QUITO (Reuters) - Ecuador`s new President Jamil Mahuad was sworn into office on Monday promising to turn around the Andean nation`s dire economic situation and find a solution to a simmering border conflict with Peru. In a ceremony in Congress, Mahuad draped the presidential sash made by nuns over his chest and set a conciliatory tone in an hour-long inauguration speech that followed. The presidents of Bolivia, Colombia, Costa Rica and Venezuela were among the 600 dignitaries attending. The 49-year-old Harvard-educated lawyer had started the day by resigning as mayor of capital city Quito and making changes in the country`s top military ranks. Mahuad takes over as Ecuador`s 41st president and the eighth in the last 20 years to rule a democracy shaken with instability. He replaces President Fabian Alarcon, elected in February 1997 by Congress after Abdala Bucaram, nicknamed "El Loco" or "the Crazy One," was removed by congressional vote. Top priority for the new administration is a resolution to a long-standing border dispute between Ecuador and Peru that triggered a brief 1995 war that killed dozens of soldiers. In the latest flare-up Peru accused Ecuador last week of moving soldiers beyond an agreed demilitarized zone along the remote, jungle frontier. Ecuador denied the manoeuvre. Representatives from

neutral guarantor nations met in Quito over the weekend to hammer out an agreement aimed at avoiding an armed clash while opposing troops

stood "face to face". Mahuad also stressed reactivating the Andean nation`s economy, which has been dragged down by a $1.35 billion fiscal deficit, falling oil export earnings and Pacific coast damages wrought by El Nino. The new president forecast that by the end of his term in 2003 inflation would stand at less than 10 percent, annual economic growth at 5 percent and exports at $7.2 billion. He said he will tie economic growth to the fight against widespread poverty in this nation of 11.9 million people, where the minimum monthly wage is only $20. To help the impoverished, the new government plans to boost spending on social services to $200 million from $120 million while counting on new foreign investment to pull the country`s accounts back into balance, said Mahuad. Mahuad, a divorcee who as mayor of Quito won a reputation for hard work, was formerly labour minister under president Osvaldo Hurtado and served in Congress as a deputy for Pichincha province, which encompasses the capital. He lost his first presidential bid in 1988 before prevailing in July elections over banana magnate Alvaro Noboa.