Latvia and Portugal – perspectives for economic cooperation, investment and trade opportunties in Latvia

FIL Meeting Center, Lisbon September 15, 2004

Mr. Juris Kanels Director

Latvia – facts and figures

• • • • Population: Area : Currency: Language: 2.33 million 64 589 km ² 1 Lats (LVL) = 100 santims Latvian (official), Russian, English and German are also widely spoken • • • Neighbouring countries: Estonia, Russia, Belarus, Lithuania Member of EU and NATO since 2004 Member of the WTO since 1998

Stable macroeconomic environment GDP growth rates: 2000: 6.9 %; 2001: 8,0 %; 2002: 6.4 %; 2003: 7,5 %, 2004 (F): 7,5%

160

Latvia

150 140

Estonia Lithuania

130 120 110

EU

100

1995 1996 1997 1998 1999 2000 2001 2002 2003

Source: Ministry of Economic

Strong monetary policy

• Currency (Lats) pegged to SDR since 1994, entry into Eurozone set for 2008, 1 LVL = 1.66 EUR • One of the lowest inflation among Central European and Eastern European countries: • 1999: 3.2 %; 2000: 2.6 %; 2001: 2.5%; 2002: 1.9%, 2003: 2.9% Credit ratings: Moody`s A2; Standard & Poor's A-; Fitch A-

Foreign trade by country 1995 - 2003 100% 80% 9,0% 9,0% 8,0% 11,0% 9,0% 12,0% 12,0% 12,0% 13,0% 12,0% 13,8% 12,9% 17,8% 15,2% 14,8% 14,4% 16,8% 15,6% 60% 44,0% 45,0% 49,0% 40% 57,0% 63,0% 64,6% 52,6% 60,4% 54,8% 20% 38,0% 36,0% 30,0% 19,0% 12,0% 0% 1995 1996 CIS 1997 1998 EU 1999 8,7% 2000 14,8% 10,0% 12,8% 2001 Baltic countries Other 2002 2003

Source: Ministry of Economic

Cumulative FDI into Latvia 1995-2003 3500 3000 2500 2000 1500 1000 500 0 905 750 635 674 512 398 345 261 2246 1973 111 504 675 927 1107 1277 1431 1580 1995 1996 1997 1998 1999 Year 2000

Equity capital Other capital

2001 2002 2003

Source: Ministry of Economic

FDI in Latvia by country at the end of 2003 Other 21,0% Sweden 13,5% Switzerland 2,0% United Kingdom 3,0% Russian Federation 5,0% Netherlands 6,0% Norway 6,5%

Source: Bank of Latvia

Germany 11,0% Estonia 7,0% United States 7,0% Denmark 9,0% Finland 9,0%

FDI into Latvia by activity at the end of 2003 Real estate and other business activities 25% IT&T 5% Transport & Logistics 7% Financial services 15% Hotels and restaurants 1% Other 9% Manfacturing 17% Wholesale and retail trade 18% Energy and infastructure 3%

Source: Bank of Latvia

Latvia: strategic geographic position

Excellent business environment

• • Corporate Income Tax - 15% Start-Up procedures “Latvia is ranked among the top ten countries worldwide in terms of business start up time.”

(Doing Business, Understanding Regulation

, World Bank, IFC, Oxford University Press, 2004 (average length of time is 11 days to undertake all procedures to register a company)

Business environment

Tax rate 40 35 30 25 20 15 10

15 31

5 0 C yp C ru ze s ch R ep ub lic Corporate Income Tax in the New Member States

35 26

Est on ia

18

H un ga ry

15

La tvi a

15

Li th ua ni a M al ta

27 25

Po la Sl nd ova k R ep ub lic

25

Sl ove ni a Source: Ernst & Young

Business environment Equal treatment of foreign investors

• By law, foreign investors have the same rights and duties as local investors • The foreign investor may be the sole founder and owner of a company in Latvia • • No restricted sector activities The foreign investor may freely repatriate after tax profits and investment capital • Foreign companies registered in Latvia are entitled to buy land and property • Active dialogue between the Foreign Investors’ Council in Latvia (FICIL) and the Latvian Government

Advanced telecom infrastructure

Estonia EU Average

Latvia

Slovenia Czech Rep.

Slovakia Poland Lithuania Hungary 0,0%

Internet Usage in CEEC EU Countries

10,0% 26,4% 25,6% 15,8% 23,5% 20,2% 20,0% 30,0%

% of Population

40,4% 38,4% 46,0% 44,7% 40,0% 50,0% Source: Internetworldstats.com, 2004

Special Economic Zones

• 80% rebate on real estate and corporate income taxes, not exceeding 50% of total amount invested • • VAT 0 % for goods on services provided in free zones VAT, Excise tax and customs duty exemptions on import for companies operating in the zones • Application of 0 % VAT to majority of services Special Economic Zones exist in the Freeports of:  Riga  Ventspils  Liepaja and in the city of Rezekne

Promising business sectors

• • Information Technology Machinery Manufacturing and Metalworking and Electronics and Electrical Engineering • • • • Chemicals, Bio-tech and Pharmaceuticals Forestry and Woodworking Transit and Logistics Light industry: Food Processing and Textiles

Medium gross monthly wages/salaries in selected positions, 2003 Area of Activity Indicative Position/Qualification Management IT&T Logistics Manufacturing Director of medium size company Company function manager Team leader Network administrator of a small/medium size company Programmer-analyst Call center operator Truck driver Warehouse worker Engineer, CAD design Engineer, manufacturing equipment Qualified worker

Source: Fontes R&I

EUR/ month 3125 2047 1414 797 967 413 559 323 656 644 434

Reasons for choosing Latvia as your business destination

• • • • • • • Political stability Stabile macroeconomic environment Stabile macroeconomic environment Excellent business environment Attractive business incentives Attractive business incentives Services by Latvian Investment and Development Agency

Welcome to Latvia!

Keystone to the Baltic States

Latvian Investment and Development Agency P ērses iela 2, Rīga, LV 1442, Latvia Phone: +371 7039400, Fax: +371 7039401 E-mail: [email protected]

http://www.liaa.gov.lv