I. COMMERCIAL OVERVIEW (EXECUTIVE SUMMARY)

Since re-achieving independence in 1991, Latvia has made striking
progress toward restoring a market economy and completing reforms
to help it recapture the prosperity of the pre-World War II
years.  With a population of 2.7 million, Latvia is a relatively
small but potentially attractive market for American consumer
products, computers and office equipment, building products, and
capital machinery and equipment.  One of the country's strongest
business attractions is its capital, Riga, which has emerged
alongside St. Petersburg and Moscow as a commercial, financial
and transportation hub for northwest Russia/Baltic region.

The commercial environment is very friendly to American
companies, a fact underscored by President Clinton's signature of
a bilateral agreement on trade relations and intellectual
property rights protection during his July 1994 visit to Riga.
The country has virtually no controls on foreign currencies,
making investment and repatriation of profits exceptionally easy.
The Latvian Government has adopted incentives, including tax
holidays, to encourage foreign investment, and has adopted modern
laws establishing copyrights, patents and trademarks.  A
mechanism for enforcing intellectual-property rights protection
is being developed.  Telecommunications are being rapidly
modernized under an agreement between the Latvian
telecommunications company and a consortium of British and
Finnish companies.  Office space is both relatively easy to find
and inexpensive -- seven to fifteen dollars per square meter per
month, with thirty dollars being the top of the market.  English
is the West European language of choice in government and
business.

In considering long-term prospects in the Latvian marketplace,
Americans should bear in mind that, having re-achieved freedom
after fifty years of occupation, Latvia is a recovering country,
not a developing one.  Many Latvians have educations, values and
aspirations similar to those of middle-class inhabitants in
Northern and Western Europe.  While these Latvians do not have
the income to match their aspirations, there is every reason to
believe that they will not be long in attaining it.

American products face strong competition in the Latvia from
Western and Northern European competitors.  Latvia has free-trade
agreements with Sweden, Finland, Norway and Switzerland as well
as with the European Union.  In April 1994, a trilateral free-
trade agreement between the three Baltic countries went into
effect, abolishing all tariffs on industrial products.  Bolstered
by historical trade relations between Latvia and their countries,
companies from Sweden, Germany and Finland approach the market
with confidence, while Polish and Finnish companies tend to
dominate the Latvian market for imported food.  American
companies have the advantage that the U.S. hosts the largest
Latvian emigre community in the world.  Hundreds of Latvian-
Americans are returning to Latvia to assume leading roles in
government and business.  Their activities have created strong
bonds between the U.S. and Latvia for the first time in the two
countries' histories.

As in other countries to emerge from the old Soviet bloc,
government bureaucracy, corruption and organized crime are the
most significant hurdles to U.S. trade and investment in Latvia.
While these obstacles make it more complex to do business in
Latvia than in the West, very few of the U.S. companies that have
tested the market have found the problems insurmountable.  In
part, this is because foreign companies enjoy relatively good
access to senior government officials in this small country.

U.S. companies doing business in Latvia rate the commercial
environment as among the best to be found in Eastern Europe or
the former Soviet Union.  Because the courts and legal system are
not yet functioning as they would in the industrialized West and
the Latvian regulatory and tax structures are still at a
formative stage, there are fairly high levels of uncertainty
associated with doing business in Latvia.  U.S. companies
operating successfully in Latvia accept the higher risk as part
of the price of getting in on the ground floor in the expanding
East European and Russian markets.