Overseas Business Risk – Latvia

Information on key security and political risks which UK businesses may face when operating in Latvia.

Political and Economic

Overview

The Baltic country of Latvia is located at the crossroads of northern and eastern Europe, on the East Coast of the Baltic Sea. The Republic of Latvia is bounded by Estonia to the north, Russia and Belarus to the east and Lithuania to the south, and has a maritime border with Sweden to the west. Other neighbouring countries include Finland, Poland and Germany. The strategic location of Latvia has been the major influence on the country’s diverse historical and cultural experiences.

Latvia first gained independence in 1918. In 1940-1941 it was occupied by the Soviet Union under the provisions of the 1939 Molotov-Ribbentrop Pact with Nazi Germany, by Nazi Germany from 1941-1944, and again by the Soviet Union from 1944-1991.

The more tolerant political atmosphere in the Soviet Union under Gorbachev in the late 1980s allowed pro-independence and reform groups to come to the fore. Independence was proclaimed in May 1990, but it was not until the attempted Moscow coup on 19 August 1991 allowed Yeltsin and his followers to come to power that Latvia approved the constitutional law and fully proclaimed itself an independent country once again. This announcement was made on 21 August, and Iceland became the first country to officially recognise the re-independence on 23 August.

Political and Economic

Latvia is a unitary parliamentary republic and is divided into 119 municipalities (110 counties and 9 cities). The capital and largest city is Riga. With a population of 2.23 million Latvia is one of the least-populous members of the European Union, and its population has declined 14.9% since 1991. Latvia has been a member of the United Nations since September 17, 1991; of the European Union since May 1, 2004 and of the NATO since March 29, 2004.

The 100-seat unicameral Latvian parliament, the Saeima, is elected by direct popular vote every four years. Last elections took place in October 2011.

The president is elected by the Saeima in a separate election, also held every four years. Mr Andris Berzins is the current president of Latvia (since 8th July 2011). The president appoints a prime minister who, together with his cabinet, forms the executive branch of the government, which has to receive a confidence vote by the Saeima. Mr Valdis Dombrovskis was repeatedly appointed as the Prime Minister of Latvia in October 2011. Highest civil servants are Secretaries of State.

After years of economic stagnation in the early 1990s and following Latvia’s accession to the EU in 2004, Latvia enjoyed a period of record-breaking growth: annual real GDP peaked at 12.2% in 2006, and all the more impressive wage increases hit 19.9% in 2007. But domestic demand grew excessively, especially private consumption and real estate investment, fuelled by cheap credit. The economy developed dangerous imbalances that were exacerbated by the global financial crisis. GDP growth turned negative in 2008 and the 18% contraction in 2009 was Europe’s highest. In December 2008, the Latvian Government secured a 7.5 billion EUR loan from IMF/EU and began measures to stabilise the economy, including structural reforms. In first quarter 2010, after exports and industrial production picked up, GDP recorded its first quarter-on-quarter growth in nearly two years. Despite a large fiscal deficit, Latvia aims, through co-operation with the IMF-led programme, to achieve the Maastricht criteria and join the euro-zone in 2014.

According to the Statistic Bureau of Latvia the real GDP (y-o-y) in the 2nd quarter of 2013 reached 4.4% and it is expected that the GDP of the 2013 will reach 4.5% which might give a strong leadership role to Latvia as the fastest growing economy amongst EU-27 countries.

Historically, Latvia has been one of the main transit points for both north-south and east-west trade flows. Its geographical location remains central to strategically relevant transportation flows connecting major world economies like the USA, European Union, Russia, the CIS and the Far East. The transit sector is one of the strongest industrial sectors in Latvia. Other major sectors in Latvia are: manufacturing of chemicals and pharmaceuticals, electronics and electrical engineering industry, agriculture and food processing, wood industry and the textile and clothing sector.

