What 1994 currency crisis caused Mexico's stock market and peso to plunge?

The Mexican peso crisis was the 1994 currency crisis that caused Mexico’s stock market and peso to plunge.

The crisis began in December 1994, when Mexico devalued the peso after pressure on its foreign-exchange reserves became unsustainable. Investors rapidly withdrew capital, and the currency’s fall increased the burden of dollar-linked obligations.

The shock affected Mexican banks, companies, and households, while international investors reassessed risks in emerging markets. The United States and other countries helped assemble a financial rescue package, including U.S. loans and guarantees.

The episode is also called the Tequila Crisis. It is distinct from the 1997 Asian financial crisis, which began with Thailand’s baht, and from the 1982 Latin American debt crisis. The Mexican event showed how quickly exchange-rate pressure could become a stock-market and banking crisis.