American credit rating agency Moody’s published  its analysis in relation to the negotiations of the Costa Rican Government with the labor unions regarding the fiscal plan and stated that “even though dialogue is positive, the current social unrest is negative for Costa Rica since it complicates fiscal consolidation efforts”

Moody’s highlighted the importance of the approval of the fiscal plan “to achieve the stability that is fundamental to improve the credit quality of Costa Rica”.

Back last year, Moody’s had downgraded Costa Rica’s government bond rating to BA2 from BA1, maintaining the negative outlook of the rating and pointing as the key driver behind the downgrade “the continued weakening of Costa Rica’s fiscal profile, reflected in its rising government debt burden and persistently high fiscal deficit”.

“The continued negative outlook on Costa Rica’s credit rating incorporates Moody’s view that continued wide fiscal deficits and higher debt could, over time, have negative consequences for other macro-economic variables, such as inflation, interest rates, and the current account balance. This, in turn, the would increase the vulnerability of the sovereign credit profile to event risks, including those stemming from international economic and financial conditions or a reversal of current robust trends in GDP growth and foreign investment”.

The credit rating agency also criticized that the original fiscal plan expected an increase of income of 1.9% of the GDP, but after changes approved by the Legislative Assembly in commission caused this number went down to just 1.1% of the GNP.

Costa Rica’s debt has risen every year since 2008, when it was almost half the current level at 25% of GDP. Moody’s forecasts that Costa Rica’s debt could reach 57% of the GDP by 2019, much higher than the median ratio of 43% of GDP.

Meanwhile, Barclay’s Bank, also advised its investors to move their investments on Costa Rican bonds due in 2023 and 2025 to bonds in El Salvador which are due in 2025 and 2027.

“The initial expectations of the new administration of Carlos Alvarado, to manage to approve the fiscal plan in October of this year is fading away”.