After serving as minister of planning and becoming the strongest advocate of neoliberal reforms in the Paz Estenssoro government, Sánchez de Lozada became a presidential candidate in 1989. Chosen by Paz Estenssoro's MNR party, Sánchez de Lozada replaced the aging president as leader of the strongest Bolivian party. Although he obtained the first plurality of votes in the 1989 election, Sánchez de Lozada lost the presidency when Congress elected leftist Jaime Paz Zamora with the support of the legislators loyal to conservative Hugo Bánzer. Sánchez de Lozada positioned himself as the leader of the opposition and benefited from Paz Zamora's weak support in Congress. After four years of Paz Zamora, Bolivians were ready to support Sánchez de Lozada for president. He served during the 1993–97 period and his government was characterized by moderate economic growth, solid fiscal policies and a conscious effort to modernize the national economy. Sánchez de Lozada's good standing with the international lending community helped Bolivia achieved an unprecedented period of economic stability and social peace. Sánchez de Lozada, aware of his ethnic and cultural difference with the indigenous majority in Bolivia, made especial efforts to reach out to those communities by appointing more indigenous leaders to high government posts and by targeting many of the government social programs to help alleviate indigenous poverty. Although many observers believed that Sánchez de Lozada would retire from politics at age 67 after ceding power in 1997, he decided to return to electoral politics after President Bánzer resigned for health reasons and Vice President Quiroga served the remaining of the term. In the 30 June 2002 election, Sánchez de Lozada obtained the first plurality of votes with 22.5%, edging indigenous leader Evo Morales (20.9%) and populist Manfred Reyes Villa (20.9%). Congress ratified Sánchez de Lozada as president.
Although many observers expect the second Sánchez de Lozada administration to show the same leadership and fiscal discipline that characterized his previous administration, others acknowledge that, because of his age, it is possible that the 72-year-old president will not complete his five-year term.