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LatinNews Regional Monitor: Caribbean & Central America - 11 February 2020

In brief: Moody’s downgrades Costa Rica

* International credit ratings agency Moody’s Investors Service has downgraded the Costa Rican government’s long-term issuer and senior unsecured bond ratings to 'B2' from 'B1' and changed its rating outlook to 'stable' from 'negative'. Moody's cites as key drivers for the downgrade: “High fiscal deficits leading to an upward trend in debt metrics which will remain above rating peers” and “recurring funding challenges resulting from relatively large borrowing requirements”. Moody’s notes that “fiscal deficits averaging over 6% of GDP since 2015 have pushed government debt/GDP higher than 'B' rated peers” and “projects government debt to reach 63% of GDP in 2020, higher than the 56% 'B' peer median”. The government led by President Carlos Alvarado has announced plans to reduce the fiscal deficit, including the sale of state-run entreprises, the Fábrica Nacional de Licores (Fanal) distillery and the Banco Internacional de Costa Rica (Bicsa) bank, equivalent to 0.03% of GDP and 0.04% of GDP respectively, along with plans to use some ¢226bn (US$400m, equivalent to 0.62% of GDP) from the surplus of state institutions such as the national tourism institute (ICT) and the rural development institute, among others, to pay off the debt.

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