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.

¿Busca soluciones de inteligencia comercial para su empresa?



More on this topic

Costa Rica Ends 2018 with Another Downgrade

December 2018

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

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.

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.

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."

ok