Before the Mexican peso crisis in 1994, the Mexican economy had started just recovering from what they called the “lost decade” of the 1980’s. The Mexican economy seemed state, and investors began pouring money into the country. The Mexican government had millions in reserves, and their main trade partner, the United States, proposed the North American Free Trade Act which would essentially cut down trade barriers between the two countries (Whitt, 1996). NAFTA went into affect in the beginning of 1994, and not even a year later the devaluation of the Mexican peso occurred. The worth of the peso fell from 4 pesos to the dollar, to over 7 pesos to the dollar.
