(This is an excerpt from presentations made to Latvian businesses that visited Rhode Island, USA on a trade mission
in 1994. It was presented to other Latvian businesses in Riga, Latvia later that year.)
There are many issues which need to be addressed in order to stimulate and insure business transactions
between businesses in countries of the Former Soviet Union (FSU) and the United States of America (USA).
These issues include: culture, politics, legal, finance, social, language, as well as a host of many other areas
which need to be dealt with if business transactions are expected to be executed.
The differences in culture between two separate and distinct countries can create a myriad of problems when
it comes to understanding the different attitudes and nuances which present themselves. However much some
individuals may believe that culture plays no role in business transactions, the cultural backgrounds of two
distinctly different business partners does play a major role in influencing their decisions.
The political organizations which exist in each country, and how they exert their influence on business
transactions can also sometimes lead to great levels of confusion. With the recent events regarding the
dissolution of the Soviet Union, it has been very difficult for many of the former Soviet Republics to re-establish
new forms of independent governments, while also attempting to deal with serious economic problems on a
domestic and international level.
Some FSU countries have been able to deal with these issues better than others. Some political infra-structures
have attained a more viable semblance of stability, while others appear to be in a constant state of change.
What may appear to be normal evolutionary changes to FSU citizens, may appear to be drastic instabilities
to potential foreign investors/business partners. Distance, as well as inadequate information many times
magnifies the possible misunderstandings regarding what is happening politically in a foreign nation. Only
those who have adequate access to current and pertinent information regarding local political and governmental
activities will be able to maintain some level of security regarding their business ventures in a foreign country.
An "arms-distance" business transaction may be able to counter many of the problems identified here,
but it sometimes indicates little if any actual involvement in the business activities of the foreign partner. Such a
transaction would require that the foreign partner is able to operate independently, and requires no in-country
assistance, no investment of foreign capital, etc.
As the political organizations change within countries of the FSU, so do the legal systems. The laws which
exist regarding: taxation, foreign investment, private ownership, partnerships, joint ventures, strategic alliances,
import/export duties and tariffs; are constantly changing. Just as it is difficult for an FSU business to identify
all of the applicable laws regarding all of these issues, it is even more difficult for an American business to identify
them. Access to the information regarding these laws and their short and long term implications play a major
role in the potential success of any international business transaction. The barriers which can be created by
not being able to access this information are great, and many times will lead to a potential investor/partner
becoming discouraged in their attempts to discern viable ways to make a deal work. This very often results
in a potential business partner "walking away" from the deal, not because the deal is not attractive,
but because the legal requirements are too difficult to comprehend and comply with.
Financial issues raise an even greater concern for many American investors/business partners. Many factors
play a role in this. The volatile economy in many of the FSU countries; inflation, devaluation of currency,
non-convertibility of currency, non-standardization of currency through-out FSU regions, all add to the level
of risk which American businesses are forced to deal with. Prices quoted one day may drastically change
another due to the drastic fluctuation of local currencies. Products moving through multiple FSU countries
may require various forms of currency as well as compliance with a variety of specific country laws and regulations.
A financial business transactions also requires some sort of standardized accounting practice. Due to the
newness of a market economy and private enterprise in FSU countries, the normally accepted forms of
private business financial statements are still being developed as a normal facet of the operational plan of
FSU businesses. American companies have been required by law to submit financial statements to the
government since this is one of the ways they are taxed. Financial disclosures to governmental and
regulatory agencies has become a standard for American companies. This is not necessarily the case
for FSU companies since they are still developing methods to deal with financial accounting and
accountability to their respective governments.
Financial statements are also used to determine the profitability of a company's activities, and to determine
the level of risk regarding making investments in a company. Many other issues are also determined based
upon the information provided in standard financial statements. Since business is primarily designed to attain
some level of profit, almost all decisions regarding a business are related one way or another to its' financial
performance as indicated by its' financial statements.
No one likes to "reveal" their private financial information to another, especially if it results in
increased tax obligations. (This IS something which FSU and USA companies have in common.) It is difficult
to have to reveal financial information to a potential foreign partner when this process might result in increased
tax obligations to a local government. But, if international business relationships are to be developed and
fostered, this information must be made available to each respective partner and ultimately to each respective
government. One could refer to this process as just another "cost of doing business".
The formats in which this information is provided is basic in nature, and standard through-out the international
business community. There are variables which do exist from country to country, but the concept of "profit"
appears to be universal. No one is interested in doing business in such a fashion that they lose their investment.
Social issues in a particular country also impact the potential success of any business transaction. A blatant
disregard for the social conditions of a country one is looking to do business in may result in disaster. The
particular habits and methods regarding how people of a particular culture communicate and live their lives
is something which merits considerable attention. It is important to be aware of the social customs of the
potential partners you intend to do business with. A mutual understanding of each other's social issues
greatly enhances the ability to communicate. Ignoring the social implications of a specific culture may
ultimately impede any level of progress in the areas of business transactions. This usually leads to heightened
levels of frustration, and failed business transactions.