In 2012 Latvia’s biggest trading partners were Lithuania (18.2%), Estonia (10%), Germany (9.8%) and Russia (9.3%).

In 2012, the total trade in goods and services between Latvia and the UK was EUR 818.9 million, 15% higher than 2011. Exports of goods and services to the UK were EUR 505.3 million (+17%), while the imports of goods and services from the UK were EUR 313.6 million (+10%). The total Latvia’s trade balance with the UK was EUR 191.7 million.

In 2012, the UK was Latvia’s 8th largest export partner in goods and Latvia’s 15th largest import partner in goods. Latvian exports of goods to the UK reached EUR 320.6 million, 23% higher than 2011 representing 3.3% of Latvia’s total exports of goods in 2012. Latvian imports of goods from the UK were EUR 200.2 million, 4% more than 2011, representing 1.6% of Latvia’s total imports of goods in 2012. In 2012, the trade balance of goods was EUR 120.4 million.

The main export goods to the UK are wood products. Latvia imports from the UK machinery and mechanical appliances, electrical equipment, textile, and transport vehicles, mainly.

In 2012, the UK was Latvia’s 7th largest partner in service export and Latvia’s 5th largest partner in service import. In 2012, Latvian exports of services to the UK reached EUR 184.7 million, more than 8% compared to 2011. The UK imports of services from Latvia were EUR 113.4 million, 22% more than 2011. In 2012, Latvia’s trade balance of services with the UK was negative EUR 71.3 million.

The main types of services in trade between Latvia and the UK are transportation and travel.

More information on political risk, including political demonstrations is available in FCO Travel Advice.

Business and Human rights

As a member state of the EU, OSCE and the UN Latvia is actively engaging on human rights issues with those organisations. Freedom House has ranked the Baltic States including Latvia as “Category 1 – Free” in Political Rights and Civil Liberties in its 2013 report. Latvia is a member state of the ILO since 1991 and has ratified 47 ILO International Labour Standards (Conventions), including the eight fundamental Conventions.

The law entitles all workers, except uniformed members of the military, to form and join independent unions and recognizes the right to strike, subject to limitations related to public safety. The law provides for collective bargaining and prohibits anti-union discrimination or employers’ interference in union functions. Yet a number of employees find it unnecessary for trade unions and NGOs to take initiative in any aspect, except for receiving additional benefits.

The law prohibits forced or compulsory labour, including by children, and the government generally enforces such laws effectively. Women enjoy the same rights as men, but although the law prohibits employment discrimination, in practice women frequently faced hiring and pay discrimination, particularly in the private sector. While the majority of employers believe in equal attitude towards all employees regardless of religious beliefs, citizenship, place of residence, gender or the knowledge of the official state language, there are cases when this attitude depends on the acquaintance or relations with the enterprise’s/agency’s management.

Bribery and Corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

According to the NGO Transparency International Corruption Perception Index (CPI), Latvia was ranked in 54th place in 2012.

Latvia is represented in Transparency International by the local NGO Delna (www.delna.lv). Transparency International Latvia/ Delna promotes an open, just and democratic society, free from corruption in politics, in business and interpersonal relations; works to increase the awareness for democratic principles in our society in order to enhance its participation in fighting corruption; fights for an increase of the transparency and accessibility of information from national and local private and public institutions; analyzes what causes and promotes corruption, develops and implements high profile programs aimed at the reduction of corruption, consistently lobbies for legislative reforms; targets any opaque or inadequate behaviour of government officials or anyone with entrusted power in every suitable way; promotes the cooperation between non-governmental organizations and national and local agencies.

The main anti-corruption authority in Latvia is the Corruption Prevention and Combating Bureau (KNAB). KNAB has worked out a new Corruption Prevention and Combating Programme Project for 2009-2013. The programme contains 80 measures in several areas: prevention of “state capture”, tackling illegal and inefficient use of state and municipal assets, control of illegal income, improving investigation of corruption offences, ensuring efficient use of EU and other international funds, internal measures to prevent corruption in public institutions, awareness raising. Each measure is assigned to specific public institutions. KNAB regularly collects information about progress achieved in implementation and reports to which Cabinet of Ministers.

