Standard & Poor’s says Costa Rica’s risk rating improved

The Journal

BUSINESS & ECONOMY
Standard & Poor’s says Costa Rica’s risk rating improved

(Infocom) — Risk-analysis firm Standard & Poor’s (S&P) has announced an improvement in Costa Rica’s risk rating, moving the country’s credit rating up from stable to positive. According to the global firm, this comes in recognition of Costa Rica’s good fiscal policy management and its overall economic policy in the past few months — which has led to reducing public debt and reaching positive fiscal results without affecting public investment and expenditures in social programs.

Standard & Poor’s indicated that the revised outlook is the result of a substantial reduction of Costa Rica’s public debt burden, which improved the country’s fiscal profile and its ability to handle its obligations. The firm pointed out that a strong growth of tax revenue, coupled with the growth of the economy, have contributed to slashing debt as a percentage of the Gross Domestic Product (GDP) — and this is expected to go even lower in 2008. S&P also said that the country’s increased exchange flexibility could reduce its vulnerability to sudden external shocks.

Regarding Costa Rica’s future outlook, S&P indicated that the Central American Free Trade Agreement (CAFTA) could boost attraction of investment into the country and specialization in the isthmus over the next few years. The firm also warned about the importance of the Central Bank’s capitalization project, which would help improve the effectiveness of the exchange policy, boosting liquidity in the country.

Treasury Minister Guillermo Zuñiga said he was very satisfied with the news, calling the rating a vote of confidence about the country’s fiscal policies to significantly increase tax revenue, decrease the need to obtain financing in the stock market, improve its long-term debt profile, and lower the pressure placed by such debt in the short term.

But Zuñiga also said it’s important to forge ahead with approval of the CAFTA implementation bills that are still pending so that the trade deal can fully go into effect, as well as pass the Central Bank’s capitalization bill — which he considers key to improving the country’s monetary policy and slash inflation, just like S&P indicated. Zuñiga added it’s important to be prudent in fiscal management, as this is Costa Rica’s main strength when dealing with adverse conditions in the international markets.

Standard & Poor’s is a leading provider of financial market intelligence. The world’s foremost source of credit ratings, indices, investment research, risk evaluation and data, Standard & Poor’s provides financial decision-makers with the intelligence they need to feel confident about their decisions.

Many investors know Standard & Poor’s for its respected role as an independent provider of credit ratings and as the home of the S&P 500 benchmark index. But Standard & Poor’s global organization also provides a wide array of financial data and information, Is the largest source of independent equity research and a leader in mutual fund information and analysis.