What was the tequila effect?

The tequila effect is the colloquial name that gives the fall of the economic crisis in 1994 in Mexico, also known as the Mexican Peso crisis. In Mexico, it is often referred to as December error ( El Error de Dicitic ), the name of Carlos Salinas de Gortari. The tequila effect is more precisely used to describe the domino effect that caused the economic crisis in Argentina, Brazil and other neighboring regions in Latin America. His government was notoriously corrupt, while the members of the government were receiving grafts and slipping funds from the country. At the same time, the entry into the election year, Gortari underwent the program of extensive expenditure and built a large national deficit. One of the presidential candidates, Luis Donaldo Colosio, was also murdered, leading to concern among foreign investors that the Mexican government was planning to destabilize in a regime of similar Latin American countries.

This lack of trust forBorder investors meant that when the government needed to update its debt, which were growing considerably through massive expenses, the buyers could not find. This left the default settings on their loans as one of the only options. This, in turn, led to investors to lose more confidence in the government and caused minor failures of banks, which in turn fed and further reduced investors' confidence.

The

tequila effect is partially complicated because of how many small things have contributed to considerable collapse. The upcoming elections played a big role in the start of the tequila effect, not only in the intended expenses. In order to prevent investors from preventing the national economic decline that Salinas could become, the government bought large amounts of securities of the Treasury, which significantly reduced its reserves of the assets of the dollar.

After Salinas left the office, the new President Ernesto Zedillo joined. Masonllo immediately tried to devalue a little peso to make things happen again. Critics, howeverThe devaluations managed badly and foreign investments were downloaded on a massive scale. During the week, Peso decreased from four to dollar to more than seven to a dollar. This level of devaluation, which led to tequil's effects in neighboring countries, could be catastrophic, but the United States hit a massive loan and helped somewhat stop the bleeding of value.

, however, the tequila effect spread before it was perverted, with a decrease in peso spreading to other countries. Brazil saw the currency of the devaluation extremely for a very short period of time. Argentina was also hard to affect the effect of tequila, with a decline in domestic expenditure and a credit crisis coming in 1995.