remarks by mr. javier guzman calafell, deputy governor at the banco de mexico, at the panel of central bank governors on “ new challenges for central banks in latin america ”. seminar on financial volatility and foreign exchange intervention organized by the central reserve bank of peru and the interamerican development bank. cusco, peru, july 25, 2017. 1 the central banks from emerging market economies ( emes ) have faced a challenging external environment in recent years. the monetary policies implemented by the advanced economies after the global financial crisis, combined with episodes of turbulence in highly integrated international financial markets deriving from a combination of factors, have resulted in substantial volatility of capital flows. in addition, emes have confronted a world economic environment characterized by lower rates of global potential growth, a decline in commodity prices, a growing anti - globalization sentiment and events of a geopolitical nature. the combination of these factors has led to a situation of acute uncertainty. if this were not enough, the global financial crisis has eroded confidence on our understanding of the economics science and of the proper way to implement monetary policy under current circumstances. the mexican experience of the last couple of years provides an illustrative example of the nature and magnitude of the challenges that our central banks have faced. since mid - 2014, the country has been hit by a combination of external shocks. to a significant extent, the current evolution of the economy the opinions and views expressed in this document are the sole responsibility of the author and do not necessarily represent the institutional position of the banco de mexico or of its board of governors as a whole. has been determined by the impact of these shocks and the economic policy that has been implemented in response to them. let me refer briefly to the most important : 1. the price of the mexican crude oil basket fell from around 100 dollars per barrel in june 2014 to some 45 dollars per barrel at present. although the share of oil in exports and gdp is relatively modest, it accounts for a substantial share of public revenues. therefore, these developments have had significant implications for public finances. in fact, when the impact of the concurrent reduction in oil prices and output is taken into consideration, the result is a decline in annual public revenues from this source of approximately 5 percent of gdp since 2012. 2. after a prolonged period with near - zero interest rates, the us federal reserve began to increase the target for the federal funds rate in late 2015. while this shock affects emes in general,

bankers ’ speeches recognising the role of non - banks 20. recognising that non - banks can provide innovative payment products and foster competitiveness in the market, the reserve bank authorised non - banks to enter the retail payment space. at the same time, we took care to ensure that the non - banks which come in adhere to kyc / aml guidelines and follow the prescribed guidelines for customer protection and customer service. for example, even as non - banks specialise in payment services and products, the settlement domain remains with the banks, and the outstanding balances are required to be kept in an escrow ( trust ) account so as to insure against bankruptcy. 21. recently, the reserve bank has allowed entry for non - banks into another payment space – atms. although there has been a steady year - on - year 25 per cent growth in the number of atms in the country, their penetration as measured by the number of atms per million population is still very low when compared to other emerging markets. to increase the deployment of atms, especially in the smaller centres, non - bank entities are now permitted to set up, own and operate atms, styled as “ white label atms ” ( wla ). accordingly, the regulatory guidelines prescribe a proportion of atms to be necessarily installed in tier iii to tier vi centres ( towns / villages with population of less than 50000 ), thereby extending anytime, anywhere banking facility to a wider segment of population. since this initiative will bring in less literate and less empowered population into the ambit of atms, we have expressly stipulated that, even as the wla is set up by an nbfc, the primary responsibility for redressing the grievances of customers relating to failed transactions and for cash management remains with the sponsoring bank. promoting safety and security of payment instruments 22. we have implemented several measures to improve “ hygiene factors ” such as safety and security of payment transactions. the security of online card transactions has been strengthened with the implementation of additional factor of authentication. with effect from july, 2011, an online alert for all card transactions has become mandatory. similarly, to protect card present transactions, we issued directions to banks and other stakeholders to initiate measures to strengthen the security and fraud risk management practices, merchant sourcing, and to issue emv ( europay - mastercard - visa ) chip card and pin to customers who have evidenced at least one purchase using their de