Costa Rica Elects Pro-Gay Marriage Leader in Surprise Landslide

(Bloomberg) -- Costa Ricans elected a candidate from the ruling party to be their next president, confounding polls which had predicted a win for an evangelical preacher who'd campaigned on his opposition to gay marriage.

Carlos Alvarado, 38, a novelist and former labor minister will take office on May 8, after winning 61 percent of the vote, with 95 percent of polling stations reporting.

One of Alvarado's most urgent tasks will be to try to get a grip on the nation's record fiscal deficit and revent further credit rating downgrades. He's pledged to introduce “fiscal rules” that limit the government's ability to run up debt, and to pass a package of tax and spending measures.

“I call on lawmakers to move forward in debating the fiscal reform bill,” Alvarado said in his victory speech to supporters in the capital San Jose. “Costa Rica needs to resolve this.”

The country has received four downgrades over the last five years from the three main credit ratings agencies.

Alvarado is “unlikely to deliver public employment reform or additional tax hikes,” though probably will fulfill his fiscal rule pledge, said Eurasia Group analyst Risa Grais-Targow, in a phone interview.

Alvarado has said he'd limit growth in government hiring to 1 percent through 2020 and 1.5 percent in 2021 and 2022 in an effort to cut the fiscal deficit to three percent of GDP by 2022.

The Central Bank forecasts that in the absence of tax and spending reforms, the deficit will reach 7.1 percent of gross domestic product this year and 7.9 percent in 2019.

JPMorgan analyst Gabriel Lozano wrote in a report last week that the ruling party's “weakened credibility” following a recent corruption scandal means Alvarado would have harder time getting the “urgent” fiscal plan through Congress than his opponent would have done.

“If a fiscal plan is delayed beyond 2020, we believe a new rating downgrade would be warranted,” Lozano said.

Court Ruling

Polls had predicted a win for evangelical preacher Fabricio Alvarado, 43, who shot into the lead in the first round vote in February after he opposed a ruling by an international court that supported same-sex marriage in the country.

Carlos Alvarado backed the international court ruling and promised to get religion out of government. While they are not close relations, a genealogist traced both their families back to the same Costa Rican woman in the 18th century.

The nation's dollar bonds have rallied this year, the only sovereign in its rating bucket to produce positive returns, amid optimism the fiscal situation will be addressed.

To contact the reporter on this story: Michael McDonald in San Jose, Costa Rica at mmcdonald87@bloomberg.net.

To contact the editor responsible for this story: Matthew Bristow at mbristow5@bloomberg.net.

©2018 Bloomberg L.P.