Mexican Peso Crisis

About Mexican Peso Crisis

The Mexican peso crisis, also called the Tequila Crisis, began when Mexico devalued the peso on December 20, 1994. The peso lost half its value within weeks. The crisis was triggered by political assassinations, an armed rebellion in Chiapas, and rising US interest rates. The US and IMF provided a 50 billion bailout. The crisis spread to other Latin American markets through the tequila effect. Mexico recovered quickly, repaying the bailout ahead of schedule. The crisis demonstrated the risks of relying on short term foreign investment and led to the creation of the IMF Contingent Credit Line.