What significant event occurred in 1994 affecting the Mexican peso?

The significant event that occurred in 1994 affecting the Mexican peso was known as the Tequila Crisis. This crisis was characterized by a sudden devaluation of the peso, which came after Mexico's government implemented a series of economic reforms and opened its economy to foreign investment. Although these reforms initially encouraged economic growth, they also led to vulnerabilities, including a high level of short-term debt in foreign currencies.

As investor confidence waned, particularly due to political instability and inflationary pressures, the Mexican government was compelled to devalue the peso in December 1994. This devaluation caused significant financial turmoil in Mexico and had ripple effects across Latin America. The crisis highlighted the risks associated with overly liberalized capital markets and reliance on short-term foreign capital.

In contrast, the other options, while significant in their own right, do not specifically represent the abrupt economic turmoil experienced in 1994. The Peso Recovery refers to the subsequent stabilization efforts following the crisis, the Economic Reform encompasses broader changes that spanned several years prior, and the NAFTA Agreement, which was signed in 1994, is related to trade liberalization but not directly responsible for the immediate crisis that shook the peso.