Fitch based its ratings on Costa Rica’s high per capita income, strong governance indicators, net external creditor position, improved public finances, the nation’s relatively diverse economy and the full implementation of the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) and its accompanying legislation, which should help sustain these trends over the medium to long-term. On the other hand, according to Fitch’s report, the country’s monetary and exchange rate policy framework represents a key credit weakness, particularly in light of comparatively high levels of inflation and financial dollarization, a relatively large current account deficit, financial sector weaknesses and fragile albeit improved international liquidity.
Fitch believes that Costa Rica’s “improved public finances, net external creditor position and broad-based multilateral support could help to mitigate the impact of the U.S. recession and tighter global liquidity on sovereign creditworthiness.”
For a copy of the Fitch report, please click here.
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