The Tequila Crisis was the 1994 Mexican financial crisis that caused a sharp fall in Mexico’s stock market after a peso devaluation.
Mexico devalued the peso in December 1994 after pressure on its currency reserves and exchange-rate system. The move triggered a rapid loss of investor confidence, capital flight, falling asset prices, and a severe financial crisis. The nickname “Tequila Crisis” became widely used internationally for the episode.
The crisis reflected several vulnerabilities, including large short-term foreign-currency obligations known as tesobonos, a current-account deficit, and political uncertainty. The United States and international institutions assembled a large support package to help Mexico meet its obligations and stabilize the currency.
The Tequila Crisis is distinct from the 1997 Asian financial crisis, although both involved exchange-rate pressure, capital outflows, and contagion fears. Mexico’s crisis also demonstrated how quickly financial stress in one emerging market could spread through global investment networks.