Peso Crisis — 'Error de Diciembre' Triggers Latin American Contagion

Incoming Finance Minister Jaime Serra Puche announced a peso devaluation of 15% on December 20, 1994 (three weeks after Zedillo's inauguration). Investors panicked — the peso had been artificially supported during the election year — and the peso collapsed 50% within weeks. GDP fell 6.2% in 1995; Mexico's banks nearly failed. President Clinton pushed a $50 billion emergency credit package (without Congressional approval) to prevent the 'Tequila Effect' from collapsing other emerging markets. Mexico repaid the US loans by January 1997 — three years early.