No Moody’s Blues for Costa Rica

Moody’s Investors Service upgraded Costa Rica’s credit rating on Thursday from speculative to stable after the country proved capable of overcoming external shocks during the worldwide economic downturn.

According to Moody’s, although Costa Rica’s public deficit has grown in recent years, it remains similar to the debts of nations with stable bond ratings.

Costa Rica’s acquisition of international reserves, combined with its countercyclical fiscal policies, has helped the country reduce its vulnerability to external economic factors, the Moody’s report indicated.

Moody’s also projects that foreign investment in Costa Rica will be stable in the coming years, which will help the country handle its fiscal deficit.

The report warned, however, that Costa Rica’s tendencies toward dollarization and inflexible exchange rates could be high risks for the country’s credit sovereignty in the years to come.

Moody’s upgraded Costa Rica’s government bond rating to Baa3 from Ba1.