Latvia Executive Summary
Latvia
is in Eastern Europe, bordering the Baltic Sea,
between Estonia and Lithuania, and is about the
same size as Ireland, with a population of 2.3m,
including a substantial Russian minority. Most
of the country is flat, with many lakes and rivers.
Much is forested. Natural resources are scarce,
but Latvia has 531km of coastline, and the ports
of Liepaja and Ventspils provide important warm-water
harbors on the Baltic. The capital is Riga.
Consolidation
of the Latvian nation and development of a common
language took place in the 1600s, but Latvia has
spent much of its history under foreign rule.
As an independent nation since 1991, Latvia joined
the European Union in 2004. Latvia is a parliamentary
democracy. The Council of Ministers is nominated
by the prime minister and appointed by the Parliament.
The
1998 Russian financial crisis was hurtful for
Latvia, but the government's budget stringency
and a gradual reorientation of exports toward
EU countries has lessened Latvia's trade dependency
on Russia. Most companies, banks, and real estate
have been privatized; Latvia joined the World
Trade Organization in February 1999.
GDP in 2003 at purchasing power parity was $23.9
billion, and growth in that year was 7.4%; growth
remained strong in 2004. GDP per head at purchasing
power parity was $10,200 in 2003. Inflation was
2.9% in that year, with unemployment at 8.6%.
The Latvian currency is the Lat, pegged to the
Euro at the rate of 0.702804 Lats for 1 Euro.
It is expected that Latvia will be dealing in
euros as a domestic currency by 2008.
Latvia
is one of the more advanced, fast growing 'transition'
economies and has good services, transportation
network and logistics. There is a well-developed
banking system, stable political and monetary
conditions, and a favourable taxation regime.
The Latvian economy is rapidly expanding and is
buoyed by a young and highly educated work force
eager to get ahead. Latvia boasts one of the best
international credit ratings in Central and Eastern
Europe. Standard & Poor's has given Latvia
an "A-minus/stable" rating, while Fitch-IBCA
has rated the economy "A-minus/positive".
The
government continues to pursue liberal, market-oriented
economic policies emphasizing macroeconomic stability
and the creation of business-friendly incentive
structures. The Latvian tax system neither favors
nor discriminates against inward foreign investment.
Companies are taxed at 15% and individuals at
25%. However it is government policy to ensure
all income generated in transacting business is
taxed within the country.
There
are Special Economic Zones at Liepaja and Rezekne,
and the ports of Ventspils and Riga operate as
Free Ports. All four zones have substantial tax
advantages.
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