No one fully believed that a begrudging military would hand over power to the new centre-left coalition candidate, Jaime Roldós Aguilera , until it actually did so in August 1979, largely thanks to Roldós' landslide election victory three months earlier and some heavy pressure from President Carter in the US. Since the oil boom, the economic landscape of the country had transformed: per-capita income was five times greater than before 1972, employment was up by ten percent, particularly in the public sector, and a new urban middle class had been created. Despite the new wealth, the position of the rural poor, the indígenas and the workers hadn't much changed, and inequality was entrenched as ever. Roldós had plans for wide-ranging structural reforms but couldn't carry them through, as a bitter rivalry had developed between him and his party associate, Bucaram - now the leader of an opposition-dominated Congress - who deliberately set about blocking the Roldós agenda.

 

By 1981, the economic situation once again looked precarious. The country had an enormous budget deficit, in large part thanks to overspending by Bucaram's Congress. Worse still, trouble flared up on the Peruvian border, adding to the financial burden. Then, in May, three months after a ceasefire was agreed with Peru, Roldós was killed in an airplane crash near Loja, fuelling a number of conspiracy theories.

His vice-president, Osvaldo Hurtado Larrea , stepped in, and tried to push on with the programme of reforms, but by now the economic situation was rapidly deteriorating. Oil prices fell sharply, and gross domestic product shrank by over three percent; inflation rates soared, unemployment climbed and the Unitary Workers' Front (Frente Unitario de Trabajadores) called four general strikes; El Niño floods caused damage amounting to US$1 billion, while blight ravaged highland potato crops. Hurtado was forced to take unpopular austerity measures in an attempt to combat a foreign debt that had spiralled to US$7 billion. To his credit, he did manage to secure constitutional elections and the transition of power to a second democratically elected government - the first time in almost 25 years.

The 1984 general election was won by León Febres Cordero Rivadeneira and his broad-based centre-right coalition. Inspired by the Reagan and Thatcher administrations, the new government embarked on a "neo-liberal" programme, which stressed the importance of the free market, foreign investment, the export economy and the scaling-down of state powers. Yet the government was plagued by allegations of corruption and human rights abuses , and as the cost of living rose, public disquiet grew. In 1986, shortly after a failed coup attempt by the Airforce general, Frank Vargas , Febres Cordero was held hostage by Vargas supporters and was threatened with death unless Vargas was released. The president immediately complied, an act that was perceived as cowardly by the public. To add to the country's woes, in March 1987, a serious earthquake rocked the Oriente, killing hundreds, making tens of thousands homeless, and destroying 40km of the Trans-Andean oil pipeline. The economy was crippled as oil production stopped for six months while the pipeline was repaired, and Febres Cordero was forced to default payment on foreign debts totalling more than US$10 billion.