Although democratic regimes in Latin America since the early 1980s have been surprisingly durable, party systems in much of the region continue to experience very high levels of electoral instability. A critical juncture approach to institutional change suggests that variation in party system stability is related to the impact of market liberalization in the 1980s and 1990s on the programmatic alignment—or dealignment—of partisan competition. Market reforms that were adopted by conservative leaders and opposed by a major leftist rival aligned party systems programmatically, allowing societal opposition to be channeled into institutionalized forms of competition that were highly stable in the postadjustment era. By contrast, bait-and-switch reforms adopted by populist or leftist leaders were programmatically dealigning for party systems, leaving them vulnerable to highly destabilizing reactive sequences in the aftermath to the reform process—including mass social protests, the demise of historic conservative parties, and the outflanking of traditional populist or leftist parties by more radical, anti-neoliberal outsiders. The political dynamics of market-based economic adjustment thus heavily conditioned the ways in which party systems would process the postadjustment revival of populist and leftist alternatives in the region.