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.

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