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The Sala
IV - the Constitutional Court gave the green light to re-elections,
allowing ex-presidents the ability to aspire once again for that
position. Photo LaPrensa Libre.
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S&P revises Costa Rica rating outlook to
negative
Standard & Poor's Ratings
Services said today that it revised its outlook on Costa Rica's 'BB+' long-term
local and 'BB' long-term foreign currency sovereign credit ratings to negative
from stable.
The negative outlook reflects Costa Rica's
heightened vulnerabilities, which result from fiscal slippage and the increased
exposure of the banking system to currency risk (in the context of the country's
poor external liquidity).
"Weak external liquidity and the recent
rapid growth in domestic credit, much of it in foreign currency, increase the
risk inherent in the central bank's crawling peg exchange-rate regime,"
said sovereign analyst Richard Francis. "A change of regime under stress
would heighten the risk of banking sector failures and raise the government's
contingent liability," he added.
Mr. Francis explained that Costa Rica's general
government deficit increased to nearly 5.2% of GDP in 2002 (of which almost
one-quarter derives from losses at the central bank), and may only decline to
3.6% of GDP in 2003 thanks to the implementation of temporary measures enacted
at end-year 2002. "The higher general government fiscal deficits have
increased policymakers' reliance upon monetary policy as the primary method for
maintaining macroeconomic stability.
The resultant rise in interest rates has led to the higher cost of servicing a
growing general government debt and has encouraged domestic agents, most
worryingly those without hard currency earnings, to take long-term dollar
loans," he noted.
Standard & Poor's said that failure to
implement tax reform in order to lower the fiscal deficit (in addition to steps
aimed at strengthening the country's monetary and financial regulatory
framework) could lead to downward pressure on the government's credit
rating.
Fiscal reform would help lower interest rates while discouraging further
dollarization. Although there is general political consensus on the need for
fiscal adjustment, a fractured Congress has complicated the negotiations for a
reform package; at the same time, rigid government finances give little
flexibility to cut expenditure.
Complete ratings information is available to subscribers of RatingsDirect,
Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com.
All ratings affected by this rating action can be found on Standard & Poor's
public Web site at www.standardandpoors.com;
under Fixed Income in the left navigation bar, select Credit Ratings Actions.
Negotiators from U.S., Central America begin third round of free-trade talks
SAN SALVADOR, El Salvador - Negotiators
looking to hammer out a free-trade agreement between the United States and most
of Central America kicked off five days of meetings Monday amid heightened
security.
Soldiers and police officers guarded all entrances of the luxury San
Salvador hotel where more than 250 government representatives and business
leaders from the United States, Guatemala, El Salvador , Nicaragua, Honduras and
Costa Rica held preliminary meetings.
Monday's discussions were not marred by the protests that marked negotiating
sessions held in January in San Jose, Costa Rica, and in February in Cincinnati,
Ohio. Citizen's Alliance, an umbrella organization representing dozens of
left-leaning social groups, was planning a major demonstration for Wednesday,
however.
In the past, critics including some labor and environmental groups have
questioned why the trade issues could not be debated publicly before negotiators
met privately.
Negotiators have pledged to reach an agreement by the end of the year. The
meetings in the Salvadoran capital mark the third of nine rounds of discussions
scheduled to be held throughout Latin America and the United States in 2003.
"We are on schedule and working well," said Salomon Cohen, the head
of Guatemala's negotiating block. "We are about 33 percent of the way
finished and, by the seventh round, we should have an agreement 85 percent or 90
percent finished."
Trade between the United States and the five Central American countries
currently totals about US$20 billion a year, approximately double that of 1995.
In 2001, the United States exported US$9 billion in goods to the countries
about the same as the country's exports to Russia, India and Indonesia combined.
Eduardo Ayala, head of the Salvadoran delegation, said negotiators spent
Monday discussing diverse ways to increase access to each of their nations'
markets as well as how best to set binding environmental guidelines for all
nations who enter into the agreement, among other topics.
Food Retail Giant Ahold to Sell South American Units
AMSTERDAM -- Struggling Dutch food retailer
Royal Ahold NV said it plans to exit South America as it moves to lower its debt
load of more than 12 billion euros ($12.9 billion) and focus on what it called
its mature and most stable markets.
The planned divestments follow the company's Feb. 24 announcement that
accounting irregularities at its U.S. Foodservice unit led it to overstate
earnings by at least $500 million in 2001 and 2002. The company also said it had
found possible illegal transactions at its Argentinean Disco unit. The U.S.
attorney's office in Manhattan and the Securities and Exchange Commission are
investigating.
Ahold had already disclosed plans to sell noncore assets, but the February
announcement stepped up the urgency.
The South American operations have been erratic, in large part because of
currency devaluations and weak economies.
In Brazil, Ahold plans to sell its Bompreco, G. Barbosa and Hipercard
operations, which had unaudited sales last year of 1.3 billion euros.
In Argentina, Ahold will unload the troubled Disco unit once the 2002 annual
accounts have been signed off. The unit had sales last year of 762 million
euros. Ahold will also sell its Peru and Paraguay operations, where unaudited
sales last year were 279 million euros.
No timing has been set for any specific divestment, Ahold said.
"Although we intend to proceed expeditiously with our divestment plan,
we are determined to maximize the value we receive for these operation and
obtain the best possible results for all our stakeholders," Ahold board
member Theo de Raad, who is responsible for Latin America and Asia, said in a
prepared statement.
Ahold has no plans to divest itself of its operations in Central America,
spokeswoman Carina Hamaker said.
"In Central America markets are more stable," Ms. Hamaker told Dow
Jones Newswires.
In Central America Ahold has a joint venture, named CARHCO, with La Fragua
and CSU, which operates more than 275 supermarkets in Guatemala, Costa Rica,
Honduras, El Salvador and Nicaragua.
Analysts expect the company to exit its operations in Asia which are
unprofitable and lack scale. Ms. Hamaker declined to say whether Ahold regarded
Asia as a mature and stable market.
Analysts are also suggesting Ahold should sell its businesses in Central
Europe, but Ahold didn't say how it assesses these markets.
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