This article examines the incidence of liberal and “illiberal” democracy in Latin America from 1978 through 2004. It demonstrates, first, that illiberal democracy—which combines free and fair elections with systematic constraints on citizens’ rights—became the norm throughout the region. Second, it shows that regime transitions most often ended not in liberal democracy but in illiberal democracy. Third, rare events logit analysis reveals that two variables, hyperinflation and presidential elections, had significant impact on movement toward fuller democracy. As a form of short-term economic shock, hyperinflation generates widespread discontent; given the opportunity to vote, citizens elect reformist opposition candidates who, once in office, remove controls on civil liberties. This scenario substantially increases the likelihood of transition from illiberal to liberal democracy.