The Baring Crisis in a Mexican Mirror

In the now conventional wisdom, the Mexican crisis of 1994-95 was the first financial crisis of the twenty-first century. In this article I argue that it may be better understood as the last financial crisis of the nineteenth. The Mexican crisis exhibits striking similarities to the Baring Crisis of 1890. Parallels include the enthusiastic reaction of foreign investors to the combination of low interest rates in the financial centers and economic reform elsewhere in the world. They extend to the role of state banks in accentuating the impact of foreign capital on the domestic economy and of political weakness in hamstringing the government’s management efforts. The comparison underscores just how difficult it has become to arrange financial rescues of countries and financial institutions in distress.