According to the World Bank Group, Latvia ranks 22nd out of 189 countries in terms of ease of doing business. The country ranks among the top 20 for obtaining credit for businesses; in the top 30 starting a business, construction and registration of real estate, easy and efficient tax payment, international trade and enforcement of contracts; and among the top 50 for resolving bankruptcies and protecting minority investors. The weakest point of Latvia's business environment is by far its ease of getting electricity for newly built properties, for which the country ranks 65th.
Overall, Latvia is the most favorable for companies that do not plan to build new infrastructure. Ease of starting a business, paying taxes and getting credit combine well with cheap but skilled and educated labor and low cost of infrastructure and facilities. Because of this, Latvia is a very popular country to start a business, especially for entrepreneurs from outside the EU, as overall it takes a lot less investment to start a business in Latvia than most other EU member states, while the bottom line (in terms of quality) is the same. The entrepreneurial risks for such entrepreneurs are comparatively low as long as they consider the possible competition on the local market.
Since Latvia joined the European Union in 2004, it has adopted most of the Union's laws and policies. One of the examples is the Schengen Agreement, which allows free international trade with other EU member states.
Latvian politics favors the free market and consistency with EU policies. Some analyzes classify Latvian legislation as conservative, meaning that new policies take a long time to be accepted by the government and are generally treated with caution. Legislative initiatives proposed by the EU are excluded from this. Latvia aspires to be an active member of the European Economic Area and tries to align its policies with European standards.
Most companies are concentrated in the Latvian capital Riga and the surrounding cities. Other major cities often devote themselves to specific market sectors, e.g. The port cities of Ventspils and Liepāja offer ice-free ports (read more about logistics in Latvia), while Daugavpils is a major rail hub.
Cities of regional importance also play their role in Latvia's economic environment. For example, the Rezekne Free Economic Zone is located in the city of Rezekne. The FEZ contributes to the development of the region and attracts companies with up to 100% property tax relief, 80% corporate tax relief and up to 55% return of investment costs through tax incentives. Rezekne is also an important railway junction.
The most urbanized regions of Latvia are the central, eastern and western regions. However, it must be noted that if the central region is thoroughly urban, the east and west are urban in the sense that the majority of the population lives near large cities, with small rural areas in between. The southern and north-eastern regions are predominantly rural.