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CanadExport is Canada's official source of news and advice on trade, export and investment opportunities around the world, for entrepreneurs who want to compete, partner and prosper in the global marketplace.						CanadExport Vol. 25, No. 18 (PDF)

For years now, the economies of Latvia, Lithuania and Estonia have been firing on all cylinders.

Since accession to the European Union in 2004, these countries have posted the highest growth rates of any member country. So it comes as no surprise that American, European, Nordic and Asian companies have set up shop there to sell, invest and use these three countries as launching pads to the more than 640 million consumers in Russia and the EU.

But how are Canadian entrepreneurs doing in a region showing such promise?

Claire Poulin, Canada's Ambassador to Latvia, Lithuania and Estonia, concedes there is a lot of work to be done but adds that there is no better time than now for Canadians to bring their business to the region.

"This is a special time for Latvia, Lithuania and Estonia," says Poulin. "They have only been independent for 16 years, which is very little in the history of a country, so what they have achieved so far is nothing short of amazing."

In Latvia's bustling capital of Riga, for example, the cobblestone streets hum with the sounds of high-end German and Italian cars, and many of the city's people can be seen wearing the latest Armani fashions. While the city's Soviet past is evident, it seems like a remnant of a far more distant past.

That the re-ignition of Latvian commerce has been so fast and furious can perhaps be traced to Riga's mercantile past. A founding member of a 13^th century alliance of merchant associations known as the Hanseatic League, Riga was one of the world's most important trade gateways.

Fast forward 800 years or so and Latvia and its Baltic neighbours are once again building on that tradition. Estonia is Europe's leader in e-government and e-education, and Lithuania is a transportation powerhouse.

"For Canadian companies, some of the biggest opportunities in all these countries can be found in construction and building products (including green building products), the agri-food sector, information and communications technologies, and energy and environment," says Poulin.

Canada's top official in the Baltics says that the infusion of massive amounts of EU money, or so-called 'structural funds', is fuelling a boom in residential and commercial construction, not to mention all kinds of infrastructure including rail, roads, information technology and the energy sector.

One good reason to enter this market is that Canadian companies can only take advantage of these funds if they are resident in the EU. And since the EU funding won't last forever, Canadian firms might want to explore this potential right now—something countries like Sweden and Finland have done to great advantage.

But even with all this in its favour, Latvia, Lithuania and Estonia are sailing some choppy waters. Many worry these economies are over-heating, with high inflation taking its toll, and growth at levels that may be unsustainable. Banks are willing money lenders, tempting consumers to increase their debt load and wages are increasing fast. Some investors warn that the real estate market in Latvia is at the top of a bubble.

Latvia, which boasts the highest growth at around 10% last year, is the most susceptible to pressures of rapid growth. While Estonia is also growing fast, most expect its more advanced economy to land a little more softly. Lithuania is also expected to fare better, mainly because its currency (the litas) has been tied to the Euro for a longer period, as has Estonia's kroon. As a result, the adoption of the Euro is not expected until at least 2010.

Also, 50 years of Soviet rule has left a legacy of corruption, mostly in Latvia and Lithuania, but officials are attacking this problem from all angles.

"As the Baltics start to meet EU standards on this, corruption is getting harder to hide," says Poulin. "Tenders are being very closely scrutinized as these countries are working hard to assure foreign companies that these are very good places to do business."

So far though, good monetary conditions are prevailing, and many countries are hedging their bets that a future can be built in these enterprising countries.

"Income and corporate tax rates are low, and EU and NATO accession has given these nations a boost of confidence. There are too many opportunities to ignore. After all, Canada is well perceived in the Baltics. We are seen as technologically advanced, and we are seen to offer quality at a great price. But not enough people here are getting the message. We risk losing out simply because we have not given this market enough emphasis."

In addition to being more proactive, Poulin advises Canadian entrepreneurs to contact the Canadian Trade Commissioner Service.

"We are here to help Canadian entrepreneurs. Let us give you the market intelligence you need on your sector and let us put you in touch with the right people. Our support can go a long way."

For more information, contact Irena Cirpuse, Canadian Embassy in Riga, and go to www.infoexport.gc.ca.

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