Costa Rican Legislature Approves $2 Billion Eurobond Reform Amid Controversy
The government receives authorization for two $1 billion international bond issuances following a contentious legislative vote.
On Thursday, Costa Rica's legislative assembly passed a reform to the Eurobond Law that permits the Ministry of Finance to issue two $1 billion bond tranches in the international market.
The reform was narrowly approved with 21 votes in favor and 19 against.
Initially, the assembly had granted the executive branch permission to issue a total of $5 billion in Eurobonds, scheduled to be split as follows: $1.5 billion in the first half of 2023, another $1.5 billion in the second half of 2023, $1 billion in 2024, and an additional $1 billion in 2025. However, due to failures to meet fiscal goals, the Ministry of Finance could not proceed with the placements last year.
Consequently, the ministry sought legislative clearance to transfer the $1 billion issuance planned for 2023 to this year and move the issuance scheduled for 2025 to 2026.
The approved reform not only allows President Rodrigo Chaves' government to issue $2 billion in bonds but also eases the fiscal indicators that the Ministry of Finance must meet to have the right to issue these Eurobonds.
Support for the reform came from a coalition of lawmakers, including seven from the ruling party, one from the National Liberation Party (PLN), five from the Broad Front (FA), three from the New Republic, two from the Christian Social Unity Party (PUSC), and two independents.
Opposition came primarily from the PLN, where 12 members voted against the proposal, alongside lawmakers from the Liberal Progressive Party (PLP), four independents, one congresswoman from the PUSC, and one from the FA. Controversy arose over the relaxation of fiscal indicators that allow for an increase in public debt interest payments from 4.6% to 5% of GDP under the new plan.
In related matters, Antonio Ortega indicated that he would oppose the Eurobond measure if issues relating to the Costa Rican Institute of Aqueducts and Sewers (AyA) regarding water service in Paraíso were not addressed.
Following negotiations associated with debt forgiveness for Paraíso, Ortega shifted his stance to support the Eurobond initiative.
In other economic news, Costa Rica's inflation, measured by the yearly variation of the Consumer Price Index (CPI), recorded a decrease in May 2025, standing at -0.12%, as reported by the National Institute of Statistics and Censuses (INEC).
This marks a return to negative territory, last seen in November 2024.
The country has now experienced 25 consecutive months of inflation below the Central Bank's tolerance range of 2% to 4%, with a central target of 3%.
Following a peak in April 2023 at 3%, inflation steadily declined to its lowest level since 2020, with a -3.28% reading in August 2023.
After fluctuating throughout 2024, inflation returned to positive figures in December 2024, closing at 0.84%.
In May, it fell again to -0.12%.
In the month of May, a monthly decrease of -0.40% was registered as 38% of the 289 goods and services analyzed saw price drops.
Notable decreases were observed in the prices of cabbage (-49.82%), potatoes (-34.54%), and other items.
Meanwhile, prices of papaya and certain services increased.
Economic analyst José Luis Arce stated that the negative monthly variation is related to a normalization process in food prices, following temporary hikes due to adverse weather conditions at the end of 2024 and the beginning of 2025. He noted that external factors affecting inflation were stabilizing, hinting at a positive outlook ahead.
The reform was narrowly approved with 21 votes in favor and 19 against.
Initially, the assembly had granted the executive branch permission to issue a total of $5 billion in Eurobonds, scheduled to be split as follows: $1.5 billion in the first half of 2023, another $1.5 billion in the second half of 2023, $1 billion in 2024, and an additional $1 billion in 2025. However, due to failures to meet fiscal goals, the Ministry of Finance could not proceed with the placements last year.
Consequently, the ministry sought legislative clearance to transfer the $1 billion issuance planned for 2023 to this year and move the issuance scheduled for 2025 to 2026.
The approved reform not only allows President Rodrigo Chaves' government to issue $2 billion in bonds but also eases the fiscal indicators that the Ministry of Finance must meet to have the right to issue these Eurobonds.
Support for the reform came from a coalition of lawmakers, including seven from the ruling party, one from the National Liberation Party (PLN), five from the Broad Front (FA), three from the New Republic, two from the Christian Social Unity Party (PUSC), and two independents.
Opposition came primarily from the PLN, where 12 members voted against the proposal, alongside lawmakers from the Liberal Progressive Party (PLP), four independents, one congresswoman from the PUSC, and one from the FA. Controversy arose over the relaxation of fiscal indicators that allow for an increase in public debt interest payments from 4.6% to 5% of GDP under the new plan.
In related matters, Antonio Ortega indicated that he would oppose the Eurobond measure if issues relating to the Costa Rican Institute of Aqueducts and Sewers (AyA) regarding water service in Paraíso were not addressed.
Following negotiations associated with debt forgiveness for Paraíso, Ortega shifted his stance to support the Eurobond initiative.
In other economic news, Costa Rica's inflation, measured by the yearly variation of the Consumer Price Index (CPI), recorded a decrease in May 2025, standing at -0.12%, as reported by the National Institute of Statistics and Censuses (INEC).
This marks a return to negative territory, last seen in November 2024.
The country has now experienced 25 consecutive months of inflation below the Central Bank's tolerance range of 2% to 4%, with a central target of 3%.
Following a peak in April 2023 at 3%, inflation steadily declined to its lowest level since 2020, with a -3.28% reading in August 2023.
After fluctuating throughout 2024, inflation returned to positive figures in December 2024, closing at 0.84%.
In May, it fell again to -0.12%.
In the month of May, a monthly decrease of -0.40% was registered as 38% of the 289 goods and services analyzed saw price drops.
Notable decreases were observed in the prices of cabbage (-49.82%), potatoes (-34.54%), and other items.
Meanwhile, prices of papaya and certain services increased.
Economic analyst José Luis Arce stated that the negative monthly variation is related to a normalization process in food prices, following temporary hikes due to adverse weather conditions at the end of 2024 and the beginning of 2025. He noted that external factors affecting inflation were stabilizing, hinting at a positive outlook ahead.