The Mexican peso crisis was the 1994–1995 financial crisis that caused a sharp peso devaluation and market collapse.
Mexico maintained a managed exchange-rate system while running large current-account deficits and relying heavily on short-term foreign investment. Political violence, including the Zapatista uprising and the assassination of presidential candidate Luis Donaldo Colosio, weakened confidence during 1994.
After Mexico’s reserves fell, the government devalued the peso in December 1994. Investors then withdrew capital rapidly, and the currency lost much of its value. The crisis spread to other emerging markets and became known internationally as the Tequila Crisis.
The United States organized a large support package with help from the International Monetary Fund and other institutions. The episode is distinct from the 1997 Asian crisis: Mexico’s crisis centered on the peso, reserve losses, and short-term dollar-linked debt, whereas the later Asian crisis began with pressure on Thailand’s baht.