A banking crisis has triggered a political upheaval in Paraguay, ending President Santiago Pena's tenure within just 4 days. The country's Senate voted to remove Pena on Friday following the collapse of Ueno Bank, a major digital lender accused of benefiting from its close links with the government. The former president was subsequently placed under house arrest as prosecutors began investigating allegations of corruption and misuse of public office.
The crisis began on November 3, when Paraguay's central bank seized Ueno after finding that it had fallen short of capital requirements. The bank's services, including its app, cards and money transfers, stopped working, leaving millions of customers unable to access their savings.
Why did Ueno Bank collapse?
Ueno had expanded rapidly from a finance company into one of Paraguay's largest banks by deposits. It attracted customers through supermarket discounts and other offers, eventually building a customer base of around 3 million people.
However, the bank's expansion relied heavily on public deposits. It reported holding around $800 million in government-linked funds in October, accounting for roughly a quarter of its total deposits.
Regulators found poorly documented loans to companies linked to the bank's owners and expenses that had incorrectly been recorded as assets. After these were adjusted, Ueno's capital dropped below half the legal minimum. The central bank had also raised concerns about its lending practices months earlier.
How Pena lost power
Pena's association with Ueno became central to the impeachment proceedings. The 47-year-old former International Monetary Fund economist had been a business partner in Grupo Vázquez, the conglomerate that owns the bank, until March 2025.
Lawmakers accused him of using political influence to channel public money into Ueno, including allowing the state pension fund to deposit $355 million beyond legal limits. Pena has denied wrongdoing.
On Thursday, he offered to resign, but Congress did not accept the proposal. The lower house voted 78-0 to impeach him, followed by a unanimous 44-0 vote in the Senate to remove him on Friday. Vice-President Pedro Alliana was sworn in as his successor.
Protests also erupted in Asuncion, with depositors demanding access to their savings. Demonstrators chanted, “We want your head, Peña!”
What happens to Ueno's depositors?
The central bank has said that deposits are insured up to approximately 228 million guaranies, or around $35,000, per customer. This covers 97 per cent of Ueno's customers, with payouts legally required within 15 days of the takeover.
Payments began on Thursday, initially covering balances of up to 10 million guaranies. The crisis has also affected businesses, retirees and public projects, with funds meant for infrastructure reportedly trapped in the bank.
What happens next?
Alliana will serve the remainder of Pena's presidential term, which ends in August 2028. Meanwhile, Pena remains under house arrest pending further proceedings over alleged breach of trust, influence peddling and misuse of public office.
Separately, prosecutors have charged 27 people linked to Ueno's management, including its founder Miguel Vazquez. Former central bank chief Carlos Carvallo is also facing an arrest warrant.