With a gross domestic product of more than 23 billion euros in 2014, Latvia has begun to rebound from the devastating world economic crisis of 2007-2008. The small Baltic nation of 2 million people saw many working-age adults emigrate during the subsequent years of government-led austerity measures, but today’s indicators show its economy headed in a largely positive direction.
A member of the euro zone since 2014, in 2016 Latvia saw its economy listed as one of the European Union’s fastest-growing. Figures from 2015 recorded an increase in the value of its exports of close to 123 million euros.
Here is a brief outline of five key points in Latvia’s history as a center of world trade during the past millennium.
The Middle Ages
Due to its strategic location on the Baltic Sea, Latvia has often been invaded by strong neighbors, such as Sweden, Poland, Russia, and Germany. In the late 12th century, foreign merchants and traders frequented Latvia’s Daugava River as a means of navigation to Russia. Later in the Middle Ages, German barons took over the unorganized Latvian territories and established themselves as a ruling elite.
Riga and other Latvian ports became part of the German-dominated Hanseatic League, one of the world’s first common markets, in the late 1200s. This led to Riga’s developing status as a major trade center in the Baltic area, and to growing connections with Western Europe.
The Early Modern Era
Historians credit Latvia with being the only Eastern European nation to engage in the Western European-dominated discovery and global trade of the 16th and 17th centuries. After the Livonian War ended late in the 16th century, a portion of what is today western Latvia was ceded to the Polish-Lithuanian Commonwealth. There, the new rulers established the largely self-governing duchy of Kurzeme, also known as Courland.
Jacob Kettler ascended to the dukedom of Courland in 1641. He was responsible for creating Europe’s largest merchant fleet of the time. Kettler established a strong local shipbuilding industry and expanded trade to the point that his ships were soon traversing the whole of Europe. His ports at modern-day Ventspils and Liepaja were among the European Continent’s busiest.
Kettler’s fleet sailed so far that he was able to establish a colony on the Caribbean island of Tobago, where he traded in gold, ivory, spices, and other luxury goods. His ships also plied the Gambia River in Africa, where his men constructed Fort Jacob on St. Andrews Island and developed water-borne trade to a greater extent than attained elsewhere in Western Africa. True to his Lutheran faith, Kettler refused to trade in slaves, instead using his power to dispatch missionaries to the regions near his outposts.
But war between Poland-Lithuania and Sweden put a stop to Kettler’s operations. The Swedes took him prisoner in the fight against their enemies, which allowed English and Dutch forces to take over his colonies, although some of the streets on St. Andrews Island still bear Latvian names.
The 18th and 19th Centuries: Under Russian Control
Peter the Great of Russia conquered Latvia in the late 18th century, and Latvia shared in the prosperity of the Russian empire. Latvia’s port city of Riga grew to such an extent that it surpassed St. Petersburg in the volume of its trade.
After Russia’s brutal suppression of Latvian non-violent protests in 1905, Latvian yearning for independence intensified. Latvia suffered greatly in World War I, and briefly elected a Bolshevik government in 1917 before declaring its independence from Russia.
The Later 20th Century
Latvia declared independence in 1918, and began to rebuild its economy and expand its exports. During the period between the two World Wars, Latvia was a leading exporter of agricultural products such as flax, butter, and bacon.
By the late 1930s, Latvia had developed its electronics industry to such an extent that it offered the world’s smallest camera, as well as radio equipment, automobiles, and airplanes. These developments helped its people enjoy one of Europe’s highest standards of living.
During the time of World War II, the Soviet Union once again subdued Latvia and its economy. After regaining its independence in 1991, Latvia quickly moved to create a free economy, soon becoming an important conduit for post-glasnost Russia’s export of raw materials.
Between 1999 and 2010, Latvia’s share of products in the global marketplace grew two times over. Geographic expansion and Latvia’s concentration on boosting its exports of traditional products accounted for much of the increase.
Studies show that during that time period, Latvia’s export unit values, as well as the quality of its products and the appetite for them among foreign consumers, increased significantly, making the country much more competitive. The number of markets in which Latvian products were present increased nearly three times over during the period.
A Strong Role in the 21st-Century Global Economy
Latvia continues to supply its major trading partners, most of them in Northern and Eastern Europe, with forestry products, dairy products, and other goods. Additionally, it has recently expanded its markets to step up trade with nations as far away as China. Since 2008, a railway route has linked Latvian exports with Chinese markets, delivering much faster than shipping routes. This growth in trade outside Latvia’s own region currently helps to offset losses due to the Russian embargo on EU-produced goods.
Almost half of Latvia remains forested. Raw lumber, finished wood products, and agriculture continue to serve as major parts of its export economy, along with textiles, metals, petroleum products, and machinery. The country also exports pharmaceuticals and ecologically-friendly cosmetics, as well as electronics and logistical systems. Some experts have said that Latvia’s strength in exports will be the key to furthering its prosperity over the long term.
Latvia has moved beyond supplying traditional goods to its trading partners. Along with its fellow Baltic republics Estonia and Lithuania, it is emerging as a hub of 21st-century innovation, exporting financial services and information and communications technologies. From 2010 to 2014, the financial services industry’s share of the total Latvian export market rose from just over 6 percent to nearly 11 percent.
During the first half of 2015, Latvia held the presidency of the EU’s Council of Ministers. At the time, experts pointed to the country’s track record of jump-starting its economy after the crash, as well as its history of dealing constructively with challenges presented by Russia, as qualities other nations could emulate.