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A Lower S & P Rating for Costa Rica

Article Summary:

Standard & Poor’s rates Costa Rica with a new, slightly lower rating of BB/B, The change is a result of the country’s limited ability in offering competitive exchange rates, which is what the agency uses to create debt ratings, as well as the reflection of a weak tax collection system in the country.

Original Article Text From El Financeiro via Google Translate :

S & P modifies the Low-Skilled Costa Rican debt

The rating agency Standard & Poor’s Ratings (S & P) lowered the rating of sovereign debt in local currency of Costa Rica, which went from ‘BB + / B’ to ‘BB / B’.

The dollar sovereign debt maintained its previous rating to ‘BB / B’.The change was announced on February 13 reflects the fact that the country still has a limited exchange rate flexibility, which is what the agency behind the spread between debt ratings in local and foreign currency, and also reflects the weakness tax in the country.

Both ratings remain stable outlook, reflecting S & P’s expectation that the Government will implement measures to stop the fiscal deterioration.

The BB rating means that the ability to pay the debt acquired Costa Rican is relatively safe in the short term, but arouses uncertainty in the long run and is vulnerable to international conditions .

The country has with S & P rated speculative grade, which creates limitations for some funds from developed countries invest in bonds of Costa Rica.

The rating agency Moody’s had given Costa Rica investment grade in 2010 , a review of risk that left open the improved fiscal situation, which remains without substantial advance in the Legislature.

The announcement of S & P does not benefit the intentions of the executive to place new debt to finance its fiscal deficit that 2012 would represent 4.5% of GDP.

The Legislature has on its agenda since March 2011 the bill that would allow this issue, with no advanced processing.

Link to Original Article:

From El Financeiro

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