Costa Rica: one step away from investment grade

Moody's kept the ratings for Government bonds at Ba1, one level below the rating for investment; nonetheless, the outlook was raised from stable to positive.

Wednesday, August 13, 2008

If the rating is raised, Costa Rica will join Brazil and Peru as countries from Latin America who have reached the investment grade during the last few months.
The improvement in sovereign ratings for Costa Rica occurred in part because most of the country's public debt is in local currency and is managed by public entities.
The compensates the risks that may occur if the current exchange rate regime is abandoned, although that is highly unlikely, said Alessandra Alecci, vice-president and Senior Analyst at Moody’s.

More on this topic

Moody's Improves Nicaragua's Sovereign Rating

July 2015

Better ability to handle fiscal accounts and an upward trend in foreign investment are the factors that the rating based its upgrade on, changing the debt rating from B3 to B2.

From a press release issued by Moody's:

New York, July 10, 2015 -- Moody's Investors Service has upgraded Nicaragua's foreign and local currency government's issuer ratings to B2 from B3; outlook remains stable.

Moody's Sets Negative Outlook for Costa Rican Debt

September 2013

The rating agency's reason for the change from stable to negative is the increasing public debt and lack of fiscal reform.

Moody's believes that the country has not been able to pass a tax reform to reduce the deficit afflicting the government. "With the change we are saying there is an increased likelihood that the country's rating in the future will be lowered," said Gabriel Torres, principal sovereign debt rating analyst.

Risk for Guatemala, Costa Rica and El Salvador

June 2012

In all three countries, public finances have deteriorated due to higher fiscal deficits generated by increased government spending.

Public deficit and public debt have deteriorated the quality of the finances of Costa Rica, El Salvador and Guatemala.

"We have a negative outlook on our 'BB' rating for Guatemala and we have cut El Salvador’s rating by two grades over the past three years.

Moody's downgrades El Salvador´s Debt Rating

March 2011

Moody's downgraded the rating to "Ba2" from "Ba1", citing a continued deterioration of the country's financial condition.

In a statement the rating agency stated, "The metrics for sustainability of government debt (including debt to income ratio) are not consistent with a grade of 'Ba1' in light of the limited prospects for growth the country has," Yahoo News published.

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