LATVIAJuly 01, 2014

Melissa Paonessa

LaQuista Trotter

Robert Donahue

The Story Begins…

Joe wants to start up a business in Latvia. He knows that he must do his research about the country to understand how to implement this venture. First, Joe should know about the Latvian culture…

Background• Political situation + Economic Environment= Business

Culture• The political history of Latvia has been turbulent• Annexed by Russia and Germany from the late 18th

century until the late 1980s.• Full independence was recognized on August 21, 1991

and Latvia became a member of NATO• Total population of 2 million

Background (contd)

• Currency (LVL) was replaced by the EURO on Jan.1, 2014

• Rated as BBB for Sovereign, Currency, Banking, Political, and Economic risk.

Communication

• Latvian = Official Language• Most people over the age of 15 speak Russian while

much of the population also speaks English• Very reserved and don’t like expressing emotions in public• Best to adopt a very direct approach when addressing

business topics

Education• The right to free education is guaranteed by law for

primary and secondary studies• Students who pass the higher education council exams

receive grants for their education, while others have to pay their own fees

• Education is seen as a way of securing a good job and earning a living

Business Etiquette• Straight forward and trustworthy and expect their business

to be the same• Business partners do not expect presents at the first

meeting, yet small gifts to business associates are generally accepted.

• Formal Meetings: Men wear suits and a tie while women wear jackets and skirts/trousers.

• The way you dress will express your status: Latvians prefer expensive clothing and strong perfumes

• At the office: business people follow a less formal dress code and in smaller business there is usually no formal dress code

Corruption• As in other former communist countries, bribery and

corruption are used as a means of doing business in Latvia

• Presents may need to be given to speed up government processes and get things done such as reducing waiting time for official papers or convincing politicians to pass favorable legislation

Conducting Business• Latvians do not like long business meetings; it is very

important to be well prepared• If potential business partners feel uncomfortable they may

withdraw from the meeting and cancel further negotiations• Express seriousness about business through formal

approach in dress and conducting meetings• Business style is a hierarchical approach and significant

business decisions are made by top management which can sometimes slow the negotiation process

International Business

• Latvian government has tried since its independence from Russia to reshape and redirect the dependency of its own economy

• After the Russian meltdown of 1998, Latvia had to introduce stringent measures to control the economy and to set in progress the gradual reorientation of exports towards EU countries

More about the Culture• Here is the link to a video that gives some more insight

about the business culture in Latvia. It provides knowledge of some taboos and tips to ensure that the adjustment to new and different business culture is a success.

• http://www.youtube.com/watch?v=gUY9NeS5gm8

The Story Continues…

Joe is intrigued and excited about the culture that he will experience while conducting business in Latvia. He feels that he needs to understand more about the business world…

The Ease of Doing Business

• Latvia has ranked #24 out of 189 countries• Improved its ranking significantly in the past two years due to an improving

business environment

Starting a Business

• For a standardized company:• Legal Form: Sabiedriba ar ierobe otu atbildibu (SIA)• Paid in Minimum Capital Requirement: LVL 1• Start-Up Capital: 10 times GNI per capita

Procedures to Start a Business• Latvia has a set of specific procedures—the bureaucratic

and legal steps that an entrepreneur must complete to incorporate and register a new firm.

Procedure Time Cost

Complete Signatory Cards and Deeds 1 day LVL 18

Open Bank Account & Receipt of Reference 1 day LVL 5

Commercial Registry & State Revenue Service for Taxes

10 days LVL 124

Register employees for mandatory state social insurance contribution with the State Revenue Service

Less than 1 day

No Cost

The Market• Challenges:

• Country’s small size• Costs too high relative to potential customer base

within the country• Quickly saturated• American products face strong competition• Entrenched government bureaucracy and moderately

high levels of corruption

The Market• Opportunities

• Service industries • Transportation• Information technology• Financial services

• Other industries• Construction• Food processing• Metal work• Pharmaceuticals• Railroad Cars• Electronics• Textiles• Processed Wood Products

• Tourism is rapidly growing• Latvian government administer government structural funds for

businesses

Pricing

• Each company is free to choose pricing policy

• Exception: State regulated sectors with monopoly features• Telecommunications, electrical power, gas

• State Anti-Monopoly Commission• Ensures that no cartel agreements are made

Sales Service• Latvian market expects customer

service and support within the country

• In retail sectors, customers expect 24-hour service

• According to Latvian law, all merchandise must be guaranteed for a 24-month period beginning at time of purchase

• Suppliers within and outside the EU should be aware of existing and upcoming legislation affecting sales, service, and customer support.

Product Liability and Safety• Directive on Liability of Defective

Products:• Producer is liable for damage

caused by defect

• General Product Safety Directive:• General safety requirement at

the EU level to ensure only safe products

• European Product Safety Network

Trading• Integrated Trade of the

Community• Rules that apply to products

imported and exported

• Labeling and Marketing Requirements in the EU

• To sell products in the EU, required to apply CE marketing when product is covered by product legislation

More to the Story

Now that Joe has better knowledge of doing business in Latvia, he knows that there is still some more that he has to know. Being a businessman, Joe understands that the economy of a country plays a huge role and wants to know more about the Latvian economy…

Labor Force

• 1.022 million (2013 est.)

• Country comparison to the world: 143

• Unemployment Rate• 9.8% (2013 est.)

• Country comparison to the world: 105

GDP• GDP (purchasing power parity):

• $38.87 billion (2013 est.)

• Country comparison to the world: 109• $37.38 billion (2012 est.)• $35.4 billion (2011 est.)

GDP Real Growth Rate

4% (2013 est.)• Country comparison to the world: 76

• 5.6% (2012 est.)• 5.5% (2011 est.)

Exports

• $12.67 billion (2013 est.)• Country comparison to the

world: 88

Exports

Commodities:• Food Products• Wood and Wood Products

• Metals• Machinery and Equipment

• Textiles

Partners:• Russia• Lithuania• Estonia• Germany• Poland• Sweden

Major Exports by Output

Imports

• $15.56 billion (2013 est.)

• Country comparison to the world: 87

Imports

Commodities:• Machinery and Equipment

• Consumer Goods• Chemicals • Fuels• Vehicles

Partners:• Lithuania • Germany • Russia • Poland • Estonia• Italy• Finland

The Story Concludes…

Joe feels confident that his business venture in Latvia will be a success. He know knows more about the cultural, business, and economic aspects of the country to help him start his business. Joe is motivated to initiate the process!

References• https://www.cia.gov/library/publications/the-world-factbook

/geos/lg.html

• http://www.heritage.org/index/country/latvia• http://www.em.gov.lv/images/modules/items/tsdep/makro_

58/makro_58_en.pdf

• http://www.em.gov.lv/images/modules/items/tsdep/zin_2013_2/2013_dec_eng.pdf

• http://photos.state.gov/libraries/latvia/231771/PDFs/2013-CCG_Latvia%20FINAL.pdf

• http://businessculture.org/eastern-europe/latvia/business-communication/

• http://www.kwintessential.co.uk/etiquette/doing-business-latvia.html

• http://balticexport.com/?article=biznesa-un-saskarsmes-kultura-latvija&lang=en