QCOSTARICA — ‘Country Risk’ is the inherent risk of operating within or with a certain country due to the probability of a financial loss due to macroeconomic, political, social causes or natural disasters in it.
Its relevance lies in the fact that it is considered a key indicator that must be monitored when operating in a country or wanting to start doing business in a new market, as this indicator helps quantify the risk of the operation.
To have a better overview of the subject, Allianz Trade, one of the two shareholders of Solunion, together with MAPFRE, has presented the Country Risk map, corresponding to the second quarter of 2024, where geopolitical conflicts have triggered changes in 15 countries.
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Among them, two Central American countries region have improved their ratings: Costa Rica and Nicaragua.
Concerning Costa Rica, it goes from B3 to BB2, that is, from sensitive risk to medium risk.
According to the World Bank, Costa Rica is a success story in terms of development in many aspects. It is considered an upper-middle-income country that has recorded constant economic growth over the last 25 years. This improvement is the result of an outward-looking strategy, based on openness to foreign investment and gradual trade liberalization.
Likewise, Costa Rica is considered a world leader for its environmental policies and achievements, which have helped it create its green brand, becoming the only tropical country in the world that has reversed deforestation.
In terms of growth, Costa Rica managed to reach 4.6% in 2022 and 5.1% in 2023, driven by strong internal and external demand. However, due to global uncertainty and a slowdown in major trading partners, growth in 2024 is expected to be 3.9% and then moderate to 3.7% in 2025 and 2026.
For its part, Nicaragua goes from D4 to C3, that is, from high risk to medium risk. In this sense, the World Bank details that the country has benefited in recent years from Foreign Direct Investment (FDI) and remittances that reached 8.3% and 20.6% of the Gross Domestic Product (GDP), respectively, in 2022. Although trade openness has increased, exports consist mainly of low-complexity products.
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In 2023, Nicaragua’s GDP grew by 4.3% driven by sectors such as electricity, mining, trade, construction, finance, transportation, and communications. Consumption and investment also increased. GDP is expected to reach 3.7% by 2024 and stabilize at 3.5% in the medium term.
Both countries have shown an improvement in their ratings, representing the good evolution of the region for investment, not only due to a better economy, but also due to its labor force, communication routes, constantly growing industries and foreign investment.
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