Which 1994 market crisis began after Mexico devalued the peso in December?

The 1994 market crisis that began after Mexico devalued the peso in December was the Mexican peso crisis.

Mexico had maintained a currency regime that limited peso movements, while the country accumulated substantial short-term dollar-linked obligations known as tesobonos. Political shocks, falling foreign reserves, and investor concern made the arrangement increasingly difficult to sustain.

In December 1994, the newly elected administration widened the peso’s trading band and then allowed a major devaluation. Investors rapidly withdrew capital, and the peso lost much of its value. The resulting financial turmoil spread to other emerging markets.

The crisis is also known as the Tequila Crisis. The United States organized a large support package with international participation, helping Mexico meet its obligations and stabilize the currency. It is distinct from the 1997 Asian crisis, although both demonstrated how quickly investor confidence can cross borders.