The 1994 Mexican financial crisis triggered by the peso’s devaluation is called the Mexican peso crisis, also known as the Tequila Crisis.
Mexico had attracted substantial foreign capital in the early 1990s, but much of its debt was short-term and linked to the U.S. dollar. Political violence, including the Zapatista uprising and the assassination of presidential candidate Luis Donaldo Colosio, increased uncertainty during 1994.
The government devalued the peso in December 1994 after reserves came under pressure. The devaluation was followed by a rapid loss of confidence, capital flight, and a severe recession. Dollar-linked tesobono debt made the adjustment especially damaging because the government’s obligations became harder to service.
The United States and international institutions organized a support package worth tens of billions of dollars. The crisis also spread to other emerging markets, an effect often called the “Tequila Effect.” It is distinct from the 1997 Asian financial crisis, though both demonstrated how quickly investor sentiment can cross borders.