While not very apparent at the time, a significant shift in President Reagan's El Salvador policy came when George Shultz replaced Alexander Haig as secretary of state in July 1982. Asserting that American foreign policy no longer reflected “consistency, clarity, and steadiness of purpose,” Haig had serious differences of opinion with NSC Advisor William Clark and Defense Secretary Caspar Weinberger over Israel's 1982 incursion into Lebanon. It is also likely that White House Chief of Staff James A. Baker urged Haig to resign. Shultz served in the top diplomatic posting for six and a half years – the longest tenure since Dean Rusk in the 1960s.

Like his predecessor, Shultz saw the Central America issue as a clear case of global communist aggression, reflecting in his memoir: “The old forces of dictatorship had taken a new form: that of a command economy, a self-appointed elitist vanguard, and guerrilla warfare. Nicaragua had become its base, all of Central America its target. El Salvador was first on the list.” Unlike Haig, though, Shultz believed that there were deep structural forces at play in the conflict. He told a House subcommittee in March 1983 that there were “legitimate social, economic, and political grievances” fueling the conflict. Yet, given the continued external assistance to the FMLN from Cuba and the Soviet bloc, the United States could not simply focus on the underlying inequalities. Rather, the United States had to help alleviate suffering through political and economic reform as well as “counter a Communist strategy which seeks to aggravate and exploit these problems and so to seize power by force of arms.”

It appeared that Shultz had become the engagement strategy's proponent par excellence, developing a grin-and-bear-it attitude in balancing the contradictions in American foreign policy in Central America.