The 1994 Mexican financial crisis triggered a sharp stock-market fall after the peso was devalued and is known as the Tequila Crisis.
Mexico devalued the peso in December 1994 after pressure on its foreign-exchange reserves and difficulties financing short-term dollar-linked debt. The devaluation damaged confidence, encouraged capital flight, and raised the domestic cost of servicing foreign-currency obligations.
The crisis spread through financial markets in Mexico and affected other emerging economies. The United States arranged a major rescue package involving loans and guarantees, while the International Monetary Fund also provided support. Mexico adopted austerity and financial measures as the economy contracted.
The name “Tequila Crisis” refers to the Mexican origin of the shock and its regional financial effects. It should not be confused with the 1997 Asian financial crisis, which began in Thailand and spread across several East and Southeast Asian economies.