The 1994 Mexican financial crisis is commonly called the Tequila Crisis.
The crisis began in December 1994, shortly after Mexico devalued the peso. Investors rapidly withdrew capital, and the currency lost much of its value. Mexico faced a severe liquidity problem because it had substantial short-term dollar-linked obligations known as tesobonos.
The shock spread beyond Mexico. Investors became more cautious about other emerging markets, causing falls in assets across Latin America and elsewhere. The United States organized a large rescue package involving loans and guarantees, while the International Monetary Fund also supported stabilization efforts.
The name can cause confusion because “Tequila Effect” is also used for the international spillover. The episode was not the same as the Latin American debt crisis of the 1980s or the Asian financial crisis of 1997. Mexico’s economy eventually recovered, but the crisis became a lasting example of how exchange-rate policy, foreign-currency exposure, and sudden capital flight can combine.