Latvia is located in Northeastern Europe, bordering Estonia to the north, Russia to the east, Lithuania to the south, and the Baltic Sea to the west. It covers an area slightly larger than West Virginia. The climate is maritime with wet, moderate winters. A low plain runs across much of the land to form the Latvian terrain. Natural resources are minimal and include amber, peat, limestone, and dolomite.

Latvia's transitional economy recovered from the 1998 Russian financial crisis, largely due to the Skele government's budget stringency and a gradual reorientation of exports toward EU countries, lessening Latvia's trade dependency on Russia. The majority of companies, banks, and real estate have been privatized. Latvia officially joined the World Trade Organization in February 1999. Preparing for EU membership over the next few years continues as a top foreign policy goal. The high current account and internal government deficits remain major concerns. The gross domestic product (GDP) is comprised of: agriculture (5%), industry (26%), and services (70%).