A climate of labor unrest, imminent economic crisis, and growing activism on the political left confronted Lacalle when he assumed office on March 1, 1990. Lacking a parliamentary majority, he formed a "European-style" coalition, called National Coincidence (Coincidencia Nacional), with the Colorado Party, the first such interparty sharing of power in a quarter-century. Nevertheless, the two parties were able to agree only on sharing four cabinet appointments and supporting the new government's fiscal-reform measures.

Lacalle gave the posts of ministers of housing and social promotion, industry and energy, public health, and tourism to the Colorado Party in exchange for the necessary support in the General Assembly for approving various controversial projects regarding education, the fiscal deficit, and the right to strike- -measures that labor unions and the left opposed. Lacalle chose Mariano Brito, a law professor with no previous government service, as his defense minister; Enrique Braga, one of his principal economic advisers, as his economy and finance minister; Héctor Gros Espiell, a lawyer-diplomat, as his foreign affairs minister; and Juan Andrés Ramírez, a lawyer-professor who had not previously occupied any key position, as his interior minister.

At the top of Lacalle's policy priorities were regional economic integration and moving Uruguay toward a market economy, largely through privatization of inefficient state enterprises and through free trade. Unlike his predecessor, however, Lacalle found himself confronted with a Marxist mayor of Montevideo, whose Broad Front coalition was opposed to economic restructuring. By mid-1990 the prospects for a "co-habitation arrangement" between the neoliberal, rightof -center president and Vázquez appeared poor. Shortly after taking their respective offices, the two leaders publicly clashed on departmental government prerogatives. Vázquez sought to pursue autonomous policies in areas such as transportation, public works, and health and to decentralize power in Montevideo Department. Lacalle opposed Vázquez's attempts to expand his departmental powers, arguing that a more powerful mayor of Montevideo would undermine the position of the executive branch. The confrontation that effectively ended the co-habitation arrangement took place over Montevideo's new budget, which Lacalle threatened to block.

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Source: U.S. Library of Congress