The 1994 Mexican financial crisis began with the devaluation of the peso and was called the Mexican peso crisis.
Mexico maintained a managed exchange-rate regime while financing a large current-account deficit with foreign capital. Political instability, including the Chiapas uprising and the assassination of presidential candidate Luis Donaldo Colosio, increased pressure on the currency and investor confidence.
In December 1994, Mexico devalued the peso. Investors then withdrew capital rapidly, and the currency lost much of its value. The crisis spread through emerging markets in a contagion sometimes called the Tequila Effect, while Mexican stocks and bonds suffered severe losses.
The United States, the International Monetary Fund, and other institutions assembled a rescue package worth tens of billions of dollars. Mexico later recovered, but the episode showed how quickly short-term foreign financing could reverse and destabilize markets.