Mexico 1994

About Mexico 1994

Mexico experienced the Tequila Crisis in 1994 to 1995. The peso was devalued in December 1994 after investor confidence collapsed following the assassination of presidential candidate Luis Donaldo Colosio. Mexico had issued short term dollar linked bonds called tesobonos that were maturing. Foreign reserves fell to dangerous levels. The US provided a 50 billion rescue package, supplemented by the IMF. The crisis spread to other Latin American economies through the Tequila effect. Mexico returned to growth by 1996, recovering faster than expected. The crisis demonstrated the risks of short term dollar linked debt. Mexico graduated from IMF programs and built large foreign reserves. The Tequila Crisis led to the creation of the IMF Supplemental Reserve Facility for rapid response to financial crises.