The consolidation of a nation-state in Ecuador began at the end of the nineteenth century, more than half a century after it won independence from Spain, when an expansion of foreign trade, particularly the export of cacao, accelerated the accumulation of capital and strengthened the country's links with the international market. There emerged within the coastal oligarchy a group of financiers and merchants distinct from the landowners and able to impose its political leadership. This commercial bourgeoisie oversaw the liberal transformation of the country in which the support of the popular sectors was at times of critical importance. Through occasional uprisings the coastal peasantry had for some time challenged the old oligarchic regime. Urban labour and the middle class were also integral to the liberal triumph and responsible for the intermittent emergence of radical ideas. On 5 June 1895, following a popular uprising in Guayaquil, General Eloy Alfaro, the Liberal-radical leader, was appointed jefe supremo of the republic. This was the beginning of the Liberal Revolution.

Liberalism was based upon Ecuador's integration into the international economy, national economic integration, most notably by means of the Quito—Guayaquil railway, and the restoration of state authority over the Church. Church and state were separated, the clergy were forcibly deprived of many of their functions and privileges and the Church lost much of its land through expropriation under the so-called Ley de Manos Muertas — measures which constituted a major political and ideological challenge to the traditional order.