The Dominican economy expanded at a record rate under Balaguer. Favorable international prices for sugar provided the basis for this so-called Dominican miracle. Foreign investment, foreign borrowing, foreign aid, the growth of tourism, and extensive public works programs also contributed to high levels of growth. By the late 1970s, however, the expansion had slowed considerably as sugar prices dipped and oil prices rose. Rising inflation and unemployment diminished support for the government, particularly among the middle class.

The PRD, feeling the mood of the population and sensing support from the administration of United States president Jimmy Carter, nominated Silvestre Antonio Guzmán Fernández to oppose Balaguer in the elections of May 16, 1978. A relatively heavy 70 percent turnout seemed to favor the PRD; early returns confirmed this as Guzmán built a sizable lead. Early in the morning of May 17, however, military units occupied the Central Electoral Board and impounded the ballots. Clearly, Balaguer was attempting to nullify the balloting or to falsify the results in his favor. Only forceful remonstrances by the Carter administration, backed up by a naval deployment, moved Balaguer to allow the resumption of the vote count. Two weeks later, Guzmán's victory was officially announced.