LATVIA

COUNTRY OVERVIEW

LOCATION AND SIZE.

Located in the Baltic region of Eastern Europe, Latvia is bordered by Estonia (339 kilometers; 211 miles), Russia (217 kilometers; 135 miles), Belarus (141 kilometers; 88 miles), Lithuania (453 kilometers; 281 miles), and the Baltic Sea (531 kilometers; 330 miles). Slightly larger than the state of West Virginia, Latvia has a total area of 64,589 square kilometers (40,136 square miles). Its capital, Riga, is centrally located and lies next to its namesake, the Gulf of Riga.

POPULATION.

In July of 2000 the population of Latvia was estimated at 2,404,926, a decrease of 10 percent from the 1989 population of 2,666,567. This decrease is the result of 2 factors. The first is the economic hardships that set in following the break-up of the Soviet Union in 1991—of which Latvia had been a reluctant member— and the decision of families to postpone procreation. For the first time since the 1945 flight from the advancing Red Army and the 1949 Soviet deportation of dissident Latvians to Siberia, the total number of deaths outnumbered the total number of births. The second, and more important, factor has to do with the out-migration of Slavs, primarily Russians and Ukrainians. The regained independence of Latvia in 1991 brought a shift in political power from Russian control into Latvian control. New Latvian language requirements for certain employment sectors and the sudden reality of monolingual Russian speakers living in a new "foreign" country spurred a large emigration movement.

In 2000 the birth rate stood at 7.8 births per 1,000 while the death rate stood at 14.88 per 1,000. With a current out migration of 1.32 per 1,000, Latvia's annual population growth rate is-0.84 percent, and the projected population for 2015 is 2.1 million and for 2030 is 2.0 million. With an official unemployment rate of 8.6 percent (unofficial estimates are close to 14 percent), there is no great demand for an immediate increase in the labor force . The below replacement level birth rate may factor into labor shortages should Latvia's productive economy increase significantly. Female life expectancy (74.6 years) is much greater than male life expectancy (62.4 years) and thus among older people women greatly outnumber men. The largest percentage of the population are within their working years, 20 to 64, and a great amount of economic responsibility falls upon them. The dependency ratio (the percentage of the population that are either above or below their productive working years) in 1997 was 49.9 percent. In this same year, the percentage of the population aged 65 and above was at 13.6 percent and is estimated to reach 16.8 percent by 2015. Despite this increase in the percentage of the aged, the dependency ratio is predicted to drop to 45.8 percent by 2015. This is due to the drop in fertility rate, from 2.0 children per mother in 1975 to 1.3 in 1997.

Language and citizenship policies that served as a reprisal against former Russian dominance fostered the out migration of that group, but criticisms from the

United Nations and the European Union for such discriminatory practices have caused the Latvian government to soften its citizenship and naturalization policies. In 1989 Latvians comprised only 52 percent of the country's population while Russians constituted 34 percent, with Belorussians, Ukrainians, Poles, and Lithuanians, in respective ranking, making up most of the remainder. Within 6 major municipalities, the Russian population grossly outnumbers the indigenous population, and the former dominance of the Russian language meant that it was impossible for a Latvian to engage in any type of economic activity without the use of Russian. Current conditions have changed and monolingual Russian speakers are faced with very difficult circumstances. In 1996 ethnic Latvians comprised 56.6 percent of the country's population, while the remaining ethnic Russians constituted 30.3 percent. However, 71 percent of the Latvian population are considered citizens while the remaining 29 percent are not, indicating that a significant portion of the ethnic Russian population has been given citizenship. This issue has been a continuing source of contention in the country's politics.

INDUSTRY

MANUFACTURING.

Proximity to European markets and the ease and cheapness of transport across the Baltic Sea makes Latvia well situated for delivering goods to market according to EU standards. Cheap labor, a stable currency, membership in the World Trade Organization, and future membership in the EU has made industry an important part of Latvia's development plans.

Manufacturing in Latvia is currently organized around machinery, textiles (especially woolens), food processing, and wood processing. Due to cheap labor and abundant resources, wood processing is the most dynamic sector and possesses the potential for dramatic increase. Latvia produces automobiles, electric rail cars, and consumer goods such as radios and appliances. Steel, cement, wood products, chemicals, and electronics are also manufactured in Latvia's major urban centers. Dependence on imported energy delivered at increased prices injured the industrial sector of Latvia, once the most industrialized of the Soviet Republics, and the service sector has increased in importance. Information technologies (IT) have recently become a rapidly developing area due to changes in the political, business, and technical infrastructure of the country. About 20 percent of total foreign investments is directed at manufacturing.

