Managing Economic Crises; Bill Clinton and the Mexican Peso Crisis

The year 1994 was one of the most tumultuous in the modern history of Mexico. During that year, two major political figures were assassinated, an uprising against the federal government began in the state of Chiapas, and the government attempted to finance its deficit payments with various debt instruments. The political instability caused by the assassinations and the Zapatista uprising, along with continued economic uncertainty within Mexico, caused foreign investment capital to flee Mexico. Because of this capital flight, Mexican President Ernesto Zedillo, decided in December of 1994 to devalue the Mexican currency. Instead of helping the situation, it actually caused more panic from foreign investors. More capital left Mexico and the government was in danger of defaulting on its debt payments. During this time period, President Bill Clinton kept a close eye on the situation with Mexico. Because of NAFTA and other economic agreements, the Mexican and American economies were intertwined more than ever. Mexico’s inability to pay their debts, the increasing political instability, and the downward spiral in the economy worried many in the United States that it would have an adverse affect on a still recovering American economy