Since 2005, Banco Internacional de Costa Rica (BICSA) has been 51% owned by Costa Rica's state-owned Banco de Costa Rica (BCR), and Fitch believes that the bigger bank would support BICSA in case of need, although there might be legal or political impediments. The explicit sovereign guarantee that Costa Rican state-owned banks have is not available to BICSA.

Fitch gives BICSA a stable outlook, also assigned the following ratings to Panama-based Banco de Costa Rica (BICSA):

• Short-term foreign currency rating B;
• Individual C/D;
• Support 3;
• National-scale long-term rating A+(pan);
• National-scale short-term rating F1(pan).

Fitch says that BICSA's individual rating and IDRs are underpinned by recent improvements in profitability, capitalization, and asset quality, following a corporate reorganization that resulted in a dramatic reduction in the bank's cost base.

BICSA was established in 1976 to serve as a trade financing house. It has offices in Miami, Guatemala, Nicaragua and El Salvador in addition to Panama and Costa Rica itself.

Fitch's ratings reflect the country's own sovereign ratings. High tax inflows have continued to eat away at the government's deficit, which fell to only US$66.8m for the first eight months of 2006, representing less than 1% of GDP, compared with 1.3% a year earlier.

Revenues rose 22% over 2005, partly due to higher import tariffs. Last year's tax collections were themselves 20.5% higher than in 2004, reducing the 2004 budget deficit of 2.5%.

Government spending has however continued to increase, by 14% for the first eight months of 2006, and debt interest of US$560m more than wiped out a primary surplus of US$493m for the period.

Still, the economy is doing well. In 2005 there was an increase in exports by 12.8% and a 19% increase in the number of visiting tourists, reaching 1.5 million. Central Bank figures show 5% growth for 2005; and growth is expected to reach 6.8% in 2006.

Successive government have been trying for years to push a fiscal reform bill through the legislature, which would replace the existing territorial basis of taxation with world-wide taxation of income. Such good news from the economy will not encourage legislators to allow the government its planned tax increases.