ABSTRACT
On December 20, 1994, Mexico spun into a currency crisis. Pressed by falling reserves, the government attempted a step devaluation of 15 per cent-and was soon forced into a free float of the slipping peso. Through the early months of 1995, nervous investors reacting by pulling assets not only from Mexican financial markets but also from Argentina, Brazil, and other Latin American markets. The United States, anxious to restore confidence in both the sinking Mexican economy and emerging markets in general, combined with the International Monetary Fund to produce a US$53 billion rescue package in late February 1995.2 In return, Mexico was forced to promise a harsh new adjustment program, one that eventually produced a sharp recession and an even steeper fall in wages.
