What name was given to Mexico’s 1994–1995 currency and financial crisis?

Mexico’s 1994–1995 currency and financial crisis was called the Tequila Crisis.

The crisis began in December 1994 when Mexico devalued the peso after foreign-exchange reserves fell and investors doubted the country’s ability to maintain its exchange-rate policy. Capital fled, the peso lost much of its value, and Mexican banks and businesses struggled with dollar-linked debts.

The episode followed years of financial liberalization and large capital inflows. Political shocks, including the assassination of presidential candidate Luis Donaldo Colosio in March 1994, also damaged investor confidence. Mexico’s short-term dollar-indexed debt, known as tesobonos, intensified the pressure when creditors demanded repayment.

The United States, the International Monetary Fund, and other institutions assembled a rescue package worth tens of billions of dollars. The crisis spread concerns about other emerging markets and helped popularize the term “contagion” in discussions of international finance. It is also called the 1994 Mexican peso crisis, but “Tequila Crisis” is its best-known nickname.