Stable political system. High level of social development. Moderate decline in public-sector debt in recent years. Monetary inflexibility. Limited (but improving) exchange-rate flexibility. The risk of a sharp spike in public-sector debt in the event of adverse exchange-rate movements. The ratings on Republic of Costa Rica reflect its stable political system and its high level of social development, along with the moderate decline in its public-sector debt in recent years. Constraining the ratings are the nation's monetary inflexibility, limited exchange-rate flexibility, and the risk of a sharp spike in public-sector debt in the event of sudden adverse exchange-rate movements. The combination of a high level of dollarization in the financial system and losses at the central bank limit the effectiveness
