The rise of interest rates in US is one of the reasons behind the lower demand for Costa Rican debt bonds, which are perceived as riskier because they are not investment grade.

When US interest rates began to fall, international investors sought riskier options and performances, such as external debt bonds rated below investment grade in countries such as Costa Rica. Now that an increase in US rates has been confirmed, investors are beginning to abandon riskier options to move to others which have equal or better performance but with lower risk.

“… For Costa Rica, the situation now means that banks, businesses and government will find it difficult to get financing abroad, and in addition, if obtained, it will be more expensive. The situation could get more complicated for Costa Rica if the risk rating, which indicates to savers the country’s probability of paying out, gets lower. ”

The analyst Andrés Volio, told Nacion.com that “… ‘It is important that people understand that the slack that existed in the country in terms of public debt has now been all used up (…) therefore it is not possible to continue borrowing without seeing a plunge in the country’s risk rating.'”

Source: Nacion.com