Paraguay’s Senate has voted to remove President Santiago Peña from office, and he has been placed under house arrest, following the collapse of a government-linked digital bank that left millions of people unable to reach their money [1]. He is only the second president ousted by impeachment since the end of Gen. Alfredo Stroessner’s 35-year dictatorship in 1989 [1].
Peña was ordered to stay at one of his homes in Asunción until he appears before prosecutors on Saturday morning. The charges are breach of trust, influence peddling, and using public office for personal gain, and the most serious carry up to 10 years in prison [1]. Lawmakers accuse him of using his political influence to steer hundreds of millions of dollars in public funds into Ueno while regulators overlooked risky lending to the bank’s own insiders. Peña denies wrongdoing [1].
How the crisis unfolded
Earlier in the week, Paraguay’s central bank placed Ueno into resolution, the strongest step short of liquidation, after finding that its solvency ratio had fallen to less than half the legal requirement [2]. Resolution lets regulators move a failing bank’s deposits to other institutions before selling off what remains [2].
Ueno’s customers could no longer withdraw cash, make digital payments or use their cards [1, 2]. The bank had said it served about 3 million customers, roughly 60 percent of Paraguay’s adult population [2]. It had won over poorer and unbanked Paraguayans with supermarket cashback offers, and more than 1 million people opened their first bank account there, according to the bank [1, 2].
Ueno was also a highly visible brand. It sponsored the national football team and had its name across the country’s main stadium, and players say they too are shut out of their money [1, 2].
Why the bank failed
Citing the Paraguayan newspaper ABC Color, Al Jazeera reports that regulators found a pattern of risky lending to insiders, meaning loans approved for the bank’s executives, major investors, their families or their own businesses [2]. Ueno lent $146 million to companies tied to its owner, Grupo Vazquez. Investigators found the loans exceeded legal limits and lacked enough collateral [2].
Regulators also found that the loans were poorly documented and that some expenses had been wrongly counted as assets. Once the books were corrected, Ueno’s capital was less than half the legal minimum [2].
The link to the president
Protesters hold Peña personally responsible. Until March 2025, he held a stake in Grupo Vazquez, which owns Ueno [2]. After taking office in 2023, he appointed Carlos Carvallo, a former head of Ueno’s predecessor company, to lead the central bank. Carvallo has since resigned [2]. Demonstrators are also angry that so much public pension money was placed with the bank despite warnings about its insider lending [2].
Ueno held about $800 million of public funds, including roughly $380 million from the state pension and health fund, according to central bank data cited by Al Jazeera [2].
Peña first announced his resignation on Thursday, but lawmakers filed impeachment charges anyway [2]. He asked for 72 more hours to prepare his defence, saying he had been given less than 12 hours to answer “an accusatory writ and about 300 pages of attachments.” In his words: “That is not due process.” [2]
Opposition politicians wanted him formally removed rather than allowed to resign. They argue that a resignation would keep him eligible to become a senator for life and could shield him from prosecution [2].
Protests and public anger
Crowds marched on Congress in Asunción this week. Protester Luis Pineda said: “Santiago Pena and the Colorado Party have stolen all our savings.” He added: “We are fed up with 70 years of plunder,” an apparent reference to the Colorado Party, which has governed Paraguay almost without interruption for more than seven decades [2].
Wider fallout
The effects have reached well beyond savers. A ride-hailing app that depended on Ueno shut down, leaving 3,000 drivers without work [1]. The state power company says $21 million in loans from the Inter-American Development Bank and Taiwan, meant for public works, is stuck at the bank [1]. Paraguay’s bonds have suffered some of the worst losses among emerging markets this week, and the guaraní has weakened against the dollar [1].
Getting money back
Congress rushed through a law on Wednesday creating a state-guaranteed fund to repay depositors within five business days. Payouts began Thursday with small accounts of up to 10 million guaraníes, about $1,500 to $1,600 [1, 2]. Deposits are insured up to roughly $35,000 to $36,000 per customer, which the central bank says fully covers about 97 percent of Ueno’s customers [1, 2]. It describes the collapse as an isolated case and says the wider financial system is safe [1].
Criminal cases
Attorney General Emiliano Rolon Fernandez has ordered three criminal investigations covering oversight of the bank, the handling of its failure and the placement of public funds there. They include allegations involving Peña and other current and former officials [2]. A judge has ordered six Ueno executives, including founder Miguel Vazquez and bank president Juan Manuel Gustale, held pending trial, and two others were placed under house arrest. Prosecutors have charged 27 bank officials and associates with breach of trust and attempted fraud [2].
Not Paraguay’s first banking crisis
Paraguay went through a prolonged banking crisis from the mid-1990s to the early 2000s. In 1995 the central bank shut Bancopar, which had liquidity problems and also lent to companies linked to its owners. Three more banks failed over risky practices and weak oversight, and the government had to cover customers’ deposits at all four, damaging public trust in the banking system [2].
Similar insider-lending and fraud cases have brought down banks elsewhere, including Banco Intercontinental in the Dominican Republic in 2003, with losses of $2.2 billion, and Banco Espírito Santo in Portugal in 2014, with losses of $4.8 billion [2].
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