Tequila Crisis 1994
Mexico’s 1994–95 tequila crisis was a devaluation-and-tesobono run after political shocks and a crawling peg that had become incredible — the first big 1990s EM capital-account crisis.
Definition
A quasi-peg, current-account deficit, and short dollar-linked tesobonos left Mexico one-roll from default after the Colosio assassination and year-end devaluation. The Clinton/IMF package was the backstop. Contagion hit Argentina and others (‘tequila effect’).
Why it matters
It taught that ‘good’ reform stories can still die on the short-dollar rollover. Original sin plus a peg is the repeating object.
Case
December 1994 devaluation, tesobono stock that would not roll, and a 1995 US Treasury ESF + IMF package. Mexican GDP contracted sharply, then recovered with a floating peso.
How to read it
Count the short FX-linked public debt and the reserve cover of the next 12 months of amortizations. That ratio is the fuse.
Key papers
Landmark references with real publisher or arXiv links — not token-overlap noise.
- The Mexican Peso CrisisSachs, Tornell, Velasco · 1996 · Brookings PapersStandard academic autopsy.