Pass the tequila

摘要

Many factors contributed to Mexico's "tequila crisis" in 1994, but two stood out: tighter monetary policy in the United States and political instability at home. Almost exactly 20 years later, the same forces are again weighing on the currency, compounded by falling oil prices. The situation is not nearly as precarious as it was then, but Mexican policymakers may still need a shot or two to steady the nerves. Since the 50% devaluation of 1994 the peso has floated freely, which makes it safer than it was 20 years ago but something of a punch bag for nervous investors. Like many emerging-market currencies it has been dropping against the dollar-it is down 11% since June. On December 8th Mexican authorities said they would intervene to support it by auctioning $2oom on days when it sinks by at least 1.5% against the dollar. On December 10th it hit 14.5, its lowest level in more than five years.