The Paraguayan Senate voted to remove President Santiago Peña from office and placed him under house arrest on a Friday following the collapse of a government-linked financial institution. The removal came after regulators seized Ueno Bank. Peña is scheduled to appear before prosecutors on Saturday to face charges of breach of trust, influence peddling, and using public office for personal gain.
The crisis began three days before the impeachment when regulators took control of Ueno Bank. Lawmakers alleged that Peña used his political influence to direct hundreds of millions of dollars in public funds into the bank while regulators ignored evidence of risky insider lending. Peña has denied all wrongdoing. He is the second president to be ousted by impeachment in Paraguay since the conclusion of Gen. Alfredo Stroessner’s 35-year dictatorship in 1989.
The bank's seizure immediately halted all customer transactions, including cash withdrawals, savings access, and card purchases. Ueno Bank, a digital lender, had targeted the unbanked and lower-income populations with supermarket rebates, leading more than 1 million people to open their first accounts there. The impact extended to the national soccer team, which the bank sponsored, and a ride-hailing app that was forced to shut down due to the collapse.
On a national scale, the crisis has stalled major public infrastructure projects. The state power company reported that $21 million in international loans from the Inter-American Development Bank and Taiwan is currently trapped within the seized bank. This financial instability has caused the national currency, the guaraní, to lose value against the U.S. dollar and has led to significant losses for Paraguay’s bonds in emerging markets.
The legal process for the former president moved quickly, with the most serious charges carrying a potential prison sentence of up to 10 years. Prosecutors began the process of returning funds to small depositors on a Thursday, prioritizing those with balances up to 10 million guaraníes (about $1,500). While the central bank maintains that the collapse is an isolated incident and that the broader banking system remains stable, the ongoing prosecution of Peña and the recovery of international loan funds will determine the long-term political and economic stability of the country. Peña remains under house arrest in Asunción pending his Saturday court appearance.