Mexico’s 1994 peso crisis became known internationally as the Tequila Crisis.
The crisis began after Mexico devalued the peso in December 1994. Investors had become concerned about the country’s current-account deficit, political instability, and the large amount of short-term dollar-linked debt known as tesobonos. Capital quickly left, placing intense pressure on the currency and financial system.
The peso lost much of its value, and the shock spread to other emerging markets. The United States organized a substantial support package, with assistance also involving the International Monetary Fund and other institutions. The rescue helped Mexico avoid a prolonged sovereign default and stabilize its finances.
The name “Tequila Crisis” is a media nickname, not the official name of a Mexican government program. It is also called the Mexican peso crisis. The episode demonstrated how quickly investor confidence could reverse when a country relied heavily on short-term external financing.