For Latvia with incoming into the European Union big opportunities in the international markets have opened. Latvia's incoming in EU increased the amount of received means from structural and cohesion funds, removed the trading barriers, increases foreign investments, reduced unemployment and increased labour migration. The paper aim is to comprehensively analyse and simulate the effects of international integration process of the Latvian economy. In the paper the system dynamics model, which describes integration of the Latvian economy into EU, is developed. In the model international financial flows connected with Latvia and EU; import, its relation to internal producing; and migration processes are considered. Model functioning is measured considering various scenarios of situation development. The developed model can be used not only in the analysis of Latvia’s economic integration in the EU, but on its basis it is possible to create models of regional cohesion in Europe. In paper it is defined that joining to EU has increased for Latvia net grants from EU budget. But grants still do not promote development of economy of Latvia, but more stimulate development of internal demand. For demand gain satisfaction, in the conditions of poorly developed internal producing, from abroad the various goods are imported into Latvia, negative difference of export and import is increase. Also inflow of the capital to Latvia after incoming into EU is not used for positive changes in internal economy, and directed to the branches related with finance movings. Actually the industries have not felt essential inflow of the capital. After incoming into EU, Latvia has started to export labour force. As a result of migration of labour in Latvia the rate of unemployment has decreased, the wages are grown, expenses on a labour that has grown, that reduced an export potential of internal products. EU grants, capital inflow, gain of wages has caused an inflation gain in Latvia. Considering that together with inflation purchasing capacity of inhabitants has grown, it is possible to draw a conclusion that the population well-being has grown. These processes mainly have short-term character. Migration will decrease, considering a gain of wages or because of reduction of labour resources; inflow of the speculative capital will stop because of insufficiency of reliable pledges. It is possible to assert that they will stop, when the standard of living in EU and Latvia will be approximately identical, i.e. in the end of cohesion process in EU. Most stabile is relation of grants and import. Grants are provided to reduce dependence of the state on import but on the contrary, grants increase import volume. Latvia still cannot find the specialisation in EU and in the global markets. Therefore it became dependent on grants of EU and on international help. Definition of specialisation and an effective using of grants could change situation and promote economy development in Latvia.