Moody's: Costa Rica's Investment Rating At Risk

The agency believes that the investment rating is on shaky grounds due to the lack of progress on reforms to mitigate fiscal deterioration.

Tuesday, May 28, 2013

According to Gabriel Torres, principal analyst on sovereign debt, if a new tax bill is not created "it is likely to have a negative impact on the rating, a change in perspective."

As yet the agency has not provided its country report for this year, as they are waiting for a sign of change. Torres noted that this could be the last chance for Costa Rica to make advances in taxation, before they make a decision on the investment grade.

"The problem remains and we are waiting for the country to come up with a solution. We have done nothing so far, because the government still has a low amount of debt and flexibility ... But we believe this is the last chance (for the country)," he added.

The rating agency expects a response by the end of this year and in early 2014. "Among the main consequences of a change in perspective or the country's sovereign rating would be the increase in external debt and greater difficulty in attracting foreign investment ...", reported Nacion.com.

More on this topic

Fitch Warns Over Costa Rica's Fiscal Deficit

September 2014

The draft state budget for 2015 contains imbalances that will deepen the deficit, taking it to a record 6.7% of GDP.

The persistence of high fiscal deficit, a faster deterioration than expected in the dynamics of public debt, which was already high, and increasing funding restrictions could put pressure on the sovereign rating of 'BB +' and its perspective, which so far is stable.

Investment Risk Grade in Costa Rica

April 2014

According to Moody's, the country's credit rating does not reflect the current conditions of the economy, highlighting in particular the unsustainability of the fiscal deficit.

Costa Rica is running out of time to solve its high public spending problems and stop the budget deficit from continuing to grow the way it has been doing up until now.

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.

Costa Rica: Time Running Out for Tax Reform

September 2013

Rating agency Moody's has warned that the country has little time to approve a tax reform before financial instability affects its investment grade.

"We are reaching the point at which it is approaching the time to take a decision (on the country's credit rating). There is no doubt that the approval of a project to improve public finances is taking longer than we expected," said Gabriel Torres, an analyst at Moody's.

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