In April 1959, however, Stroessner grudgingly decided to heed the growing call for reform within the army and the Colorado Party. He lifted the state of siege, allowed opposition exiles to return, ended press censorship, freed political prisoners, and promised to rewrite the 1940 constitution. After two months of this democratic "spring," the country was on the verge of chaos. In late May, nearly 100 people were injured when a student riot erupted in downtown Asunción over a bus fare increase. The disturbance inspired the legislature to call for Ynsfrán's resignation. Stroessner responded swiftly by reimposing the state of siege and dissolving the legislature.

An upsurge in guerrilla violence followed, but Stroessner once again parried the blow. Several factors strengthened Stroessner's hand. First, United States military aid was helping enhance the army's skills in counterinsurgency warfare. Second, the many purges of the Colorado Party had removed all opposition factions.In addition, Stroessner's economic policies had boosted exports and investment and reduced inflation, and the right-wing military coups in Brazil in 1964 and Argentina in 1966 also improved the international climate for nondemocratic rule in Paraguay.

Another major factor in Stroessner's favor was a change in attitude among his domestic opposition. Demoralized by years of fruitless struggle and exile, the major opposition groups began to sue for peace. A Liberal Party faction, the Renovation Movement, returned to Paraguay to become the "official" opposition, leaving the remainder of the Liberal Party, which renamed itself the Radical Liberal Party (Partido Liberal Radical--PLR), in exile. In return for Renovationist participation in the elections of 1963, Stroessner allotted the new party twenty of Congress's sixty seats. Four years later, PLR members also returned to Paraguay and began participating in the electoral process. By this time, the Febreristas, a sad remnant of the once powerful but never terribly coherent revolutionary coalition, posed no threat to Stroessner and were legalized in 1964. The new Christian Democratic Party (Partido Demócrata Cristiano--PDC) also renounced violence as a means of gaining power. The exhaustion of most opposition forces enabled Stroessner to crush the Paraguayan Communist Party (Partido Communista Paraguayo--PCP) by mercilessly persecuting its members and their spouses and to isolate the exiled Colorado epifanistas (followers of Epifanio Méndez Fleitas) and democráticos, who had reorganized themselves as the Popular Colorado Movement (Movimiento Popular Colorado--Mopoco).