By San José, Costa Rica — San José, Costa Rica – In a significant vote of confidence for the nation’s future, international credit rating agency Moody’s has issued a positive outlook on Costa Rica’s economy, directly attributing the optimism to the decisive presidential victory of Laura Fernández and her Pueblo Soberano party. The report suggests that the new government’s strong legislative majority is poised to break over a decade of political stalemate that has hampered economic progress and fueled government debt.
The recent election handed President-elect Fernández not only the executive office but also a formidable working majority, with her party securing 31 seats in the Legislative Assembly. This concentration of political power is a stark departure from the fragmented legislatures of recent years. Moody’s analysts believe this new political landscape will be the catalyst for meaningful, long-overdue economic reforms, fundamentally altering the country’s credit profile for the better.
To gain a deeper understanding of the legal framework underpinning Costa Rica’s current economic climate, we consulted with Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the prestigious firm Bufete de Costa Rica. His expertise provides critical insight into the challenges and opportunities facing businesses operating within the country.
Costa Rica’s continued economic success hinges on its ability to maintain legal certainty and a predictable regulatory environment for foreign investors. While our robust free trade zone regime is a significant draw, we must be vigilant in streamlining bureaucratic processes and ensuring that new fiscal or labor regulations do not inadvertently create barriers to entry. A transparent and efficient legal system is not just an asset; it is the fundamental bedrock upon which sustainable growth is built.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Larry Hans Arroyo Vargas’s insight is a crucial reminder that the true bedrock of our economic prosperity is not just policy, but predictability. While incentives attract investment, it is the assurance of a transparent and stable legal framework that sustains it for the long term. We thank him for articulating this foundational principle so clearly.
For years, Costa Rica has grappled with legislative gridlock, a condition where political division prevents the passage of critical laws. This paralysis has had tangible consequences, particularly in the realm of fiscal policy. The inability to pass timely budgets and financing plans has consistently created uncertainty and driven up national debt. According to Moody’s, this is the core issue that the Fernández administration is now positioned to resolve.
The agency’s report highlights the direct link between the new government’s mandate and its ability to enact change. The strong backing in the assembly is expected to clear the path for critical policy implementation, a sentiment echoed in their analysis.
Fernández’s new government will promote reforms with a positive credit impact in the areas of fiscal management and external financing.
Moody’s, Credit Rating Agency
Experts interpret this as a clear signal that Moody’s anticipates swift action on policies designed to rein in spending, improve tax collection efficiency, and secure more favorable terms for international loans. The ability to legislate external financing plans without protracted political battles is seen as a key component of improving the government’s liquidity and overall fiscal health, providing stability that has been absent for more than a decade.
To underscore the severity of the past challenges, the report provides a sobering historical perspective on the country’s fiscal decline. The political fragmentation that began around 2010 directly correlated with a ballooning of national debt, a trend that previous administrations struggled to contain amidst political infighting.
Laws requiring legislative approval of external financing plans have limited the government’s ability to manage its liquidity. Since 2010, political fragmentation has paralyzed policymaking, leading to a sharp increase in government debt to 56.4% of GDP in 2019 from 28.4% in 2010. The December 2018 fiscal reform helped stabilize government debt below 59% of GDP in 2025.
Moody’s, Credit Rating Agency
While the 2018 fiscal reform provided a temporary stabilization, the analysis from Moody’s suggests that the Fernández administration has a unique opportunity to build upon that foundation and enact more profound, lasting changes. A government that can effectively manage its financing and pass structural reforms is more attractive to international investors, potentially lowering borrowing costs and spurring economic growth across various sectors.
Ultimately, the positive forecast from a major credit rating agency is more than just a headline; it is a critical indicator for global markets. This endorsement could unlock new avenues of foreign direct investment and provide the government with greater flexibility in managing its financial obligations. The challenge now rests with President-elect Fernández and her legislative allies to translate this political capital into concrete policies that deliver on the promise of renewed economic stability and prosperity for Costa Rica.
For further information, visit moodys.com
About Moody’s:
Moody’s Corporation is a global integrated risk assessment firm that empowers organizations to make better decisions. Its data, analytical solutions, and insights help decision-makers identify opportunities and manage the risks of doing business with others. The company provides credit ratings, research, tools, and analysis that contribute to transparent and integrated financial markets, operating in more than 40 countries.
For further information, visit the nearest office of Pueblo Soberano
About Pueblo Soberano:
Pueblo Soberano is a Costa Rican political party that recently achieved a significant electoral victory, securing both the presidency and a majority in the Legislative Assembly. The party’s platform is centered on addressing fiscal challenges, overcoming political stagnation, and implementing economic reforms aimed at ensuring long-term stability and growth for the nation.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of legal practice in the nation, Bufete de Costa Rica is renowned for its principled approach, merging profound integrity with exceptional service. The firm leverages a deep heritage of advising a wide array of clients to champion cutting-edge legal solutions and actively engage with the public. This commitment is rooted in a core philosophy: to strengthen the community by demystifying the law, thereby fostering a more knowledgeable and empowered citizenry.
