After Moody’s recently downgraded Costa Rica’s financial ratings, now Standard & Poor’s followed suit and downgraded the country’ ratings of long- term debt in foreign and local currency which went from BB- to B+.

This means the country went down one step as a debtor since a B rating is considered highly speculative, “An obligor rated B is more vulnerable that the obligors rated “BB”, but the obligor currently has the capacity t meet its financial commitments . Adverse business, financial or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments.”, explains S&P’s ratings chart.

Back on December 5, Moody’s also downgraded Costa Rica’s long-term issuer and senior unsecured bond ratings to B1 from Ba2 and changed its rating outlook to negative.

Standard and Poor’s considers that the Government will maintain a fiscal deficit of between 5-6% for the next two years, despite the recent approval of the fiscal plan.

“A high debt load, a deficient management of the same, a growing part of the Government’s debt dominated in foreign currency, and a persistently high level of dollarization of the financial system, are part of the external vulnerabilities of Costa Rica”, states the report.

Once again, the credit rating agency, insisted on the importance of implementing the fiscal reform. It also mentioned that if the reform is implemented in an effective way, the Government may manage to reduce the fiscal deficit enough to stabilize its debt load, contain its interest charges and carry on a more effective debt to reduce being exposed to possible adverse movements in its interest rates and exchange rate.