S&P Does Not Give Costa Rica Investment Grade

Standard & Poor's maintained a rating of "BB" for Costa Rica (speculative investment), not ratifying the rise awarded by Moody's in September 2010.

Wednesday, February 9, 2011

The report "Today in the Market” by Aldesa, states:

"The prestigious credit rating company, Standard & Poor's (S & P), confirmed a "BB" rating for the sovereign debt of Costa Rica, giving it a stable outlook. This level means the ability to pay acquired debt by the country is relatively safe in the short term, but sees long term uncertainty and vulnerability to international conditions.

Costa Rica maintains the rating two notches below investment grade, as issued by Moody's in September 2010.

In its analysis, S & P believes that Costa Rica has several factors which can project economic growth of 5% this year, and between 4% and 5% in the coming years. These factors are political stability, the strength of public institutions and a highly educated workforce, which ensures the attraction of direct foreign investment and tourism.

In all the above areas, Costa Rica shows better than their peers like Guatemala and Turkey, however, there are other threats which prevent progress to the next level, BB +, like Uruguay.

What factors prevent us from improving the grade?

-The inflexible exchange rate
-The dollarization of the economy

On the other hand, the agency believes that the fiscal deterioration observed is due to temporary factors and that the country will be able to raise revenues and to keep similar levels of debt as those countries with the same rating, adding that, if there is deterioration in this regard, the rating could be reduced."

There lies the difference between the investment grade given by Moody's, which is more optimistic about an early tax reform.

More on this topic

Guatemala's Sovereign Risk Rating Revised

July 2013

"Weak public institutions in Guatemala and a polarized political environment continue to limit its credit quality" - Standard & Poor's

An article in elperiodico.com.gt reports that "The three most important credit rating agencies internationally: Moody's, Standard & Poors and Fitch Ratings, have pointed to deficient management in Guatemala's social indicators."

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

May 2013

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

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."

Negative Outlook for Salvadoran Debt Rating

January 2013

Standard & Poor's placed has set El Salvador’s risk rating as ‘negative outlook’, indicating deterioration in the investment climate and growth of the fiscal deficit.

Last Friday Standard & Poor's Ratings (S & P) cut its forecast for El Salvador, arguing that the climate of increasing political polarization is weighing on investment and economic growth.

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.

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