While Costa Rica’s credit rating is Baa3 and Stable, Moody’s issued a warning that this could change.

The agency believes that the investment rating is on shaky grounds due to the lack of progress on reforms to mitigate fiscal deterioration.

According to Gabriel Torres, principal analyst on sovereign debt, if a new tax bill is not created “it is likely to have a negative impact on the rating, a change in perspective.”

As yet the agency has not provided its country report for this year, as they are waiting for a sign of change. Torres noted that this could be the last chance for Costa Rica to make advances in taxation, before they make a decision on the investment grade.

“The problem remains and we are waiting for the country to come up with a solution. We have done nothing so far, because the government still has a low amount of debt and flexibility … But we believe this is the last chance (for the country),” he added.

The rating agency expects a response by the end of this year and in early 2014. “Among the main consequences of a change in perspective or the country’s sovereign rating would be the increase in external debt and greater difficulty in attracting foreign investment …”, reported Nacion.com.

Source: Nacion.com