 2.23m. Latvian is the official language; Russian, German and English are widely spoken.

The President is elected for a four-year term by the Saeima, Latvia’s parliament; the current President is Valdis Zatlers, who was elected on May 31, 2007.

Like most of the ex-USSR countries, Latvia has had to cope with the privatisation of most of its economy. However, Latvia’s geographical location has helped it remain a key transit point for north-south and east-west trade flows between the USA, the EU, the Far East, Russia and the CIS, making the transit sector one of Latvia’s main industrial sectors. The country joined the WTO in 1999, and the EU in 2004.

GDP per head is USD14,400 (2009). The GDP growth rate was -18% in 2009, -4.6% in 2008 and plus 10.3% in 2007. The currency is the Lat (LVL); the Latvian central bank expects Latvia to adopt the Euro in 2014 at the earliest. Real estate in Latvia has suffered greatly from the global recession, with prices falling 75% since 2007.

Latvia has three main, ice-free ports – Riga, Liepaja and Ventspils – and an extensive rail network connecting Latvia with Russia, the CIS, the neighbouring Baltic States and Poland. Telecommunications are good, with a fibre optic network connected to Scandinavia and Western Europe. There is a growing and competitive mobile phone network.

Businesses benefit from a flat 15% corporate income tax on profits and capital gains, while income from dividends paid by Latvian, EU and EEA member state entities are tax exempt. Businesses operating in the Liepaja or Rezekne Special Economic Zones, or in the Riga or Ventspils Free Ports, can qualify for tax rebates of 80%-100%.



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