In matters of financial stability (just as in medicine), “prevention” is always better than “cure”. Let me now turn to discussing “ex ante” preventative policies. The crisis revealed that our “ex ante preventative” policy tools were insufficient to deal with the build up of systemic risk.
Currently, in Mexico, close to half of all peso-denominated public debt securities with fixed coupons are held by foreign investors. Factors behind the portfolio inflows may include Mexico’s macroeconomic stability, capital account openness, a freely floating exchange-rate regime, and high liquidity enjoyed by the Mexican peso in FX markets.