The 1994 Mexican financial crisis that triggered sharp market falls was nicknamed the Tequila Crisis.
The crisis began after Mexico devalued the peso in December 1994. Investors rapidly withdrew capital, and the currency lost much of its value. The shock spread through financial markets in Latin America and affected confidence in other emerging economies, a transmission effect sometimes called the “Tequila effect.”
Mexico had accumulated substantial short-term dollar-linked debt known as tesobonos. When confidence weakened, the government faced difficulty meeting obligations and maintaining the peso’s exchange-rate regime. An international rescue package led by the United States and the International Monetary Fund helped stabilize the situation.
The episode is distinct from the Asian financial crisis, which began in 1997, and from Mexico’s 1982 debt crisis. Although the nickname refers to Mexico’s famous spirit, the event involved currency, sovereign-debt, banking, and stock-market stress rather than only an exchange-rate movement.