What 1994 crisis began when Mexico devalued the peso?

The 1994 crisis that began when Mexico devalued the peso was the Mexican peso crisis.

Mexico widened the peso’s exchange-rate band in December 1994 and soon allowed the currency to float after pressure on foreign-exchange reserves. Investors withdrew capital, and the peso lost a large portion of its value. The crisis created severe problems for Mexican companies and banks that had borrowed in dollars.

Because the shock spread through financial markets and was associated with Mexico’s drink-themed nickname, it became widely known as the Tequila Crisis. The United States and the International Monetary Fund organized a large support package, helping Mexico meet its external obligations and stabilize markets.

The Mexican episode is different from the 1997 Asian financial crisis, which began with Thailand’s baht. It is also distinct from Argentina’s later crisis, although all involved exchange-rate pressure, foreign borrowing, and sudden capital flight.