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On December 22, 1994 the Mexican government allowed the peso to float, after which the peso depreciated another 15%. The value of the Mexican peso depreciated roughly 50% from 3.4 MXN/USD to 7.2, recovering only to 5.8 MXN/USD four months later. Prices in Mexico rose by 24% over the same four months, and by the end of 1995 Mexico's hyperinflation had reached 52%.

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Mexico's economy experienced a severe recession as a result of the peso's devaluation and the flight to safer investments. The country's GDP declined by 6.2% over the course of 1995. Mexico's financial sector bore the brunt of the crisis as banks collapsed, revealing low-quality assets and fraudulent lending practices.

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Mexico’s unemployment rate fell to the lowest in almost eight years in March, the latest sign of stronger growth in Latin America’s second-largest economy.The unemployment rate "fell to 3.74 percent in non-seasonally adjusted terms", according to a report published Wednesday by the nation’s statistics agency, known as Inegi. That was below the 3.9 percent median estimate of 16 analysts surveyed by Bloomberg.

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The unemployment rate in Mexico as you can observe is unstable due to the floatation situation that occurred. It is currently very low in Oct 2016 and decreasing more. It is the lowest jobless rate for an October month since 2006. On a seasonally adjusted basis, it decreased to 3.6 percent from 3.9 percent in the previous month.

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In the decades preceding the year 2000, Mexico experienced various episodes of high inflation. In the period between 1980 and 1989, Mexico registered inflation rates that appeared to be out of control. The average inflation rate recorded during this period was 69.9% and the highest inflation rate ever seen in Mexico was recorded in February 1988, at which time inflation reached 179.7%. These 10 years of disproportionately high inflation rates were the result of chronic fiscal deficits, internal and external economic imbalances as well as currency devaluations.

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In the 2000 and 2009 period, the average inflation rate was 5.2%. In more recent years, inflation has registered single-digit rates. This period of stable and low inflation is mainly the result of the 1993 constitutional reform that granted more autonomy to the Central Bank. The Central Bank decided to adopt an inflation targeting policy in 1999 and implemented it gradually until it was formally applied in 2001. In 2003, the Central Bank established medium-term inflation target of 3.0%.

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On december 1994 the Mexican peso crisis felt with a currency crisis that sparked up mexicans government sudden devolution of the peso against the us dollar it became one of the first international financial crisis. The oil income in mexico represents thethere largest share in the governments revenue. The oil prices and started to cut. The top crisis that Mexico is dealing with is the oil prices. In the summer, oil was selling for $107 per barrel. Since June the price of oil has fallen nearly 50 percent, with oil selling for less than $56 a barrel on Dec. 15. The is mostly because the US increased oil production more than 70%, in addition to that demand for the oil has fallen as well. not just mexico but other countries will be faces this crisis like Iran, Iraq, Russia, Venezuela.

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As the peso has become near to 20 to the dollar mark it started causing anxiety on the streets also in businesses and through out the government as well. It appears that thing may get worse then this. This would start leading business to close down the small and big businesses. not just that but everything else would get more expensive. People are getting mistreated from this and life will start to get very diffcult for them. Also now changing from one currency to another is going to be very difficult as the peso is soft currency. A good example of this is egypt and they’re bothe quiet similar with same problem physcologically.

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First of all there was uncovering that happened 48 thousand government officials, including 800 mayors and 30 governors. They were being investigated for corruption. also a person named Inspector General Alejandro Ordóñez made clashes between the high courts and the executive branch, mostly over corruption investigations.There were also claims by previous DAS official Rafael Garcia that the Mexican intelligence services smoothly paramilitary drug trafficking.A major political issues as well was during the time of Pablo Escobar, Pablo was known to be the greatest drug trafficker in the world. He was the reason the country was spending so much money to find him and end him for good. The US had been helping during this time and Mexico, Colombia and USA payed a large bunk of money. Escobar had cause people to be afraid 24/7 and never know when they will be shot and exploded. Now Mexico is trying to create models for citizen involvement in peace and reconciliation efforts. The USIP provided funding for committees in 10 of the country’s 32 administrative zones (departments) that can help monitor and implement a peace accord. Mexico has been going through some very hard times and all this had lead to the flotation of their currency.

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The strength of a country's economy and the value of its currency are positively correlated. When the economy is good, a country's currency appreciates. When a country's economy declines, so does the value of its currency. With oil a major factor in Mexico's economic health, the price of oil has a direct influence on the value of the Mexican peso.

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Terms of Trade in Mexico decreased to 45.34 Index Points in September from 46.04 Index Points in August of 2016. Terms of Trade in Mexico averaged 63.68 Index Points from 1970 until 2016, reaching an all time high of 106.34 Index Points in January of 1981 and a record low of 43.46 Index Points in February of 2016.

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Mexico's growing poverty affected urban areas more intensely than rural areas, in part due to the urban population's sensitivity to labor market volatility and macroeconomic conditions. Urban citizens relied on a healthy labor market, access to credit, and consumer goods. Consumer price inflation and a tightening credit market during the crisis proved challenging for urban workers, while rural households shifted to subsistence agriculture.:11 Mexico's gross income per capita decreased by only 17% in agriculture, contrasted with 48% in the financial sector and 35% in the construction and commerce industries

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Analyzing the Mexican peso crisis reveals that it was brought about by several different factors that include the large scale of deficits in the current account, how these deficits were funded by short-term capital inflows, how the Mexican authorities asserted a relatively fixed nominal exchange rate that was seemingly overvalued to reduce inflation, and the outwardly relaxed monetary policy imposed during 1994. The causes also include how the government allowed the transformation of a huge part of this debt into dollar-dominated paper, how devaluation was mismanaged, and, lastly, how criminal and political events have emerged during this period

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The Mexican peso crisis was a currency crisis sparked by the Mexican government's sudden devaluation of the peso against the U.S. dollar in December 1994, which became one of the first international financial crises ignited by capital flight. The Mexican treasury began issuing short-term debt instruments denominated in domestic currency with a guaranteed repayment in U.S. dollars, attracting foreign investors. Mexico enjoyed investor confidence and new access to international capital following its signing of the North American Free Trade Agreement (NAFTA). However, a violent uprising in the state of Chiapas, as well as the assassination of the presidential candidate Luis Donaldo Colosio, resulted in politecal instability, causing investors to place an increased risk premium on Mexican assets.

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On December 20, 1994, newly inaugurated President Ernesto Zedillo announced the Mexican central bank's devaluation of the peso between 13% and 15%. Devaluing the peso after previous promises not to do so led investors to be skeptical of policymakers and fearful of additional devaluations. Investors flocked to foreign investments and placed even higher risk premia on domestic assets. This increase in risk premia placed additional upward market pressure on Mexican interest rates as well as downward market pressure on the Mexican peso.

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Overall, the Mexican Peso is a very weak currency due to different factors such as political, psychological, economical, and terms of trade. All these factors can affect the way this currency is viewed and it can also determine the demand on this specific currency. The Mexican peso crisis is the reason why the peso is very weak today. First of all, the terms of trade are not stable. Also, political instability was a huge factor in causing the currency to be weak. In addition, the high inflation rates and unemployment rates that were caused when the currency became weak. Finally, psychological factors are decreasing the Mexican businesses due to the currency flotation and how initials view the peso currency.