The East Europe Franchise Association - A Comprehensive resource for effective franchise business in East & Central Europe.

A Guide to Franchising in the Nations of East and Central Europe

East & Central Europe: Country Overviews
Back to Country List

The flag of LatviaLatvia

Capital City: Riga
Population (Millions): 2

ECONOMIC OVERVIEW

GDP Per Capita: US$ 14,400
GDP per Sector:
Agriculture - 3%
Industry - 14%
Services - 83%
Currency: Lats (LVL)
Ex.Rates: lati (LVL) per US dollar - 0.5157
Big Cities (>100,000): Riga, Daugavpils, Liepāja
Urban Population: 0.68
Languages: Latvian (official) 58.2%, Russian 37.5%, Lithuanian and other 4.3%

Background:

Latvia is situated between the other two Baltic states, Estonia and Lithuania. On the World map Latvia is found in the North-Eastern part of Europe on the East coast of the Baltic Sea. The country borders with:

  • Estonia
  • Russia
  • Belarus
  • Lithuania

Latvia is situated on trade crossroads and has acted as a bridge between Western Europe and Russia for a long time.

Same as in Lithuania, Latvia’s population is multi-lingual highly qualified labour. The workplace costs in Latvia are relatively low; other business maintenance costs are low too.

Latvia has a well-developed international communication and transportation infrastructure. Latvia’s distinctiveness lies in the fact that the majority of the population and business is accumulated in the country’s capital Riga.

Latvia’s climate is very similar to that of Lithuania: summer is June – August, winter is in December – February. The average annual temperature is approx. +15.8° C in summer and approx. -4.5° C in winter. July is the warmest month and January is the coldest.

ECONOMIC ENVIRONMENT

It is a small economy; the World Bank has placed it in the “high income: non-OECD” group in terms of the level of income. In terms of the nominal GDP Latvia held 87th position among 181 countries in the 2009 International Monetary Fund country ranking.

2009 has been the most difficult year for Latvia’s economy since restoration of independence.

The global economic crisis had a negative effect on state finances and the country was forced to approach the International Monetary Fund for a loan. The collapse of consumption and real estate bubble paired with the global financial crisis brought about a 4.6 % decline of the Gross Domestic Product in 2008 and a further drop by 18 % in 2009. Agriculture has been the only sector that continued to grow in 2009. The assessment of the situation at the end of 2010 indicates that manufacturing sector and export are the fastest to recover.

During the crisis unemployment rate in Latvia increased to 16.9 %.

Latvia’s economic structure is sustained by a strong service sector (~83 % of GDP in 2009) deriving a significant part of its orders from industrial sector (~14 % of GDP). Agriculture produces enough to satisfy the needs of the country’s population (~3 % of the GDP).

Information technology has been one of the service industry sectors that demonstrated rapid development in the recent period; tourism sector has also been successful in attracting foreign visitors to the country. Historically Latvia has been one of the main East-West and South-North trade crossroads therefore its transport services sector is one of the strongest in the country.

Manufacturing industry of Latvia has a strong wood and wooden products sector.

Other well-developed branches of industry include manufacturing of chemicals and pharmaceuticals, manufacturing of electronic and electrical appliances, manufacturing of basic metals and metal products, textile, manufacturing of food products and beverages.

The manufacturing industry, however, depends from imported energy and raw materials.

BUSINESS ENVIRONMENT

In 2011 Latvia holds 24th position in the World Bank Ease of Doing Business ranking table which analyses 183 countries worldwide (a rise of 3 positions since 2010).

According to the World Bank ranking, the most complex and time-consuming procedures in Latvia include closing a business/suspending business operation and dealing with construction permits. The easiest procedures include getting credit, registering property, enforcing contracts and trading across borders.

LEGAL OVERVIEW

Legal regulation of franchising relations in Latvia started in 2008 after passing the new version of the Commercial Law the respective provisions of which related to franchise came into effect as recently as 1 January 2010. Same as in Lithuania, franchise-related provisions can also be found in legislative acts on competition, real estate, intellectual property and taxation. The Commercial Law of Latvia offers a broad definition of a franchise contract. It is defined as a contract under which a holder of rights (franchisor) grants another party (franchisee) a right to use a trademark, other intellectual property rights, commercial practice, proprietary (manufacturing or service provision) information for the purpose of sale of goods and/or rendering of services in accordance with the concluded franchise contract and following the procedure developed and confirmed by the franchisor. Latvia’s national legislation also allows contracting parties a good deal of freedom in deciding regarding the content of franchise, but compulsory liabilities of the franchisor are explained in a much better way and very clearly regulated. It also regards written form of the contract and remuneration basis as mandatory elements of a franchise contract.

Latvia applies differentiated tax tariffs to franchise revenue, the tariffs range between 9 and 26 per cent depending from the legal status and form of the entity benefitting from franchise revenue.

Legal Aspects of Franchising prepared by International Law Firm VARUL

For a much more in-depth view of franchising in Lithuania and Latvia, please download the following PDFs.

"Buying a Franchise - Highway to Business Success" - PDF (4.9Mb)
"Study Report On Franchising Attractiveness Of Lithuanian And Latvian Border Regions" - PDF (2.8Mb)
Published By: Lithuanian Franchise Centre

 

East Europe Franchise Associations - Legal Disclaimers - Contact EEFA
AC Diplomat Palisády 29/A, 81106, Bratislava, Slovak Republic.
© East Europe Franchise Association 2010. All rights reserved