Informe de Standard & Poor´s


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La firma calificadora de riesgo Standard & Poor’s mantuvo la calificación de riesgo de la deuda de largo plazo de Costa Rica.

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Informe de Standard & Poor´s

  1. 1. February 13, 2012Research Update:Costa Rica Foreign-CurrencyRatings Affirmed; Long-TermLocal-Currency Rating Lowered DueTo Revised MethodologyPrimary Credit Analyst:Olga Kalinina, CFA, New York (1) 212-438-7350;olga_kalinina@standardandpoors.comSecondary Contact:Joydeep Mukherji, New York (1) 212-438-7351;joydeep_mukherji@standardandpoors.comTable Of ContentsOverviewRating ActionRationaleOutlookRelated Criteria And ResearchRatings 1 937215 | 300000728
  2. 2. Research Update:Costa Rica Foreign-Currency Ratings Affirmed;Long-Term Local-Currency Rating LoweredDue To Revised MethodologyOverview• Robust economic growth and political stability continue to support the ratings on the Republic of Costa Rica, despite high fiscal deficits, rising (though still modest) debt burden, and a lack of consensus on passing long-awaited fiscal reforms.• We have affirmed the BB/B foreign-currency sovereign credit ratings on Costa Rica.• In addition, we have lowered the local-currency sovereign credit rating to BB/B from BB+/B based on our revised methodology, in which limited monetary flexibility--reflecting Costa Ricas managed exchange rate regime--prevents a differential between local- and foreign-currency ratings.• The stable outlook reflects our expectation that the government will implement timely measures to arrest fiscal deterioration.Rating ActionOn Feb. 13, 2012, Standard & Poors Ratings Services affirmed its BBlong-term and B short-term foreign-currency credit ratings on the Republicof Costa Rica. At the same time, Standard & Poors affirmed its B short-termlocal-currency rating on the sovereign and lowered the long-termlocal-currency sovereign credit rating to BB from BB+. The outlook isstable. The BBB- transfer and convertibility assessment and 2 recoveryrating on government bonds are unchanged.RationaleThe ratings on Costa Rica balance the countrys limited monetary flexibilityas well as rising fiscal pressures with good economic prospects, stablepolitical system, and relatively high level of social development. CostaRicas monetary rigidities reflect ongoing losses at the central bank (about0.6% of GDP in 2011) and a high (albeit declining) level of dollarization,which we estimate at more than one-third of the financial sectors claims anddeposits. Inflation targeting is complicated because of the managed exchangerate regime.On the fiscal side, Costa Rica has had a hard time containing spending, whichrose substantially during the past three years. Yet, the tax reform that thegovernment proposed in early 2011 to stabilize the fiscal accounts and affordStandard & Poors | RatingsDirect on the Global Credit Portal | February 13, 2012 2 937215 | 300000728
  3. 3. Research Update: Costa Rica Foreign-Currency Ratings Affirmed; Long-Term Local-Currency Rating Lowered Due To Revised Methodologymuch-needed infrastructure and security spending faces opposition and iscurrently stalled. As a result, we project that Costa Ricas fiscal deficits(including central government, central bank, and decentralized governmententities) will widen to 5.2% of GDP this year. (They were 4.7% of GDP in 2011and 5.5% of GDP in 2010.) This is the worst reported deficit in the region.The resulting increase in the net general government debt (to a projected 35%of GDP in 2012) is unlikely to reverse in the next few years. Under ourbaseline scenario, we expect fiscal reform, albeit a watered-down version,before year-end 2012. Because the next presidential elections are due at thebeginning of 2014, it will be difficult to introduce tax reforms in 2013.Supporting the ratings are Costa Ricas stable political system, strong publicinstitutions, rule of law, and general consensus on pro-growth market-orientedpolicies. A comparatively high level of human development contributes tosocial stability and supports Costa Ricas niche in skill-based exportservices. This, in turn, sustains solid long-term growth prospects, with realGDP growth per capita expected to average 2.2% between 2012-2014. Growinginternational reserves, which are boosted by large ongoing and projectedforeign direct investment, support external stability.We lowered the long-term local-currency rating to align it with theforeign-currency rating based upon our revised sovereign rating methodologypublished on June 30, 2011. Specifically, in sovereigns without a floatingexchange rate regime (Costa Rica has a de jure crawling band with anincreasing width exchange rate regime), Standard & Poors now aligns itslocal- and foreign-currency ratings.The recovery rating of 2 indicates our expectation of substantial (70%-90%)recovery in the event of a default. The BBB- transfer and convertibilityassessment, which is two notches higher than the BB long-termforeign-currency sovereign credit rating, reflects our opinion that thelikelihood of the sovereign restricting access to foreign exchange that CostaRica-based nonsovereign issuers need for debt service is moderately lower thanthe likelihood of the sovereign defaulting on its foreign-currencyobligations. The distinction is based on the outward orientation of the CostaRican economy.OutlookThe stable outlook incorporates our expectation that the government will keepits fiscal accounts in check, whether through the eventual passage of thefiscal reform, better tax collection, or further spending cuts. Givenstill-limited (albeit rising in the past few years) monetary flexibility, webelieve fiscal prudence is important for the sovereign to maintain itscreditworthiness. Supported by robust economic prospects, we expect CostaRicas debt to remain at moderate levels, though it will likely rise in theshort term.If political disagreements mount, they would limit fiscal consolidationoptions and weaken governance. This scenario would hamper economic 3 937215 | 300000728
  4. 4. Research Update: Costa Rica Foreign-Currency Ratings Affirmed; Long-Term Local-Currency Rating Lowered Due To Revised Methodologyand external and exchange rate stability, which could eventually lead us tolower the ratings. On the other hand, higher GDP growth and growing taxrevenues could lead to a faster stabilization of the government debt burden,better macroeconomic equilibrium, and improved policy predictability (creatingmore space for exchange-rate liberalization), all of which could contribute toa higher credit rating.Related Criteria And Research• Sovereign Government Rating Methodology And Assumptions, June 30, 2011Ratings ListDowngraded To FromCosta Rica (Republic of) Sovereign Credit Rating Local Currency BB/Stable/B BB+/Stable/BRatings AffirmedCosta Rica (Republic of) Sovereign Credit Rating Foreign Currency BB/Stable/B Transfer & Convertibility Assessment BBB- Senior Unsecured BB+ Recovery Rating 2Complete ratings information is available to subscribers of RatingsDirect onthe Global Credit Portal at All ratings affectedby this rating action can be found on Standard & Poors public Web site Use the Ratings search box located in the leftcolumn.Standard & Poors | RatingsDirect on the Global Credit Portal | February 13, 2012 4 937215 | 300000728
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