The Mexican Currency Crisis (Tequila Crisis) of 1994
The Mexican peso crisis, which is also known as the tequila crisis was one of the first major currency crisis in the South American continent. The Mexican peso almost collapsed as a result of this crisis. The government was close to default on its national debt. The level of foreign reserves was dwindling to dangerously low levels and in the end the Mexican government required a bailout to stay afloat financially. Also, foreign investors that had invested in Mexican bonds ended up losing 15% of the value of their investments in a single day and over 40% of the value in the long term. These rates are catastrophic considering that bonds are fixed income investments and losing money on bonds is considered to be a very distant possibility.
Causes of the Mexican Crisis of 1994
Consequences of the Mexican Crisis of 1994
The Mexican debt crisis is therefore a case in point of what can go wrong when countries try to maintain artificially high Forex rates with the help of open market operations of their Central Banks.

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