Which Mexican currency crisis triggered a major stock-market sell-off in December 1994?

The Mexican peso crisis triggered a major stock-market sell-off in December 1994.

Mexico’s peso crisis began after the government devalued the peso in December 1994, shortly after President Ernesto Zedillo took office. Mexico had accumulated large short-term dollar-linked obligations known as tesobonos, and investors feared that reserves were insufficient to maintain the exchange-rate regime.

The peso plunged, domestic interest rates rose, and Mexican shares fell sharply. Financial stress spread to other emerging markets in a contagion sometimes called the Tequila Effect. The United States and international institutions assembled a rescue package to help Mexico meet its obligations and stabilize confidence.

The crisis is often called the Tequila crisis, but that nickname describes the same event rather than a separate currency. It also should not be confused with Latin America’s 1980s debt crisis, which involved different countries, debts, and timing.