American credit rating agency Moody’s announced this December 5th they have “downgraded the Government of Costa Rica’s long-term issuer and senior unsecured bond ratings to B1 from Ba2 and changed its rating outlook to negative, concluding the review for downgrade that was initiated on 18 October 2018”.
Moody’s stated that the key drivers for the downgrade are:
1. The continued and projected worsening of debt metrics on the back of large deficits despite fiscal consolidation efforts.
2. The significant funding challenges emerging for the country as rising debt, deficits and interest costs lead to rapidly rising borrowing requirements.

The credit agency also lowered Costa Rica’s long-term country ceilings, the foreign currency bond ceiling; its foreign currency deposit ceiling and its local currency bond and deposit ceiling as well as the short term foreign currency bond ceiling.
“Moody’s expects that Costa Rica’s ongoing fiscal consolidation efforts will be insufficient to quickly and materially reduce its high fiscal deficits. As a result debt metrics will continue to rise in the coming years and remain much higher than countries with Ba ratings”.
The Minister of Treasury, Rocío Aguilar, stated her disagreement with Moody’s position, and considers that the only way to understand this decision is if the analysis was done prior to the Constitutional Chamber’s decision regarding the fiscal reform.
Meanwhile, the President of the Central Bank, Rodrigo Cubero said that Moody’s decision “is inconsistent with the rating they had given in the past”, and considered it “illogical”, “2019 looks better than 2018 right now and it makes no sense to downgrade the rating.