For more information on KNAB responsibilities and activities, please visit their web-site www.knab.gov.lv.

Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in China and some basic effective procedures you can establish to protect your company from them.

Read the information provided on our Bribery and corruption page.

Terrorism Threat

According to information provided by the Ministry of Foreign Affairs of the Republic of Latvia, there is a low threat of terrorism. In strengthening the capability of the state to fight terrorism, a Government Action Plan for fighting terrorism has been prepared, and was introduced in April 2003. The Plan sought to improve the co-operation of state institutions in the prevention and fighting of terrorism. The main aim of the Plan was to prevent opportunities for terrorists to use the territory of Latvia, its banking system and other means, to achieve their goals. Legislative changes were made, including increasing the authority of law enforcement agencies for monitoring financial transactions. Co-operation between state security services was strengthened, improving the monitoring of import, export and transit of strategically important goods. All the measures and stipulations set out in the Action Plan have been implemented and completed.

In order to strengthen co-ordination among the various state institutions involved in fighting terrorism, a Counter-Terrorism Centre was established under the auspices of the Security Police, and started operations on 1 February 2005. The tasks of this central Latvian counter-terrorism institution include co-ordination of actions of institutions fighting terrorism, ensuring the timely exchange of information, and the compilation and analysis of information on counter-terrorist activities.

Latvia has participated in the efforts of international organisations including the UN, NATO, EU, OSCE, and the Council of Europe, to combat global terrorism. Latvia has ratified and introduced all 13 UN Conventions and Protocols which form the basis of international legislation on issues of counter-terrorism, including most recently, the International Convention for the Suppression of Acts of Nuclear Terrorism.

Within the European Union, Latvia has become involved in a range of practical counter-terrorism initiatives which provide for an increased level of co-operation between investigatory and security services, as well as in judicial matters. According to the EU Declaration on Combating Terrorism (adopted 25 March 2004) and the EU Plan of Action on Combating Terrorism (passed by the European Council on 17-18 June 2004), Latvia has introduced a number of provisions in its legislation aimed at promoting practical co-operation among EU member states in combating terrorism. Latvia is actively involved in the preparation of EU legislation, and fully supports EU efforts to combat terrorism.

Considering the constant development of the technologies and methods used by terrorists, fighting these requires appropriate measures, and close co-operation among participating institutions, at the national and international levels. The fight against terrorism demands constant progress, and in recognizing this, the responsible Latvian institutions work diligently to improve the capability of the state to react to the threat of terrorism, and to improve the mechanism of mutual co-operation.

Read the information provided on our Terrorism threat page.

Protective Security Advice

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses

When walking you should be alert to the threat of pick pocketing and other forms of theft. Always avoid unlit streets and parks at night, and be extra vigilant if walking alone. Caution should also be observed when using taxis – if using taxis please ensure that you only use official registered vehicles. Such vehicles display yellow license plates. Even when using official taxis it is advisable to determine the price of the journey before starting your journey as reports have been received of some taxis using meters which have been adapted to clock up higher rates.

In 2009 there were an increased number of reports of foreign tourists being charged extortionate prices for drinks in bars or having fraudulent transactions debited against credit/debit cards; some have then been assaulted or forced to withdraw money from a cash point to pay for the bill. Since 2011 such incidents have diminished significantly. Municipal police forces are represented widely and video surveillance system was introduced in the central part of Riga city.

You can help avoid situations like this by ensuring that you check the price of drinks before ordering, pay for one round at a time and seek recommendations for bars from trustworthy sources like your hotel or other holidaymakers. When paying by credit/debit card ensure the transaction is completed in your presence. A search of the internet can also reveal good and bad feedback on individual bars and clubs. The Riga City Council has also committed itself to prevent fraud in city bars and has introduced various mechanisms to do so.

