Latvia’s business environment is characterized by a free, market oriented economy with a dynamic and prosperous private sector. Virtually all of the previously state-owned small and medium companies have been successfully privatized, leaving only a small number of politically sensitive large state corporations. Major industries include tourism, agriculture and food processing, timber and wood products, manufacturing of metals and machinery. Due to its geographical location, the Baltic state also has a highly developed transit services sector. As such, Latvia has emerged as an important financial and commercial center, attracting foreign direct investment from Europe and around the world. And despite its accommodating business environment, certain risks still exist. Firstly, Latvia is susceptible to volatile world markets, not only due to the nature of its small, export-oriented economy, but due also to its dependence on imports of energy and raw materials. In addition, a low birth rate and decreasing population pose a considerable impediment to future government revenues and long-term growth.