Costa Rica Ends 2018 with Another Downgrade

Standard and Poor's announced that it downgraded Costa Rican bonds from BB- to B+, adding to Moody's downgrade in early December.

Friday, December 21, 2018

Standard and Poor's (S&P) reported that the decision was made because the country's fiscal situation could generate a continuous increase in the general government's net debt burden.

“If the recent tax reform is not effectively implemented, and if additional fiscal measures are implemented if necessary, a continuous increase in the net debt burden of the general government could be generated, which will contribute to higher interest expenditures," explains the S&P report." reports that "... rigidities in debt management and an already high level of sovereign debt in foreign currency could increase the vulnerability of the sovereign to external shocks. S&P advanced that it could revise the outlook and put it "stable" if the government manages to reduce its fiscal deficit enough to gradually stabilize its debt burden."

S&P's downgrade adds to Moody's, since in early December it downgraded the ratings of the Costa Rican government's long-term and senior unsecured bond issuer from Ba2 to Ba1, and changed the outlook to negative. In making this decision, the rating agency argued that the main determinants of the downgrade include the continued and projected worsening of debt measurements in the back of large deficits despite fiscal consolidation efforts. See more.

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