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The development of local financial markets: the Mexican experience

2. FoundationsDevelopmentChallenges Conclusions. Index. 3. Foundations. Macroeconomic Stability Sound Monetary and Fiscal PoliciesStructural ReformsMarket determined exchange rateUnrestricted capital mobilityPension system reformsStrengthening of the legal framework for the banking sys

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The development of local financial markets: the Mexican experience

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    1. 1 The development of local financial markets: the Mexican experience Ing. Guillermo Güémez García MEXDER New York, USA October 9 2008 Effective Slides 23 Total Slides 25 Ing. Guillermo Güémez García MEXDER New York, USA October 9 2008 Effective Slides 23 Total Slides 25

    2. 2 Foundations Development Challenges Conclusions

    3. 3 Foundations Macroeconomic Stability Sound Monetary and Fiscal Policies Structural Reforms Market determined exchange rate Unrestricted capital mobility Pension system reforms Strengthening of the legal framework for the banking system Development of derivate market Secondary Reforms Improvement in liquidity and payment systems Investor protection and transparency Credit bureau Instrument regulation Repo Securities Lending Strips Securitization

    4. 4 Foundations Development of the government local debt market Development of local nominal yield curve Preference of local vs. foreign debt Broadening of investor base Enhanced liquidity Transparency "Benchmark" securities Market makers program

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    25. 25 The development of the Mexican financial markets had been favored by a friendly international environment that includes abundance of liquidity, low interest rates and, a consequent “search for yield” by a wide variety of market participants. Recently, this environment has changed. As opposed to other volatility episodes, this time the financial turmoil came from developed markets. The degree of development in the local market has mitigated the impact of the global financial turmoil. This situation is not exclusive to Mexico, those countries committed with the development of their markets have shown a better resilience to the credit crisis. Important progress has been made and the main building blocks of the financial system are now close to being fully operational. The recent developments on the international financial markets, especially in the U.S., call for a review of supervision and regulation. On the one hand, it should continue to allow market initiative, but on the other hand, give sufficient capitalization and strength to cope with market adjustments when necessary.

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