Mexico experienced the 1994–95 financial crisis commonly called the Tequila Crisis.
The crisis began after Mexico devalued the peso in December 1994. Investors became concerned about the country’s foreign-currency obligations, dwindling reserves, political instability, and the sustainability of its exchange-rate policy. Capital flowed out, the peso lost much of its value, and Mexican interest rates rose sharply.
The shock damaged banks and businesses with dollar-linked debts and spread through emerging markets. The United States arranged a large rescue package with support from the International Monetary Fund and other institutions. The program helped Mexico meet obligations and stabilize its financial system, although the domestic recession was severe.
The crisis is also called the Mexican peso crisis. “Tequila Effect” describes the international contagion, while “Tequila Crisis” is the memorable nickname for the Mexican episode itself. It is not the same event as the Asian financial crisis that began in 1997.