Costa Rica Coffee Guide

Eurasia Group downgrades Costa Rica’s short, long-term outlooks to ‘negative’

January 17, 2015

The Eurasia Group didn’t even wait for lawmakers to get back from their holiday break next Monday before announcing a downgrade of Costa Rica’s short and long-term outlooks to “negative” from “neutral.”

Eurasia Group senior analyst Risa Grais-Targow cited growing challenges for President Luis Guillermo Solís’ Citizen Action Party (PAC) and a lack of perceived political will to rein in the country’s fiscal deficit among the drivers behind Friday’s downgrade.

A “negative” outlook from the risk analyst group means they believe politics will negatively affect the country’s wider business environment.

Grais-Targow characterized Solís’ decision to lift former President Laura Chinchilla’s (2010-2014) veto of a long-stalled Labor Reform Bill as a political blunder that would cost him support from the center-right Social Christian Unity Party, which they claim is necessary to hold on to the legislative presidency. Already lacking a majority in the Legislative Assembly, PAC’s chances of passing proposed fiscal reforms would fizzle, Eurasia Group predicted.

The Solís administration is pushing two fiscal bills for the 2015 session, including a transition to a value-added tax structure from the current sales tax system, and a global income tax that would place Costa Rica alongside the United States among a handful of countries that tax citizens on foreign-earned income.

The downgrade was further pushed by the legislature’s decision to pass Solís’ proposed budget without any cuts after the Legislative Assembly struggled to come to an agreement on what to trim from the $14 billion budget — the largest ever approved by Costa Rican lawmakers. The country’s deficit is set to grow by 6.7 percent of gross domestic product, exacerbating concerns that Costa Rica will have to continue financing the government with more debt and no exit strategy.

In September 2014, Moody’s Investor Services downgraded Costa Rica’s sovereign debt to junk – Ba1 – with a stable outlook.

You may be interested

Happy Fourth of July from The Tico Times
Events
2692 views
Events
2692 views

Happy Fourth of July from The Tico Times

Alejandro Zúñiga - July 4, 2020

Happy Fourth of July from all of us at The Tico Times! Break out your red, white and blue, rehearse…

Costa Rica coronavirus data for July 3, 2020
Costa Rica
21135 views
Costa Rica
21135 views

Costa Rica coronavirus data for July 3, 2020

Alejandro Zúñiga - July 3, 2020

Costa Rica confirmed 288 new cases of the coronavirus over the past day, totaling 4,311 cumulative known cases, the Health…

Fired for criticizing government’s response to pandemic, Nicaraguan doctors remain on the front line
News
637 views
News
637 views

Fired for criticizing government’s response to pandemic, Nicaraguan doctors remain on the front line

AFP and The Tico Times - July 3, 2020

Unemployed and emotionally worn, Nicaraguan doctors fired from the public health system for criticizing the government's handling of the pandemic…