Informe FITCH


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Fitch Afirma Calificación Internacional de Costa Rica en BB+;

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Informe FITCH

  1. 1. Fitch Affirms Costa Ricas LTFC IDR at BB+; OutlookRemains StableFitch Ratings-New York-13 February 2012: Fitch Ratings hastaken the following rating actions on the Issuer DefaultRatings (IDRs) and Country Ceiling for Costa Rica:--Foreign currency IDR affirmed at BB+;--Local currency IDR affirmed at BB+;--Foreign currency short-term IDR affirmed at B;--Country ceiling affirmed at BBB-.The Rating Outlook remains Stable.Costa Rica’s ’BB+’ ratings are supported by itsinstitutional strength and favorable social indicators. Ahistory of political and macroeconomic stability combinedwith a skilled labor force continues to attract foreigndirect investment and foster the development of highlycompetitive export-oriented industries.However, Costa Rica’s ratings are constrained by thecountry’s narrow and pro-cyclical revenue base and long-standing budgetary rigidities limits its fiscalflexibility. Moreover, the authorities’ inability to passrevenue-enhancing reforms is undermining the country’sability to proceed on faster fiscal consolidation. Therecent set back in passing the tax reform highlights thecontinued political gridlock on this issue.Costa Rica’s fiscal deficits have deteriorated since theglobal financial crisis as the government used its fiscalspace to stimulate the economy. In the context of moderateeconomic growth and in the absence of a revenue-enhancingreform, Fitch expects fiscal deficits to remain relativelyhigh, averaging 4.6% of GDP over the next two years.‘The need to broaden the tax base has gained importance asthe country faces important spending pressures ininfrastructure and security sectors’ said Lucila Broide,Director in Fitch’s Sovereign Group.‘While Costa Rica’s low indebtness relative to peers (30.8%compared with 40.3% for the ‘BB’ median) gives it somespace to deal with fiscal pressures, in the absence of atax reform, government debt could increase to nearly 40% ofGDP by 2015’ Broide added. However, Fitch notes thatcontinued financing flexibility, improved currencycomposition of government debt and the country’s structural
  2. 2. strengths support its higher debt tolerance and mitigateconcerns regarding increasing government indebtedness.Fitch expects a relatively good 3.8% average growth rateover the forecast period driven by the continued recoveryin foreign direct investment flows. Risks to economicactivity primarily stem from renewed weakness in the UnitedStates, the major destination of Costa Rica’s exports, andan escalation of the eurozone debt crisis. Uncertaintysurrounding the passage of the tax reform could also placepressure on interest rates and weigh on consumerconfidence.Inflation of 4.7% in 2011 marked the third consecutive yearat single digits and within the official target of 5% ±100bps. Fitch expects inflation to average 5.7% over theforecast period. ‘While cyclical factors have played a role in thedisinflation process, a strong commitment to transition toan inflation targeting regime and a more flexible exchangerate have increased credibility in the country’s monetaryframework and improved inflation expectations,’ saidBroide.Fitch expects the current account deficit to be fullyfinanced by FDI over the next two years, providing relativestability to the exchange rate. The bulk of investmentswill likely continue in the high-tech sector, but backoffice service, medical equipment and tourism sectors willincreasingly attract new investments.In addition, Costa Rica’s external solvency ratios remainstronger than peers. Costa Rica has remained a netsovereign and overall external creditor for the last 8years. However, international liquidity remains weaker than‘BB’ rated peers. An active foreign exchange reserveaccumulation program by the central bank partly balancesconcerns about the still high financial dollarisation andlimited exchange rate flexibility.A further expansion of the revenue base that enhancesfiscal flexibility and improves the government debtdynamics will be positively viewed by Fitch. Additionalstrengthening of the monetary and exchange rate frameworkswill beneficial for the credit. Conversely, Costa Rica’screditworthiness could be negatively affected if sustainedlarge fiscal deficits lead to a marked deterioration indebt dynamics. A sharp erosion of international liquidity
  3. 3. and a disorderly exchange rate adjustment could be alsonegative.Contact:Primary AnalystLucila BroideFitch, Inc.One State Street PlazaNew York, NY 10004Secondary AnalystCesar AriasAssociate Director+1-212-908-0358Committee ChairpersonShelly ShettySenior Director+212-908-0324Media Relations: Cindy Stoller, New York, Tel: +1 212 9080526, Email: information is available Criteria and Related Research:--Sovereign Rating Methodology (Aug. 13, 2010).Applicable Criteria and Related Research:--‘Sovereign Rating Methodology,’ Aug. 13, 2010.ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONSAND DISCLAIMERS. PLEASE READ THESE LIMITATIONS ANDDISCLAIMERS BY FOLLOWING THIS LINK:HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. INADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCHRATINGS ARE AVAILABLE ON THE AGENCYS PUBLIC WEBSITEWWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA ANDMETHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES.FITCHS CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OFINTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANTPOLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODEOF CONDUCT SECTION OF THIS SITE.