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

On Friday, Santiago Peña went from president of Paraguay to a man confined to his own home. Prosecutors ordered him held there on suspicion of breach of trust, shortly after the Senate removed him from office. All 44 senators present voted to oust him for misconduct, which makes him the second Paraguayan president removed by impeachment since the country returned to democracy in 1989.

The trigger was the collapse of Ueno Bank. Three days before the verdict, regulators took over the lender, and nearly half of Paraguay's more than 6 million people lost access to their savings and bank cards. It set off the country's worst political crisis in more than a decade. Prosecutors say Peña must stay at home until he appears before their economic crimes unit on Saturday. Silvia Gonzalez, one of the lead prosecutors, said authorities had confirmed he was present and had made himself available for all legal proceedings. Breach of trust carries up to five years in prison, or up to 10 in serious cases. The same order calls for the arrest of Carlos Carvallo, who ran the finance company that became Ueno until Peña named him central bank chief in 2023. It was not immediately clear whether Carvallo had been taken into custody.

Lawmakers accuse Peña of using his political influence to steer hundreds of millions of dollars in public funds into Ueno while regulators overlooked risky insider lending. The impeachment charges cite his stake in Ueno's holding company, which he divested under pressure last year, and his appointment of Carvallo to lead the regulator. They also say he let the state pension fund deposit $355 million at the bank, beyond legal limits. Peña denies wrongdoing. In a farewell message before the vote he wrote that he did not want his presence to cause more division or instability, and that he said goodbye with gratitude, without ignoring the anguish of people waiting for answers. Weeks earlier he had defended the bank, telling reporters last month that a regulatory inquiry did not mean Ueno would close and accusing the media of frightening people.

Vice President Pedro Alliana was sworn in Friday to serve out the term, which ends in August 2028. He is also under investigation in connection with Ueno's collapse, and he inherits a government under pressure to return depositors' money and punish those responsible.

In the streets, anger has grown daily. As senators deliberated, protesters marched through downtown Asunción demanding their frozen savings and accountability, chanting "Santi Peña to Tacumbu," the capital's main prison, where Ueno founder and former CEO Miguel Vazquez is now held. Yinal Lopez, who works at the state electricity company, whose employee pension fund had money at Ueno, called it an enormous betrayal of trust and said the president used the people's money to do whatever he wanted.

Ueno had courted the poor and unbanked with generous supermarket rebates, and by its own account more than 1 million Paraguayans opened their first bank account there. Even players on the national soccer team, which Ueno sponsored through a World Cup upset of Germany this year, say their accounts are frozen. Andrew Nickson, a Paraguay specialist at the University of Birmingham, said the ripple effect was immense and has angered many people who normally pay little attention to politics. Some depositors began recovering money Thursday, starting with those holding up to 10 million guaranies, about US$1,500. Deposits are insured up to roughly $35,000, which the central bank says covers 97 per cent of customers. It calls the collapse an isolated case and says the wider financial system is safe.

Ueno rose from obscurity to become one of the country's largest banks by deposits within a few years, with more than $800 million in public money fuelling its growth. It signed up more than two-thirds of Paraguay's adults. In a separate case, prosecutors have charged 27 people, including Vazquez, with crimes such as breach of trust and attempted fraud. A judge ordered six former directors, Vazquez among them, held in pretrial detention and two others under house arrest. Authorities seized nine luxury cars from Vazquez's home, plus a yacht and two small planes linked to him.

Peña's fall was fast. He met Treasury Secretary Scott Bessent in late October. Regulators seized Ueno before dawn Tuesday. By Thursday afternoon he had offered to resign as his Colorado party turned on him, led by former president Horacio Cartes, the party chief and his longtime mentor. By Friday his interior minister, chief of staff, legal adviser and political adviser had quit. Impeachment denied him the immunity he would have kept had the Senate accepted his resignation. Analysts say he had tried to build his own power base apart from Cartes, with Ueno at its center. Cartes, once sanctioned by the U.S. Treasury over alleged corruption, publicly called for his ouster. Next come Peña's Saturday appearance before prosecutors, the question of Carvallo's whereabouts, and Alliana's task of getting depositors their money back.