the ultimate end of any economic policy. the reduction of trade barriers has provided the mexican consumer with a wider variety of higher - quality goods at lower prices, many of them completely unavailable when the economy was closed. behind this development has been a considerable expansion of merchandise exchange with the rest of the world. during the last thirty years, total trade value, defined as the sum of exports plus imports, has tripled relative to gdp, to reach approximately 60 percent. nafta seems to have contributed to the enlargement of trade not only with mexico ’ s north american neighbors, but also with nations from other regions. in fact, there is evidence that trade diversion resulting from this preferential agreement has been relatively low. the bis central bankers ’ speeches observation is confirmed by the fact that during the last ten years, the importance of shipments to the united states relative to mexico´s total non - oil exports has declined. 1 at the same time, trade opening resulted in a significant change in the composition of exports, from one based on oil to one made up mainly of manufactured goods. within this transformation, the share of high - tech products has been gradually increasing. growth in exports has occurred in tandem with that of imports. the vertical integration of many firms in the north american region has implied significant growth of intermediate goods imports, which along with capital imports accounts for the majority of purchases from abroad. less dramatic but also clear has been the contribution of economic opening to greater fdi. on average during the last 20 years, fdi relative to gdp has been twice as large as the average observed ten years earlier, although this ratio still remains well below those of leading recipient countries. also, during the more recent past, the proportion of flows coming from the united states has been decreasing. in addition to the impetus from nafta, other factors such as the liberalization of fdi restrictions in several areas, such as the financial and the telecommunication sectors, contribute to explaining the larger inflows. through fdi, new firms have been established in the country, including those oriented to providing services, and companies have been able to adopt new technologies and modernize their productive processes. there is some evidence that the sectors more engaged in international trade in mexico have enjoyed increasing efficiency. this seems to be largely the result of import competition and access to foreign intermediate inputs. also, some studies suggest that fdi has contributed to an increase in total factor productivity. greater efficiency, in turn, has tended to support relatively higher

crisis averages. despite this progress, the rebound remains fragile, as shown by very weak fourth - quarter gdp growth. investment has extended a declining trend, with deceleration involving not only construction but machinery and equipment purchases as well. also, consumer confidence has been falling since last year, and recently more sharply. for an analysis of gdp decomposition and sectorial productivity see, for example, sanchez, m. ( 2013 ), “ the search for mexico ’ s economic progress, ” presentation for alamos alliance xx, february. bis central bankers ’ speeches analysts ’ consensus posits a gradual recovery for the mexican economy this year and next. elements that may support these forecasts include better expected economic prospects for the united states and the reactivation of government investment. 5 however, there are downward risks to this scenario, including a further decline in consumer confidence ; the time needed to restructure the housing developers market ; and less favorable external financial conditions. regarding the third factor, expectations of the tapering of u. s. federal reserve securities purchases last may brought about an increase in global risk aversion, reducing the prices of many financial assets, especially those of emerging markets, which had been favored in the previous two years. although volatility declined by the end of 2013, partly as a result of lower uncertainty after the fed finally did announce its decision to start reducing its asset purchases, risk aversion has returned in 2014. the recent deterioration of global market sentiment has once again translated into a flight to quality, away from emerging economies. some countries with significant macroeconomic imbalances, high inflation or political upheavals have been hit severely. heightened risk aversion apparently reflects uncertainty on the pace of the future unwinding of monetary stimulus in advanced nations, lower growth prospects for emerging markets, notably china, and the unknown capacity of vulnerable developing countries to undertake needed adjustments. although emerging markets as a group have been affected negatively, there has been some differentiation in investors ’ appetites among specific economies. so far, mexico ’ s financial asset prices have been relatively less affected, and the availability of foreign financing continues to be ample. yet the country cannot take the present situation for granted, since market sentiment can deteriorate further at any time. in the face of such an eventuality, the best strategy for mexico is to buttress its economic fundamentals, including fiscal discipline, financial and price stability, and productivity - enhancing reforms. monetary policy and inflation for more than a