Finally, ... language. It is a well known fact that Americans do not possess the multi-lingual skills that
many of their international neighbors do. Some of this may be directly related to the geographical location
of the USA, the relative youth of the USA, national origin and demographics. In either case, it is much more
common to find someone in an FSU country, or European country who speaks more than one language,
than it is to find an American who is fluent in more than one language. The recent influx of immigrants to
America has created a situation in the latter part of the 20'th century where there are many American citizens
who are bi-lingual, and their native language is that of the country they came from, and English is their
second(new) language. But, America still does not teach foreign languages to it's citizens as a primary function.
Hence, many native-born Americans do not possess the multi-lingual skills that many of their European counterparts do.
The manner in which communication is to be established between American and foreign firms is complicated
at best. The easiest solution is to recommend that both parties attempt to communicate in the other's native
language. But, when it comes to American companies doing business with countries in the FSU, this could
mean that they would have to learn a multitude of languages (due to the variety of native languages being
re-introduced to many of the FSU countries). A simpler solution is to suggest that Russian and English be
used as the two primary languages. If an American company only intends to do business in one of the FSU
countries, and has no desire to do business in any other FSU countries, it might be advisable to learn their
native language (or have translation services available) for the language of that country.
A logistical problem could easily be identified if an American business intended to do business
in various countries in the western and mid-western region of the FSU. Use of native languages
might require that a business to know: Latvian, Lithuanian, Estonian, Belarussian, Russian, and
Ukrainian. There are many manners in which these language problems can be resolved, but it
is important that both sides make an effort to meet the language needs of their foreign partners.
The hiring of staff who are fluent in the required foreign language, obtaining translation services,
becoming more familiar with the workings of a foreign language, are all appropriate and necessary
steps towards enhancing the ability to communicate effectively.
Faxes, letters (and especially email messages) received in a foreign language by someone who
has no knowledge of that language often times go unanswered. Handwritten letters in a similar
format receive even less attention.
Ultimately, it is advisable for international business transactions to be performed with four primary
Education Private Business
Linking up the goals, objectives and activities of these four separate sectors greatly enhances the
ability to complete a successful business transaction. Sometimes, not all four sectors are capable
of being coordinated to one common goal, but it is advisable to seek out their cooperation as much
It is difficult for two businesses from different countries to attempt to negotiate a business deal if
their respective governments are not interested in (or even aware of) the deal being negotiated.
This has an even greater impact when the private businesses attempt to meet governmental
requirements regarding import and export laws, financial transactions, etc.
If a private business in Latvia negotiates a business deal with an American company which
potentially does not comply with Latvian governmental regulations, the business transaction
may be in serious jeopardy. The levels of assistance which may be available from the
government in each country should not be ignored. More specifically, if the government is
involved, they may be able to solve some of the major trade problems which present themselves.
With regards to education, much of the work which has been performed between America
and FSU countries has been done on an educational level. Numerous colleges and universities
have linked up with each other to share and exchange information necessary to facilitate
business development. It is advisable to review the current status of the work which has
been performed in these areas. Valuable information can be gathered in this manner, and
many serious problems can be avoided. Sometimes, the long-term goals of educational
linkups can only be successful if some sort of business transaction is initiated. Although
many of these educational programs are not designed to create and establish businesses,
the educational training and other programs which they work on are designed to assist
businesses with attaining the level of knowledge necessary to perform business transactions
both domestically and internationally.
In the world of private business, many business owners both in America and Latvia may feel
as if the information about their business is private and should not be shared with anyone else.
It is true that trade secrets, patents, designs, etc. might need to be kept secret. But the
concept of business networking and business organizations/associations provide smaller
companies with a forum where they can compare their activities to the activities of other
businesses. Hopefully, an environment such as this will allows businesses to learn from each
other, and to ultimately become better suited for international business in a much quicker fashion.
Additionally, if an American company were to initiate contact with a Latvian business, the
amount of knowledge the Latvian business had about other similar businesses, related industries,
etc., would tend to make them a more valuable contact to the American company. This is not to
ignore the fact that each company should have adequate information available describing their
business activities including: financial information, customers (market base), competitors, product
information, and how business transactions could best be accomplished with regards to
governmental regulations, etc. The ability to share information about one's business only adds
to the level of security that each potential partner will be able to realize. Very few people like to
do business with people they know very little about.
Finally, it is important to review the status of educational and governmental programs which may
already be in place because these programs may be able to assist with financing the private
business ventures which are being negotiated. There exist many programs which are sponsored
by the American Government which might facilitate the execution of business deals. American
government sponsored programs include but are not limited to: exchange programs for educators;
exchange programs for business executives; business loans and financial arrangements via
foreign aid programs, Ex-Im Bank, The World Bank, The US Information Agency, The US Agency
for International Development, and countless others.
Many of these programs are designed to assist with training and financing of international business
development. Of specific interest should be many of the programs which are in place that are
sponsored by other similar US Government organizations like the US Department of Commerce
which provides vast amounts of information about the potential business opportunities in foreign countries.
It is imperative that when attempting to do business with American companies, that Latvian companies
avail themselves of all the established resources which have been put in place by both the American
and Latvian governments. Avoiding or ignoring these programs may seriously increase the amount of
work and research you may have to perform, and may jeopardize your chances for success. In order
to ensure a good international business relationship, you must first reach some level of domestic business
success, even if your business venture cannot attain fulfillment until you have reached some sort of
arrangement with an international partner.