Paraguay's Ousted President Peña Placed Under House Arrest After Senate Removal Over Ueno Bank Collapse

On Friday, Paraguayan prosecutors ordered Santiago Peña held at his home on suspicion of breach of trust. The order came shortly after the Senate removed him from the presidency. The attorney general's office confirmed to The Associated Press that he had been detained there, and that he would stay until he can be brought before the prosecutors' economic crimes and anti-corruption unit. The order also called for the arrest of Carlos Carvallo, the former central bank chief Peña appointed. It was not immediately clear whether Carvallo was in custody.

The Senate vote was unanimous: all 44 senators present voted to remove Peña for misconduct in office. It came three days after regulators seized Ueno Bank, which cut nearly 3 million customers off from their savings and bank cards. Lawmakers accuse Peña of using his political influence to steer hundreds of millions of dollars in public funds into the bank while regulators overlooked risky lending to insiders. Peña denies wrongdoing. He had submitted his resignation on Thursday, but Congress did not accept it. His lawyers, Ricardo Preda and Adolfo Ferreiro, argued that lawmakers should have approved his departure rather than press ahead with the impeachment trial. In a farewell message before the verdict, Peña wrote that he did not want his presence to cause greater division or instability, and that he said goodbye with gratitude, without ignoring the anguish of those awaiting answers.

Vice President Pedro Alliana, 52, was sworn in Friday to serve out the term, which ends in August 2028. A veteran of the long-ruling conservative Colorado party, he is a former governor of Ñeembucú province and a former speaker of the lower house. He is not clear of the scandal: prosecutors are investigating him too, and on Thursday lawmakers shelved an opposition bid to impeach him. He takes over under pressure to return depositors' money and punish those responsible.

The pace of events was dizzying. Regulators seized Ueno before dawn on Tuesday. By Thursday afternoon Peña had offered to resign as the Colorado party turned on him, led by former President Horacio Cartes, the party chief and Peña's longtime mentor. By Friday his interior minister, chief of staff, legal adviser and political adviser had all quit. Peña, a former International Monetary Fund economist, owed his rise to Cartes, a tobacco magnate who made him finance minister and twice backed him for president over rival factions' objections. Analysts say that once in office Peña quietly built a rival power base, with Ueno, flush with public deposits, central to both his business empire and his courting of provincial governors. Miguel Carter of the research center DEMOS called it a Shakespearean drama in which Peña tried to displace his patron on very fragile grounds. In September, senators loyal to Cartes demanded answers from the central bank about Ueno's lending, citing leaked internal reports warning that loans to related companies threatened its solvency. When the bank fell, Cartes, once sanctioned by the U.S. Treasury over alleged corruption, publicly called for Peña's ouster. Andrew Nickson of the University of Birmingham said Cartes put the nail in the coffin.

Ueno rose from obscurity to become Paraguay's fifth-largest bank by deposits within a few years, with more than $800 million in public money fueling its growth. It signed up more than two-thirds of the country's adults, and its logo appeared from the national soccer stadium to street vendors' bank cards. The impeachment charges cite Peña's stake in Ueno's holding company, which he divested under pressure last year, and his appointment of a former Ueno executive to run the central bank that regulated it. Lawmakers also accuse him of letting the state pension fund deposit $355 million at the bank, beyond legal limits. Removal bars Peña from the lifetime Senate seat granted to elected former presidents, and from the immunity that comes with it.

For ordinary people the collapse was immediate. Customers could no longer withdraw cash or pay with their cards. Ueno had courted the poor and unbanked with supermarket rebates, and says more than 1 million Paraguayans opened their first account there. Even national team players, whose World Cup run this year, including an upset of Germany, Ueno sponsored, say their accounts are frozen. As senators deliberated, protesters marched through downtown Asunción chanting "Santi Peña to Tacumbú," a reference to the capital's main prison. Yinal López, a worker at the state electricity company whose pension fund had money at Ueno, called it an enormous betrayal of trust.

Some depositors began recovering money Thursday, starting with those holding up to 10 million guaraníes, about $1,600. Deposits are insured up to about $37,000, which the central bank says covers nearly all customers; it calls the collapse an isolated case and says the wider financial system is safe. Prosecutors have charged 27 people, including controlling shareholder Miguel Vázquez, with crimes including breach of trust and attempted fraud. Six bank directors are in pretrial detention. Authorities have seized nine luxury cars from Vázquez's home, plus a yacht and small planes linked to him. Prosecutors are also investigating current and former central bank and pension fund officials, and whether Carvallo is in custody is the next thing to watch.