E-Paper
How a bank’s collapse brought down Paraguay’s president Santiago Peña in four days
The digital lender locked nearly half of Paraguay’s people out of their savings. Congress refused Peña’s offer to resign and removed him from office.
Prefer HTon Google
Former Paraguayan president Santiago Peña was placed under house arrest on Friday, shortly after the Senate removed him from office over the collapse of Ueno Bank, a digital lender with close ties to his government whose failure locked nearly half the country’s 6 million people out of their savings. It took four days for Ueno’s collapse to end what had been seen as one of South America’s most stable presidencies.
The central bank seized Ueno before dawn on Tuesday, November 3, after finding it short of capital. On Thursday, Peña offered to resign; Congress declined to accept the offer, and the lower house voted 78-0 to impeach him.
On Friday, all 44 senators present voted to remove him for misconduct in office, with the 45th abstaining. Peña stayed away from the trial and sent his lawyers. Vice-president Pedro Alliana was sworn in as president the same day.
Peña must remain at one of his homes in Asunción until he appears before prosecutors on Saturday morning. He is under investigation on suspicion of breach of trust, influence peddling and using public office for personal gain, the most serious of which carry up to 10 years in prison. Lawmakers have accused him of using his political influence to steer hundreds of millions of dollars in public funds into Ueno. Peña has denied wrongdoing.
He is the second Paraguayan president removed by impeachment since the end of General Alfredo Stroessner’s 35-year dictatorship in 1989.
Ueno Bank
Ueno grew in a few years from a finance company into one of Paraguay’s largest banks by deposits. It courted poor and unbanked customers with supermarket rebates, and by its own count, had about 3 million customers, around 60% of the country’s adults. It grew to more than 70 locations and sponsored the national football team and the country’s main stadium.
Public money fuelled this expansion. In October, Ueno reported holding roughly $800 million in public deposits, about a quarter of its total, including money from the state pension and health fund and from the operators of Paraguay’s hydroelectric dams.
The central bank warned Ueno in June that it was lending too much to companies tied to its owners, and Fitch Ratings moved its outlook on the bank to negative in October, citing rapid growth in its balance sheet and a high level of intangible assets.
Regulators investigating Ueno’s loans to companies linked to its owners found poorly documented lending, the central bank said, as well as expenses the bank had wrongly counted as assets.
Once those were corrected, Ueno’s capital fell below half the legal minimum. The central bank’s board voted late on Monday, November 2, to put Ueno into resolution, a process in which the regulator takes over a failing bank and transfers its deposits and recoverable assets to other lenders.
By Tuesday morning the bank’s app, cards and transfers had stopped working and its branches were shut. Even players on the national football team said they were not able to access their money.
Peña’s links with Ueno
Peña, a 47-year-old former International Monetary Fund economist, was a business partner in Grupo Vázquez, the family conglomerate that owns Ueno, until March 2025, when he divested his stake under pressure. Soon after taking office in August 2023, he named Carlos Carvallo, who had run the finance company that became Ueno, to head the central bank. Critics called the appointment a conflict of interest.
The central bank has said Carvallo recused himself from decisions involving Ueno.
The impeachment charges cite both links. Lawmakers also accuse Peña of letting the state pension fund deposit $355 million at the bank, beyond legal limits, and have questioned whether there was an institutional cover-up of Ueno’s troubles. Opposition politicians accused Peña’s government of failing to supervise the bank properly and allowing public money to be exposed to excessive risk.
Peña defended the bank until weeks before it failed. In October, he told reporters that a regulatory inquiry did not mean Ueno would close, and accused the media of frightening the public. He has since said he will cooperate with investigators.
Impeachment in Paraguay
Paraguay’s Constitution allows Congress to remove a president through a political trial, or juicio político, for misconduct in office or for crimes. The Chamber of Deputies brings the accusation, which needs a two-thirds majority of members present. The Senate then tries the president, and a second two-thirds vote removes him.
The process can move within days. In June 2012 the Senate removed Fernando Lugo, a left-wing former Catholic bishop, after a one-day trial. Lugo was the first president ousted this way since the dictatorship ended.
Had Congress accepted Peña’s resignation offer, he would have taken up the Senate seat reserved for former presidents, and with it legal protection from prosecution. A joint session called to consider the offer lost its quorum after lawmakers from Peña’s Colorado party walked out, and the impeachment went ahead.
Peña’s party abandons him
As depositors queued outside Ueno’s branches, protesters marched through downtown Asunción demanding their savings back, chanting “We want your head, Peña!” with signs that read “Give us back our money.”
Peña owed his rise to Horacio Cartes, a tobacco magnate who was president from 2013 to 2018 and now leads the Colorado party, which has governed Paraguay for all but five years since 1947. Cartes, once sanctioned by the US Treasury over alleged corruption, made Peña finance minister and twice backed him for the presidency.
In office, Peña was seen as a key ally of US President Donald Trump in South America, and met US treasury secretary Scott Bessent in late October.
Closer to home, senators loyal to Cartes questioned the central bank in September about Ueno’s risky lending to related companies.
After the collapse, Cartes withdrew his support, and both of the party’s main factions in the lower house backed impeachment. “We will not side with the theft of public, private and pension funds,” Cartes wrote in a statement on social media.
What happens to depositors?
Ueno’s deposits are insured up to about 228 million guaraníes (roughly $35,000) per person, which the central bank says covers 97% of the bank’s customers. By law, the money must be paid within 15 days of the takeover. Payouts began on Thursday, starting with balances of up to 10 million guaraníes (about $1,500). The state pension fund said pensions would be paid as usual and moved the roughly 32,000 retirees who drew them through Ueno to another bank.
But the fallout spread beyond savers. A ride-hailing app that relied on Ueno shut down, leaving 3,000 drivers without work. The state power company says $21 million in loans from the Inter-American Development Bank and Taiwan, earmarked for public works, is trapped at the bank. Paraguay’s bonds posted some of the worst losses in emerging markets this week, and the guaraní slid against the US dollar.
The central bank calls the collapse an isolated case and says the wider financial system is safe.
The criminal cases
In a separate case against Ueno’s executives, prosecutors have charged 27 people, including Ueno’s founder and former chief executive Miguel Vázquez, with crimes such as breach of trust and attempted fraud. A judge has ordered six former directors, Vázquez among them, to be held in pretrial detention, and two others confined to their homes with electronic monitors. Vázquez is held at Tacumbú, Asunción’s main prison, and authorities have seized luxury cars, a yacht and two small planes linked to him. Ueno has made no public statement, and lawyers for several of the detained executives said they needed time to review the allegations.
Prosecutors on Friday also issued an arrest warrant for Carvallo, who stepped down as central bank chief this week at Peña’s request. It was not immediately clear whether he was in custody.
What comes next?
Alliana, 52, a former governor of Ñeembucú department and a former speaker of the lower house, will serve out Peña’s term, which ends in August 2028. He is himself under investigation over the bank, though the lower house declined to open impeachment proceedings against him. “The Paraguay we receive today has urgent needs,” he said after taking the oath, as his government faces pressure to return depositors’ money.
Peña will remain under house arrest while prosecutors determine the final charges against him.
(With inputs from AP, Reuters and Bloomberg)
