The 1994 Mexican financial-market crisis was commonly known as the Tequila Crisis.
The crisis began after Mexico devalued the peso in December 1994. During the preceding years, Mexico had attracted substantial foreign capital, while maintaining a currency regime that limited the peso’s movement. Political uncertainty, declining reserves, and a growing current-account deficit made the arrangement increasingly vulnerable.
Once investors feared that the peso could not be defended, capital left the country rapidly. The currency lost much of its value, interest rates rose, and Mexican banks and companies faced severe repayment problems, especially on dollar-linked obligations. The shock also spread to other emerging markets, producing what became known as the “Tequila Effect.”
The United States and international institutions assembled a large support package to help Mexico meet its obligations and stabilize the financial system. The nickname is a reference to Mexico’s national drink and is not the formal name of a stock exchange event. The crisis is also called the Mexican peso crisis.