Moody’s Upgrades Costa Rica Credit Rating – “This is excellent news for Costa Rica”.

Moody’s Investors Service raised Costa Rica’s government bond rating from Ba1 (considered “speculative”) to Baa3 which is investment-grade. The outlook on the new rating is stable.

Analyst Alessandra Alecci said that: “On the fiscal front, years of adjustments allowed Costa Rica to pursue counter-cyclical policies without a meaningful deterioration in public indebtedness.” Moody’s anticipates that over the next few years, a reversal of the recent fiscal deterioration will lead to further debt consolidation.

According to Moody’s, the ratio of Costa Rica’s public debt to gross domestic product fell to around 43% last year, from levels above 60% a few years ago. A similar improvement has been seen in other government debt metrics, suggesting a considerably improved ability to service debt obligations.

Moody’s also stated that Costa Rica’s ability to navigate through the global crisis relatively unscathed revealed an increased credit resilience. The economy experienced only a brief and shallow recession last year and is now recovering. Significant capital outflows and pressure on the nation’s currency during the crisis didn’t compromise the nation’s external position, and in Moody’s view, the episode was an important stress test.

The President, Laura Chinchilla, said that this rating comes “at a very good moment…” and: “This rating is the result of efforts made in the last recent years which strengthened the indicators of internal and external debt, fiscal deficits, control of inflation and others.”

Rodrigo Bolanos, the President of the Central Bank agreed saying: “This is excellent news for Costa Rica”.

Why Is This “Excellent News” For Costa Rica?

• Since some investment funds can not invest in “emerging” countries unless that have an investment-grade rating, this improved credit rating make Costa Rica more attractive to more investors.
• Better credit ratings means a country’s bonds are considered a lower risk and borrowing money – at lower interest rates – become cheaper.
• This improved rating should positively affect the existing prices of Costa Rica’s government bonds – prices should go fractionally higher.
• The same applies to companies, banking and other financial entities who wish to obtain external funding – it should be easier and cheaper for them to do so and…
• If external financing becomes cheaper for the banks, they may pass those savings onto the consumers in the form of more affordable financing for consumers.

“For me this is historic; for those of us involved it’s been a dream that they gave us “investment grade”, there are few countries that have it,” said Gerardo Corrales, Manager of BAC San José.

“Without a doubt, good news. The challenge is to maintain the rating, which could weaken on the fiscal side, which looks weak in 2011 and perhaps too in 2012″, said the former Minister of Finance, Thelmo Vargas.

“This is good news for the country, not just for the Government, or the business sector. Investors focus on these indices when they make investments in the world. The country needs to work on many other things, including infrastructure, as noted by the World Economic Forum, said Jaime Molina, who is first vice president of Union of Chambers.

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Written by Scott Oliver, author of 1. Costa Rica Real Estate Scams & How To Avoid Them, 2. How To Buy Costa Rica Real Estate Without Losing Your Camisa, and 3. Costa Rica’s Guide To Making Money Offshore.

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Andrew Makarik

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Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.