agustin carstens : emerging market economies – challenges and how to move forward speech by mr agustin carstens, governor of the bank of mexico, at the economic club of new york, new york city, 28 march 2014. * * * it is a pleasure and privilege to have the opportunity to address such a distinguished audience, in this venerable fora that is over 100 years old. i thank roger ferguson for having invited me and bill dudley for his kind words of introduction. the topic i would like to develop relates to the challenges that emerging market economies ( emes ) are facing today and in the near future, and at the same time i will attempt to delineate a path on how should they respond and move forward. at the outset i would like to recognize that there is substantial heterogeneity among emes, and by doing this type of grouping i run the risk of making sweeping generalizations that may be unfair to some countries. at the same time, it is undeniable that emes, mexico included, face common challenges derived from our participation and interaction in the global economy. this in fact is recognized by financial markets, which oftentimes consider emes ’ assets as an asset class by itself, opening the possibility of contagion among countries. allow me first to go back a few years to provide appropriate background. it is fair to say that in 2007 – 2008, when the global financial crisis erupted, emes were by and large well prepared. after many countries in this grouping suffered sequential crisis in the seventies, eighties and nineties, with huge economic, social and political costs, we learnt important lessons. these led to the adoption of key policy actions, of which i would like to highlight the following : – the establishment of flexible exchange rate regimes ; – the enhancement of the degree of autonomy of central banks, with primary mandate of price stability. these led to a wide adoption of inflation targeting and probably more important for a number of countries, to the end of fiscal dominance ; – consciousness about the relevance of fiscal discipline and the preservation of public debt sustainability ; – deeper trade liberalization ; – keeping up to speed in financial sector supervision and regulation, which has produced well - capitalized banking systems. the result of this behavior was that most emes did not have any major economic imbalances in 2008. previous to the global financial crisis, emes were not in the radar screen of vulnerable economies. in support of this claim, let me say that in october

enhance their domestic systems and increase interoperability. we have consulted on harmonisation requirements to ensure that the new iso20022 standards are used consistently around the globe. we have identified specific regulatory and legal barriers to seamless payment processing and proposed solutions. cpmi has recently published a set of recommendations [ 4 ] to improve adoption of risk - free pvp settlement in foreign exchange markets. central banks and the private sector have successfully tested cuttingedge technologies for cross - border payments through bis innovation hubs. and alongside the roadmap actions per se, there have been tangible changes that are already paying dividends. nearly three quarters of payment system operators surveyed by cpmi have either implemented or have concrete plans to implement the latest financial message standard ( iso 20022 ) by 2025. [ 5 ] the bank of england joined that club last week by moving chaps, our high value payment system, to iso20022. several jurisdictions have extended the operating hours of their high - value payment systems to near 24 / 7, including countries as far apart as india, mexico, switzerland and indeed south africa. over the last two years, several countries have expanded access to their payment systems to new types of financial institution : including japan, switzerland and singapore. others, such as united states, have developed new guidelines for more transparent and risk - based assessment of account requests. and recent figures [ 6 ] show that two - thirds of cross - border transactions that take place via the swift network reach end beneficiaries within one hour. the private sector is also investing in better infrastructure : almost $ 19bn was invested in paytech start - ups last year. [ 7 ] recent survey suggested that 94 % of financial institutions are planning to invest in their payment technology in the next 3 years. [ 8 ] africa has a place among the leaders in payments innovation, from new mobile payment technologies with m - pesa to cbdc with enaira in nigeria. the pan african payment and settlement system ( papss ), launched last year, is expanding rapidly : it has nine central banks and 41 commercial banks live on the system. it recently agreed a strategic partnership with the african stock exchanges association ( asea ) to promote improved cross - border payments for capital market trades. three years on, i want to celebrate what has been achieved, and to garner support for the journey ahead. today i will explain the updated priorities for the roadmap, those actions that will deliver the greatest impact, and how you