The Mexican peso crisis all started on New Year’s Day in the State of Chiapas by a radical activist from Mexico City who started a leftist rebellion. Chiapas had legitimate complaints about the Mexican Government in Mexico City, however a rebellion was the last thing that the people in Mexico needed. In 1993 Mexico seemed to be doing fairly well but in 1994 Mexico had many problems.  There was a presidential election due in August of 1994. This election took precedence over economic policy considerations. Miguel Salinas de Gotari was the current president and appointed Luis Donaldo Colosio as the new candidate for the Party of Institutional Revolution. Although Colosio was an almost guaranteed victory he began campaigning. Colosio was then assassinated which brought a political crisis. Ernesto Zedillo was the new candidate and was announced President of Mexico in August 1994. Shortly after in September, Jose Francisco Ruiz-Massieu who was the Secretary General of the PRI was assassinated. After the two assassinations the world public viewed Mexico as politically instable and began to withdraw their funds out of Mexico. What was unknown at the time was that Ruiz-Massieu was actually assassinated by extended family and not because of political unrest.   The previous President did not want to devalue the peso before he left office. However, eventually the overvalued peso would have to be devalued. The attempt to keep the overvalued peso discouraged foreign buyers from buying Mexican goods. With the foreign public as well as the domestic public foreseeing that the Mexican peso would start depreciating they started converting their pesos into dollars. This only helped create the Mexican peso crisis of 1994 even more. Prior to the depreciating peso there were not any effective systems in place, either domestic or foreign. After further research I found that through an IMF report that most of the peso currency traded into dollars was done domestically an only a small portion was done by foreign investors. Foreign investors sold $326 million dollars during the weeks leading up to the crisis while during the time the Mexican reserves fell by $2.8 billion.   The Mexican peso crisis of 1994 was due to a short-term foreign exchange problem that was handled fairly promptly. Some of the financial aid to remedy the crisis was from the North American Free Trade Alliance (NAFTA). The quick recovery was because of the United States Government’s quick response and the IMF providing loans and loan agreements. REFERENCE http://econc10.bu.edu/Ec341_money/Papers/Leoce_mexican_peso_crisis.htmhttp://www.nber.org/papers/w6334