China Eyes Costa Rica for Refinery, Infrastructure Investments

China is interested in building an oil refinery in Costa Rica and investing in the Central American nation’s infrastructure and telecommunications sectors, Commerce Minister Anabel Gonzalez said.

The two nations are currently engaged in investment talks, Gonzalez said during a dinner in Costa Rican President Laura Chinchilla’s honor in New York yesterday.

“China is an increasingly important partner,” Gonzalez said. “We are looking at a number of investments in areas to improve our competitiveness.”

In June, Chinchilla signed into law a free trade accord with China that would benefit about 70 percent of Costa Rica’s exports. Trade between the two nations has grown 14-fold since 2000, reaching $1.3 billion last year, according to the president’s office.

Costa Rica’s central bank lowered its 2011 growth forecast to 4.2 percent this month, down from 4.5 percent in July. The country must tighten its budget to withstand a slowdown in the U.S. and help Central America’s second-largest economy maintain at least 4 percent growth, central bank President Rodrigo Bolanos said in a Sept. 14 interview.

Chinchilla has proposed a 14 percent value-added tax that may raise $1 billion in extra revenue and narrow the deficit to 5 percent of the nation’s gross domestic product. Lawmakers rejected the proposal earlier this year.

The tax proposals are likely to pass after the Citizen Action Party, the country’s largest opposition party, announced this month it would support the legislation if Chinchilla exempted medicine and basic foods from higher taxes.

Costa Rica had its credit rating raised to investment grade by Moody’s Investors Service last year. Moody’s boosted the rating to Baa3, the same level as Panama and Brazil, from Ba1.

The yields on Costa Rica’s 9.995 percent bonds due in 2020 rose 6 basis points, or 0.06 percentage point, to 4.853 percent, according to data compiled by Bloomberg.

Foreign direct investment may total $1.9 billion this year as Telefonica SA (TEF), Spain’s biggest phone operator, and America Movil SAB, Mexico’s largest wireless provider, prepare to enter the country’s cellular phone market.

To contact the reporters on this story: Eric Sabo in Washington at esabo1@bloomberg.net; Fabiola Moura in New York at fdemoura@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net