The 1994 Mexican financial crisis that triggered a major emerging-market sell-off was called the Tequila Crisis.
Mexico devalued the peso in December 1994 after pressure on its foreign-exchange reserves and a widening current-account imbalance. Investors rapidly withdrew capital, and the peso lost a large share of its value, creating severe financial stress for Mexican banks and companies with dollar liabilities.
The crisis spread beyond Mexico as investors reassessed the risks of other emerging markets. This wider reaction became known as the “Tequila Effect.” The United States and other governments helped assemble an emergency support package to prevent a broader financial collapse.
The crisis is not the same as the 1997 Asian financial crisis. Both involved capital flight and currency pressure, but the Tequila Crisis centered on Mexico and began in 1994. Its nickname refers to Mexico’s national drink and was popularized in international financial reporting.