job placements to graduates of public teaching schools, and the inheritance or sale of teaching positions. an independent institution will be in charge of evaluating teacher performance in order to keep a position. also, conditions are established on salaries and penalties in case of lack of fulfillment of duties. these basic changes point in the direction of improving the quality of education, a highly necessary step given the importance of investment in human capital to for an estimation of possible medium - and long - term effects of the labor reform on potential growth and formal employment, see banco de mexico ( 2013 ), inflation report : october – december 2012, february. bis central bankers ’ speeches enhance productivity and the worrisome results obtained in educational achievement tests and evaluations in mexico. 3 a third reform, also approved this year, pursues greater competition in key economic areas, with a special emphasis on telecommunications. the reform strengthens the institutional framework of the federal economic competition commission in order for it to effectively monitor and take legal action against possible anticompetitive practices in all areas except telecommunications, over which a separate authority will preside. particular focus is placed on eliminating barriers to competition in telecommunications. the legislation opens the door to new operators interested in all types of services, and to current players seeking to offer additional, previously excluded services, provided that certain market non - concentration requirements are satisfied. limits to foreign direct investment in telecom, satellite, and radio communications are reduced. additionally, new national television networks will be auctioned. a more competitive telecommunications industry is expected to generate wider and cheaper access to efficient communications, potentially improving productivity, while at the same time providing the consumer with more choice. a significant initiative recently submitted to congress concerns the energy sector. for oil and hydrocarbons, the proposal envisions private participation in exploration and extraction through contracts based on result sharing. additionally, it opens the possibility of permits to private participants in gas processing and oil refining, as well as transportation, storage, distribution, and commercialization. for electricity, the bill proposes allowing private participation in generation and sale to third parties through access to the public transmission network. if approved, this reform may substantially boost investment for several years and reduce the costs of basic productive inputs, yielding wide benefits to the economy. inflation and monetary policy during the last decade, monetary policy has been oriented towards achieving a three percent permanent inflation target. a variability interval of plus or minus one percentage point around this objective accounts for price fluctuations which could mainly arise from the non - core components

. in the same vein, reducing loan to value ( ltv ) ratios in mortgage loans, increasing provisions for housing loans or increasing capital requirements on mortgage lending are all viable options if the distortion is in the housing market. several countries in asia have been actively using ltv caps over the last couple of years to reduce the risks from housing price booms. which of these tools should be used will depend, however, on the institutional setting of each country, the functioning of the financial system and the asset price that is distorted. for example, in chile, if it were determined that housing prices are distorted and lenders are not correctly internalizing this distortion, then the superintendent of banks and financial institutions ( sbif ) has the authority to increase provisions and capital requirements on housing loans. addressing the risks that arise from expanding cross border debt requires, at the very least, that existing prudential regulation ensure that funding liquidity risk is dealt with adequately by financial intermediaries. often, however, this may simply lead to a transfer of this risk to the non - financial sector. hence, there remains a role for a foreign currency liquidity buffer made up of international reserves. vulnerabilities regarding currency risk that often come hand in hand with increased foreign debt, merit special attention. in the past we have seen many crises originating from the accumulation of unhedged foreign currency debt in banks and non - financial corporations. this was one of the main amplifiers of the chilean banking crisis of the early 1980s – where firms in the domestic sector built up substantial amounts of dollar - denominated debt during a period of fixed exchange rates and capital account opening. it was also an important factor in the mexican crisis of 1995, in the asian crisis, and more recently in financial problems in some eastern european countries. on the other hand, low currency mismatches allowed the central banks of many emes to lower interest rates aggressively as a response to falling demand during the crisis. in the past there was fear of exchange rate depreciation because of currency mismatches. exchange rate flexibility is a key component in any policy mix to reduce currency mismatches. indeed, this is an example of a macroeconomic policy that also contributes to financial stability. in the case of chile, and elsewhere in latin america, we saw currency mismatches drop after currencies were allowed to float following the asian crisis, as agents and regulators adjusted to increased exchange rate volatility ( figure 3 ). indeed, bank