The 1994 Mexican financial crisis that triggered a sharp fall in emerging-market stocks was the Mexican peso crisis.
The crisis began after Mexico devalued the peso in December 1994. The country had accumulated substantial short-term dollar-linked obligations known as tesobonos, and investors quickly questioned whether Mexico could meet them after the devaluation. Capital flowed out, interest rates rose, and financial stress spread through the economy.
The shock reached stock and bond markets in other emerging economies. Because investors often held similar emerging-market assets together, selling in Mexico led to broader reassessments of risk. This international spillover gave the episode its nickname, the Tequila Crisis.
The United States and other institutions assembled a major rescue package, including loans and guarantees. The crisis is distinct from the 1997 Asian crisis, although both demonstrated how currency pressure, foreign-currency liabilities, and investor withdrawals can reinforce one another.