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Mexican Peso Crisis of The Mid 1990s
Mexican Peso Crisis of The Mid 1990s
During that same year, the country experienced major events that lowered the general populace’s
confidence in the political system. A major leftist rebellion and two political assassinations did not
make people feel safe in investing in Mexico.
These reasons, along with the fact that the peso was overvalued (as Salinas wanted to keep it at its
remained fixed rate and not devalue during an election year) investors became worried. The money
that would have been put into Mexico's economy was placed elsewhere as there was less risk. This
drop of incoming investment, and international lenders’ unwillingness to renew Mexico's loans, led
to the peso crisis.
Lessons that can be learnt from the Crisis in
Mexico
-There is need for vigilance and discipline in the market
-Large & unsustainable current account deficits should be avoided
-Excessiver over-valuation of currencies should be avoided
-There is need for the regular publishing and timely dissemination
key economic data
References
Chen, J. (2020, July 8). What is the 1994 Mexican Peso Crisis. Investopedia.
https://www.investopedia.com/terms/t/tequilaeffect.asp#:%7E:text=On%20December%2020%2C%201994%
2C%20the,between%2013%20and%2015%20percent.&text=Foreign%20capital%20not%20only%20fled,vul
nerability%20was%20not%20well%20known.
danieljbmitchell. (2008, June 1). The Mexican Peso Crisis of the Mid-1990s. YouTube.
https://www.youtube.com/watch?v=hTWLEhlq1cQ
https://www.enotes.com/homework-help/what-was-causes-mexican-peso-crisis-argentine-peso-313793#answ
er-392712
References
Sachs, Jeffrey & Tornell, Aaron & Velasco, Andres. (1995). The Collapse of the Mexican Peso: What Have We
Learned?. Economic Policy. 11. 10.2307/1344521.
Drawing lessons from the Mexican Crisis: Preventing and Resolving FINANCIAL CRISES--THE role of the
IMF -- address by MICHEL CAMDESSUS. (1995, May 22). Retrieved March 24, 2021, from
https://www.imf.org/en/News/Articles/2015/09/28/04/53/spmds9508
Whitehead, J., & Kravis, M. (1996, January). Lessons of the Mexican Peso Crisis. Retrieved March 24, 2021,
from https://cdn.cfr.org/sites/default/files/pdf/1998/09/Mexico_Peso_Crisis.pdf
Griffith-Jones, S. (1997, May). Causes and lessons of the mexican peso crisis. Retrieved March 24, 2021, from
https://www.wider.unu.edu/sites/default/files/WP132.pdf