from pemex transactions have largely been the source of international reserves accumulated by the bank of mexico. see banco de mexico ( 2014 ), informe trimestral, octubre – diciembre 2013, february, pp. 50 – 53. bis central bankers ’ speeches mexico needs to stay the course, buttressing its economy through effective monetary policy to keep inflation subdued, as it has been in the last decade. a list of sound economic fundamentals does not imply that the economy is free of risks. stability cannot be taken for granted, and authorities will have to continue monitoring conditions for signs of any weaknesses in order to prevent any potential market disarray. finally, the mexican economy is undergoing a period of low cyclical growth that began in the middle of 2012. some factors should be of a temporary nature, such as a slowing of mexican exports due to the previous deceleration of the u. s. economy, lower government spending tied to the beginning of a new federal administration and the restructuring of the housing developers market in the wake of the failure of the three largest firms in the sector. thus, improvement in these factors should lead to an upturn. in particular, close linkages with the u. s. economy could make future growth more solid than that derived from the dependence of exports on commodity prices. 5 other more lasting problems center on the stagnation of total factor productivity, which contributes largely to mexico ’ s disappointing long - term economic performance. current momentum on structural reforms, which seek to generate greater efficiency, is highly promising. the agenda is ample, covering many sectors of the economy. although the full effects of the reforms may take years to materialize, their direction and the confidence that comes with positive expectations have likely already helped to attract continued capital inflows, and should fuel a sustained recovery. 6 concluding remarks the present environment is a challenging one for all emerging economies, including those of latin america, but challenges, of course, always carry with them potential opportunities. the expected global economic rebound is good news, especially for those countries poised to benefit from strong ties with the world ’ s biggest consumers. future market conditions may be rocky, posing risks in particular to nations with financing vulnerabilities. the best ring - fencing strategy is to correct imbalances as efficiently as possible. in any case, a preemptive approach to strengthen macroeconomic and financial foundations is imperative. furthermore, structural reforms to foster productivity may show the way to more sustainable

manuel sanchez : evolving global challenges and policy options for latin america remarks by manuel sanchez, deputy governor of the bank of mexico, at the 2014 iif ( institute of international finance ) latin america economic forum, bahia, brazil, 29 march 2014. * * * it is certainly a pleasure to be invited to the stunningly beautiful brazilian coast to participate in the 2014 iif latin america economic forum. i would like to thank the institute of international finance for the chance to share some thoughts with you on the challenges and opportunities faced by latin america in the current economic environment. i will organize my remarks as follows. first, i will comment on the changing global context for emerging markets ; second, i will highlight some policy options that our countries may entertain to confront likely external financial headwinds ; and finally, i will make a few comments on the mexican economy. evolving global challenges two trends are particularly noticeable in recent world economic developments. the first is decreasing growth since 2010, especially for emerging economies, amid modest post - crisis global improvement. softening commodity prices and the economic deceleration of china have contributed to this tendency, affecting some latin american commodity exporters. in particular, grains and metals have seen moderately falling prices, if from high levels. the second trend is a reversal of fortune in global financial conditions for emerging economies. whereas in the wake of the great recession, these countries drew substantial capital inflows, especially portfolio funds, and saw the prices of their financial assets rise, in 2013, the tables turned. in particular, the expectation and eventual beginning of the tapering of asset purchases by the u. s. federal reserve sharpened global risk aversion. since may of last year, portfolio capital inflows to emerging economies, previously the darling destination for foreign funds, have contracted and in some countries, even become outflows. at the same time, the prices of many financial assets seen as risky have fallen abruptly. emerging - market bonds, equities and currencies were affected by the change in market sentiment. also contributing to lower asset holdings and values has been a weaker relative outlook for growth in emerging economies. however, not all countries have been treated equally. investors have differentiated among destinations according to macroeconomic fundamentals and prospects for economic expansion, among other factors. nations with large financial imbalances, whether internal or external, have been hit hardest, including countries in the latin american region. more recently, political tensions and uncertainty on the ability of some governments to