Car theft is rife. Wherever possible guarded car parks should be used and valuables kept out of sight.

If you are the victim of a crime you should:

  • make a list of the items stolen;

  • contact the local police as soon as possible and insist on a police report (needed for any insurance and/or compensation claim);

  • cancel your credit cards and travellers’ cheques immediately and re-book your travel tickets;

  • contact the British Embassy if your passport has been stolen.

In case of emergency, please, call:

  • Police 112 or 02

  • Ambulance 112 or 03

Read the information provided on our Protective security advice page.

Intellectual Property

Several government institutions are responsible for the protection of intellectual property rights in Latvia. The Ministry of Justice is in charge of the Patent Office which is responsible for the protection of industrial property rights: the protection of trademarks, brands, industrial designs, semiconductor topography and indications of geographical origin. The Patent Office shall admit and examine applications for the legal protections of inventions, industrial designs and trademarks, grant patents and certificates of trademark registration. The Patent Office shall adopt regulations, advise legal entities and natural persons, compile and publish its official publication and cooperate with foreign and international organizations involved in the legal protection of industrial property. Copyrights and related rights fall within the competence of the Ministry of Culture and non-governmental organization AKKA/LAA Copyright and Communication Consultations Agency/ Latvian Copyright Agency. The current Copyright Law came into force in 2000. It covers the bundle of rights defined in the Berne Convention, Rome Convention for the Protection of Performers, Producers of Phonograms, TRIPS Treaty, WIPO Treaties, and EU Directives. The term of protection of copyrights is 70 years.

The Ministry of Agriculture is responsible for the protection of plant varieties and the geographical indications of foodstuffs and agricultural produce.

The Economic Police, reporting to the Ministry of the Interior, is concerned with infringements of intellectual property rights.

Cases of unfair competition are reviewed by the Ministry of Economics and the Competition Council.

The Ministry of Transport is responsible for issues related to domains, servers and downloads.

The State Revenue Service takes care of cases of infringement, seizure of faked goods and industrial intelligence.

The Prosecutor’s Office and courts take charge of the investigation and trial of infringement cases. Given the fragmentation of competence in the area of intellectual property rights protection, two Ministry of Justice organisations – the Intellectual Property Council the Expert Group – were set up to coordinate the efforts of public administration bodies.

Read the information provided on our Intellectual Property page.

Organised Crime

An important feature of the region is the existence of borders between the EU and Russia. This border separates two very different types of legislation and sometimes makes cross-border law enforcement cooperation lengthy and cumbersome. Therefore the border can be seen to facilitate certain OC groups and markets. A further facilitator for trade fraud in this region is the large volume of transports across the borders and other vulnerabilities of the logistics sector.

EUROPOL’s crime report ‘Organized Crime Threat Assessment 2011’, which assesses the current and expected trends in organized crime in the EU, mentions Latvia only once under Annex 6: EU criminal hubs (North East – centre of gravity: Lithuania, Estonia, Latvia and the Kaliningrad exclave (Russian Federation). Criminal hubs are concentrations of criminal logistics which receive illicit flows from numerous sources, and whose influence extends throughout the EU.

Criminal groups active in the Baltic countries, work as a bridge between criminals operating, in particular, in Russia, Belarus and Ukraine and the EU criminal environment. They look both towards the west and the rest of the EU, and towards the east and beyond the borders of the EU.

The institution, which fights against various forms of organised crime in Latvia, is the Organised Crime Enforcement Department of the Latvian State Police (Special attention is paid to crimes such as organised explosions, racketeering, robberies and fraud.

There is a hotline for those, with information about organized crime and corruption. Tel: +371 67075372. Anonymity is guaranteed.

Read the information provided on our Organised crime page.

Countries: Latvia
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