As of 1999, food products and beverages comprised the largest share of Latvia's manufacturing at 36.4 percent. Wood and wood products, at 17.8 percent in 1999, comprised the second largest share of Latvian manufacturing and increased 14.5 percent from the previous year. Textiles remained important at nearly 6 percent in 1999, and other significant industries in 1999 included the following: publishing and printing (4.7 percent), wear apparel (3.7 percent), chemicals (3.5 percent), metal wares (2.9 percent), and transport vehicles (2.9 percent).

SERVICES

TOURISM.

Latvia is the least known of the Baltic states and does not receive much tourism. However, Riga, the largest and most vibrant city in the Baltic States, is the primary tourist destination, offering opportunities for day trips. Tourism by Russians is still present in Latvia, but Western visitors have become more numerous. Latvia's coast supports several beach resorts, but poor water quality in the Baltic Sea has discouraged bathers. In fact, the number of visitors to Latvia has decreased from 2.4 million in 1993 to just 1.7 million in 1999.

FINANCIAL SERVICES.

Latvia's 2-tiered banking system began in 1988 when its first commercial banks were established. Prior to the break up of the Soviet Union, there were no private banks in any of the Baltic States. Since that time, the banking system, although suffering 2 crises, has developed well and offers a variety of services to its customers. The Central Bank of Latvia was founded in August of 1990. It is an independent bank that has the right to issue the national currency, supervise other banks and credit unions, and control the economy via monetary policy instruments, such as national interest rates. It is independent of the Latvian government and handles foreign currency.

The commercial banking sector is controlled by the Central Bank. The bank crises have struck Latvia since independence. Connected to a large reduction in the number of banks, the first crisis occurred in 1995. The second crisis accompanied the Russian economic collapse of 1998. Since that time, the Latvian banking system has been recovering, and a majority of the banks have ended the year with a profit.

The banking system in Latvia has been almost entirely transferred into private hands, although 70 percent of the ownership and control is with foreign institutions. There are currently 21 banks and 1 foreign bank branch in Latvia. In 12 of these banks, more than 50 percent of assets are owned by foreign shareholders. In 2000 there was a 38 percent increase in the total assets of banks as investment has increased and proved profitable. Cash and capital flow into and out of Latvia faces virtually no restrictions.

The Riga Stock Exchange (RSE), re-established in 1993, is Latvia's only licensed stock exchange. It is owned by 27 shareholders, and the Latvian Ministry of Finance regulates its activities. The shareholders include major Latvian commercial banks, brokerage companies, and the State Real Estate Fund. In June of 1997, the RSE became the first exchange in Eastern Europe to have a Dow Jones Index, meaning that the daily activities are collectively reported in a quantitative fashion to display the rise and falls in the market.

DEPENDENCIES

Latvia has no territories or colonies.

BIBLIOGRAPHY

Central Statistical Bureau of Latvia. <http://www.csb.lv/ajaunumi.html> . Accessed July 2001.

De Bernardis, Petra Lantz. "Wealth and Poverty in Transition." UNDP: Estonia. <http://www.undp.ee/equity> . Accessed July 2001.

Embassy of Latvia. <http://www.latvia-usa.org/economy.html> . Accessed July 2001.

International Monetary Fund. Latvia: Selected Issues and Statistical Appendix . <http://www.imf.org> . Accessed July 2001.

Iwaskiw, W.R. Estonia, Latvia, and Lithuania: Country Studies . Washington, D.C.: Federal Research Division, Library of Congress, 1996.

Latvian Development Agency. Latvia: The Meeting Point of Two Worlds. <http://www.lda.gov.lv> . Accessed July 2001.

Latvijas Banka. <http://www.bank.lv/englishindex.html> . Accessed July 2001.

"News from Latvia." Central Europe Review. <http://www.cereview.org/00/41/latvianews41.html> . Accessed July 2001.

U.S. Central Intelligence Agency. World Factbook 2000. <http://www.odci.gov/cia/publications/factbook/index.html> . Accessed July 2001.

U.S. Department of State. FY 2001 Country Commercial Guide: Latvia . <http://www.state.gov/www/about_state/business/com_guides/2001/index.html> . Accessed July 2001.

—Mark Carper

CAPITAL:

Riga.

MONETARY UNIT:

Latvian Lat (Ls). One lat equals 100 santimis. There are coins of 1, 2, 5, 10, 20, and 50 santimi and 1 and 2 lats, and bank notes of 5, 10, 20, 50, 100, and 500 lats.

CHIEF EXPORTS:

Wood and wood products, machinery and equipment, metals, textiles, foodstuffs.

CHIEF IMPORTS:

Machinery and equipment, chemicals, fuels.

GROSS DOMESTIC PRODUCT:

US$9.8 billion (purchasing power parity, 1999 est.).

BALANCE OF TRADE:

Exports: US$1.9 billion (f.o.b., 1999). Imports: US$2.8 billion (f.o.b., 1998).