The failures of right-wing politics fostered a groundswell of support for a resurgent left, and in the 1988 elections, the social democrat Rodrigo Borja Cevallo won a convincing victory with his Izquierda Democrática party (Democratic Left). Borja's programme of gentle reform, called " gradualismo ", steered the country away from the Thatcherite policies of Febres Cordero but made little headway with the straitened economy. Even so, Borja was respected for reinforcing the liberty of the press, protecting human rights, kickstarting the nation's literacy programmes, and rejuvenating relations with Peru. However, runaway inflation led to a wave of strikes throughout the country, and in 1990 an umbrella organization of the nation's indigenous peoples, CONAIE (Confederación de Nacionalidades Indígenas del Ecuador), staged an uprising, which at last put them firmly on the political map. After decades of isolation and alienation, the different groups had formed one political voice, calling for rights to land and territories, the right to self-government, and the creation of a multinational Ecuadorian state that recognized the pluralism and identities of its peoples. The same year, twelve Huaorani communities were granted territorial rights to a tract of land bordering the Parque Nacional Yasuní in the Oriente.

 

Desperate for a solution to the ongoing economic problems, the public switched their support back to the right, voting in the 72-year-old Sixto Durán Ballén in the 1992 general elections. He strove to tackle the situation through modernization, reduction of the state apparatus and privatization, but by scrapping fuel subsidies and raising consumer prices, he aroused the anger of the poor and the trade unions. Furthermore, his plans to sell off indigenous land to commercial interests had to be dropped after heavy pressure from CONAIE. As the term progressed, Durán's administration was dogged by corruption scandals, and in 1995, any remaining credibility was destroyed when the vice president, Alberto Dahik, fled the country to avoid prosecution over mismanagement of funds.

The 1996 elections brought a shock result when outsider, Abdalá Bucaram (nephew of Asaad Bucaram), the candidate for a coalition of left-wing and indigenous organizations, clinched victory over favourites Jaime Nebot and Freddy Ehlers. Bucaram had wooed the masses with an informal populist style - at his rallies, he crooned love songs on stage, backed by scantily clad women - and promises of increased subsidies and a stronger public sector. Guayaquil had already experienced the Bucaram treatment when he was mayor of the city in the 1980s: significantly, this was about the only place in the country where he suffered a heavy defeat in the election.

Yet despite his record, the poor and the gullible swallowed the bait, while the rest of the country looked on in disbelief as " El Loco " (the Madman), as he liked to be called, was sworn in as president. Stunts such as releasing his own CD, shaving off his Hitler-style moustache (whom he admired) on TV for charity, and offering to pay soccer star Diego Maradona $1 million of public money to play a single game in Ecuador, did little to arouse the nation's respect. Indeed, before long Bucaram had made enemies across the board, betraying his core supporters with a raft of austerity measures that made utility prices skyrocket, and causing widespread outrage when he lunched with the infamous Ecuadorian-American Lorena Bobbitt at the presidential palace. Rumours of large-scale mismanagement of funds and corruption involving Bucaram's family also began to circulate. In the space of just a year, his popularity rating had gone through the floor, and trade unions had brought the country to a halt with a general strike. In an unprecedented move, Congress voted him out of office on grounds of "mental incompetence", but Bucaram stubbornly clung to his presidency, holing out in the presidential palace. For a few days in February 1997, he, his vice-president Rosalía Arteaga, and the leader of Congress Fabián Alarcón, were all claiming they were the rightful president. Meanwhile huge crowds gathered around the building, chanting for Bucaram's removal and as allegations of corruption against him mounted, he fled to Panama carrying, according to some newspapers, suitcases stuffed with embezzled cash. Some reports have since claimed that he may personally have robbed the country of several hundred million dollars.

Fabián Alarcón came through the commotion as interim president, but as the economy stagnated and corruption allegations against his government also surfaced, he himself only just made it through his allotted period to the 1998 elections. The election race was between the Harvard-educated mayor of Quito, Jamil Mahuad , and Alvaro Noboa, a wealthy banana baron and candidate of Bucaram's party. Despite throwing huge sums of money at the electorate, the public's memory of Bucaram was still too strong, and Noboa was beaten at the polls by Mahuad and his centrist Democracio Popular party.

The country's finances had been left in total disarray and even the government was claiming it to be Ecuador's worst economic crisis in seventy years. Compounding a zero growth rate in the economy, inflation floated at around fifty percent, oil prices were sliding and El Niño had wreaked $2.6 billion of damage, including the devastation of the banana harvest. Mahuad was struggling to pick up the pieces. By March 1999, rumours began to circulate that foreign currency bank accounts would be confiscated in a move to peg the sucre to dollar, as the Argentinian government had done to the peso in 1991. In the confusion, the sucre slumped by twenty-five percent to an all-time low against the dollar, and Mahuad quickly announced a series of surprise "bank holidays" to prevent panic-stricken investors withdrawing all their deposits.

A two-day general strike was called and demonstrations were held across the country, some of them degenerating into violence. The government declared a state of emergency and deployed more than 15,000 soldiers and police to get strikers off the streets and back to work, but they were left powerless when indigenous groups barricaded the highways, bringing fifteen provinces to a standstill. Despite the trouble, Mahuad was determined to push on with necessary austerity measures , and as the strike ended he announced he was ending fuel subsidies - which hiked the price of a gallon of petrol up from $1 to $1.90, and electricity prices by 400 percent - increasing sales tax, cutting down on the state's stifling bureaucracy and clamping down on the tax evaders. Most controversially, he froze US$8.6 billion of bank-account deposits in an attempt to stop further runs on the currency, preventing people with more than a few hundred dollars savings from taking out any more than half their money within the year. His approval rating plummeted instantly to just nine percent, and in one poll almost half those surveyed said he should resign.

In July 1999, the country was paralyzed by another wave of strikes, this time from taxi and bus drivers protesting at the rise in fuel prices. They had allies in CONAIE, who helped block the roads, and gathered a crowd of 20,000 to march into the capital, overpowering the military blockades. Mahuad could only placate them by agreeing to leave prices alone till December, giving him temporary breathing space. Facing a foreign debt of $16 billion, Ecuador defaulted on a Brady-bond interest payment that September, the first country ever to do so. While bondholders were furious, at home even Mahuad's opponents praised him for putting the needs of the Ecuadorian people above the interests of foreign creditors. But trouble for the president was by no means over.