Costa Rica News – Costa Rica is joining Venezuela and Ecuador in turning to China as a potential source of finance to help the Central American nation cover a widening fiscal deficit.
President Luis Guillermo Solis’s government is in preliminary talks with China to help cover a deficit that is projected to grow to 6.9 percent of gross domestic product in 2016 from 5.9 percent this year, Director of Public Credit Juan Carlos Quiros said.
“We are looking to diversify our portfolio,” Quiros said from his office in San Jose, adding that China bought 12-year Costa Rican bonds in 2008 with an interest rate of 2 percent. “China is one more option.”
Even as China’s economy slows, the country has continued to be seen in Latin America and the Caribbean as an alternative financing source to global bond sales and loans from international institutions. Following a surprise trip to Beijing earlier this month, Venezuela President Nicolas Maduro said he secured a $5 billion loan after announcing a pipeline of loans totaling $20 billion in January. Ecuador, which like Venezuela is struggling with low oil prices, received $900 million from China earlier this year.
Costa Rica’s move comes as a years-long effort to broaden the tax base to boost revenue remains stalled. Quiros declined to say how much the country would like to borrow from China. Costa Rica sold $1 billion of 30-year bonds in March to yield 7.16 percent.
Moody’s Investors Service cut Costa Rica’s credit rating to junk status last year, putting the $50 billion economy in the same category as Russia and Portugal.
By Michael D McDonald, Bloomberg