Exiled by dictator Hugo Banzer in 1971, he co-founded in Chile the Revolutionary Left Movement (Movimiento de Izquierda Revolucionaria, MIR), originally a member of the Socialist International.

Upon returning to Bolivia in 1978, Paz's MIR cemented an alliance with the Movimiento Nacionalista Revolucionario de Izquierda of former President Hernán Siles.

The vote was annulled, however, due to the discovery of massive fraud on behalf of the government endorsed candidate, General Juan Pereda.

They, too, turned out to be a fiasco, as the UDP's Hernán Siles, with Paz as his vice-presidential running mate, finished first at the ballot box, but without attaining the 50% majority necessary for direct election.

Ominously, the ultra-right wing of the Bolivian military began to intimate that it would never stand for the installation in the Palacio Quemado of the "extremist" Siles and Paz, but the 1980 campaign continued unabated.

In October 1982 the results of the 1980 elections were upheld to save the country the expense of yet another vote, and Siles was sworn in, with the MIR's Jaime Paz as his vice-president.

At this point, the MIR (led by Paz) disassociated itself from the regime (1984), deserting the sinking ship when Siles' popularity sank to an all-time low.

During the 1985–1989 period, the MIR underwent major ideological transformations, with Paz and Oscar Eid advocating a break with Marxist notions and with any call for class-based struggle.

This seemingly unlikely MIR-ADN (Banzer) entente was officially referred to as the "Patriotic Accord," with both leaders announcing the forgiveness of past enmities for the betterment of Bolivia and the consolidation of the as yet fragile democratic process.

He opposed the complete eradication of the coca leaf, as proposed by the U.S. administration of George H. W. Bush while cooperating with the main thrust of the so-called War on Drugs.

His repeated pre-electoral statements about "rolling back" the neoliberal policies of his predecessor, Dr. Paz Estenssoro, came to nothing too, as the bulk of the privatization and de-statization reforms remained in place.

On the other hand, corruption allegations disrupted his term; these would eventually lead to the jailing of his chief aide and MIR co-founder, Oscar Eid, for drug trafficking connections.

This seems to have brought a rather sad end to a career marked by great expectations, many corruption scandals, never proved to be right and a share of electoral defeats.