Stable political system and the rule of law. High level of social development. Declining public-sector debt burden in recent years. Monetary inflexibility. External vulnerability. Inflexible exchange rate arrangement that sustains external vulnerability. Costa Rica's monetary inflexibility constrains the ratings. Limiting the effectiveness of its monetary policy is a combination of a high level of dollarization in the financial system, limited exchange rate flexibility, and quasi-fiscal losses at the central bank. As a result, Costa Rica has suffered from a higher inflation rate than most neighboring countries and most of its trading partners. Inflation, which reached about 14% in 2008, could decline to 8% this year but will remain higher than in most Central American countries. A current account deficit of
