The Tequila Crisis began when Mexico devalued the peso in December 1994, triggering a major stock-market sell-off.
Mexico had maintained the peso within a managed exchange-rate band, but falling reserves and political uncertainty weakened confidence. After the government widened the band and then allowed the peso to float, its value fell sharply. Investors reassessed Mexican assets, and financial stress spread through other emerging markets.
The crisis is also called the Mexican peso crisis or the December Mistake. The nickname “Tequila Crisis” reflects Mexico’s association with tequila and parallels names given to later regional financial crises. It was not solely a stock-market event: currency depreciation, banking problems, debt refinancing difficulties, and capital flight were central features.
The United States and international institutions assembled a support package for Mexico in early 1995. Mexico’s experience became a frequently cited example of how exchange-rate pressure and sudden capital outflows can amplify market crashes.