Which Mexican currency crisis began after the peso was devalued in December 1994?

The Mexican currency crisis that began after the peso was devalued in December 1994 was called the Tequila Crisis.

Mexico widened the peso’s exchange-rate band and then allowed a major devaluation in December 1994. Investors quickly lost confidence, and capital flowed out of the country. The peso’s fall increased the local burden of dollar-linked debts, while Mexican banks and companies faced severe financial stress.

The crisis spread through emerging markets in what became known as the “Tequila Effect.” The United States and international institutions assembled a large rescue package, helping Mexico meet its obligations and stabilize the financial system. The emergency assistance was linked to reforms and financial conditions.

The name refers to tequila as a symbol of Mexico, not to a particular stock exchange. The episode is also called the Mexican peso crisis. It is distinct from the 1980s Latin American debt crisis and the 1997 Asian financial crisis, although all involved capital flight, currency pressure, and international contagion.