Summary: Mexico's devaluation of the peso in December 1994 precipitated a crisis in Mexico's financial institutions and markets that continued into 1995. In response to the crisis, the United States assembled a financial assistance package of nearly $50 billion in funds from the United States, Canada, the International Monetary Fund (IMF), and the Bank for International Settlements. The multilateral assistance package was intended to enable Mexico to avoid defaulting on its debt obligations, and thereby overcome its short-term liquidity crisis, and to prevent the crisis from spreading to other emerging markets. This report (1) examines the origins of Mexico's financial crisis; (2) assesses the extent to which the U.S. government and the IMF were aware of Mexico's financial problems throughout 1994 and provided advice to Mexico; (3) describes the U.S. and the international responses to the crisis, including an assessment of the terms and the conditions of the agreements implementing the U.S. portion of the assistance; (4) analyzes the statutory authority for the Secretary of the Treasury's use of the Exchange Stabilization Fund to finance the assistance package; and (5) examines the initial efforts of Mexico to recover from the crisis, including Mexico's access to international capital markets.
