Which 1994 crisis began when Mexico devalued the peso and is also known as the Tequila Crisis?

The 1994 crisis that began when Mexico devalued the peso and became known as the Tequila Crisis was the Mexican peso crisis.

Mexico had maintained a managed exchange-rate system, but large current-account deficits and dependence on short-term foreign capital made the country vulnerable. Political shocks in 1994, including the Chiapas uprising and the assassination of presidential candidate Luis Donaldo Colosio, increased uncertainty. In December, the government devalued the peso, but investors rapidly withdrew funds.

The peso lost much of its value, and the crisis spread through emerging markets. The United States, the International Monetary Fund, and other institutions assembled a rescue package to help Mexico meet its external obligations. U.S. markets were also affected, although the damage did not become a global depression.

“Tequila Crisis” is the informal name, while “Mexican peso crisis” identifies the country’s currency and financial emergency. It is distinct from the Asian financial crisis that began in 1997.