The unexpected first-place finish by Vázquez in the first round of the presidential election in October 1999 shocked the Colorados and the National Party. Vázquez had gained support by promising not to touch the country's generous welfare system. More importantly, he promised to slow down liberalization of the economy, which called for more privatization of state assets. Batlle was seen as an old-guard conservative whose views on the economy did not inspire much confidence in Uruguayan citizens. Twice in plebiscites in the 1990s, Uruguayans had rejected proposed liberalization programs. Fearing a leftist victory, Batlle was forced to align the Colorados with their historic foe, the National Party. He positioned his party as a wiser and more moderate alternative to Broad Front, the leftist coalition. Yet, his economic positions remained quite similar to what Vázquez was offering: slow down the pace of liberalization and leave the country's nearly 100-year-old society untouched. It was his alliance with the National Party that brought victory. In exchange for their votes, Batlle named five Blancos to his cabinet.
At the beginning of 2000, the Colorados and the National Party held a slim majority in the Senate, with 17 of 31 seats, and a majority in the Chamber of Representatives, with 55 of 99 seats. The alliance was expected to allow Batlle more room to tinker with the economy. Faced with a shrinking economy and unemployment which had swelled to 15.2% as of 2001, the tough fiscal decisions Batlle faced at the beginning of his presidency in 2000 had in fact become even more pressing. As he makes his way through his five-year term as president, Batlle faces a declining Uruguayan economy that is being further devastated by the economic depressions in Argentina and Brazil.