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

On Friday, within hours of the Paraguayan Senate voting him out of office, Santiago Peña was placed under house arrest in Asunción on suspicion of breach of trust. Prosecutors ordered him held at home until he appears before their economic crimes unit on Saturday. Silvia Gonzalez, one of the prosecutors leading the case, said authorities had confirmed he was present and had made himself available for all legal proceedings.

All 44 senators present voted to remove him for misconduct in office. That makes Peña the second Paraguayan president removed by impeachment since the country returned to democracy in 1989. The vote came three days after regulators took over Ueno Bank, cutting nearly half of Paraguay's more than 6 million people off from their savings and bank cards. It set off the country's worst political crisis in more than a decade. Breach of trust carries up to five years in prison, or up to 10 in serious cases. The prosecutors' order also 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 ignored risky lending to insiders. He denies wrongdoing. The impeachment charges point to his stake in Ueno's holding company, which he divested under pressure last year, and to his appointment of Carvallo to head the regulator. They also say he allowed the state pension fund to deposit $355 million at the bank, beyond legal limits. Ueno had grown from obscurity into one of the country's largest banks by deposits within a few years, aided by more than $800 million in public money. It signed up more than two-thirds of Paraguay's adults, and its logo appeared everywhere from the national soccer stadium to street vendors' bank cards.

For ordinary customers, the failure was immediate. Overnight, they could not withdraw cash or use their cards. The digital lender had courted poor and unbanked Paraguayans with supermarket rebates, and Ueno says more than 1 million people 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. Some depositors began getting money back Thursday, starting with those holding up to 10 million guaranies, about US$1,500. Deposits are insured up to about $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.

As senators deliberated, protesters marched through downtown Asunción demanding their savings and accountability, chanting "Santi Peña to Tacumbu," a reference to 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 also had money at Ueno, called it an enormous betrayal of trust. In a separate case, prosecutors have charged 27 people, Vazquez among them, with crimes including breach of trust and attempted fraud. A judge ordered six former directors 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. In late October he met Treasury Secretary Scott Bessent in Washington. Regulators seized Ueno before dawn Tuesday. By Thursday afternoon Peña had offered to resign as his Colorado party turned on him, led by party chief and former president Horacio Cartes, his longtime mentor. By Friday his interior minister, chief of staff, legal adviser and political adviser had all quit. Impeachment denied him the immunity he would have kept had the Senate accepted his resignation. Weeks earlier, he had defended the bank, telling reporters a regulatory inquiry did not mean Ueno would close and accusing the media of frightening people.

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. Analysts say that once in office Peña quietly built his own power base, with Ueno as its linchpin. Miguel Carter of the research center DEMOS called it a Shakespearean drama in which Peña tried to displace his patron on fragile grounds. In September, senators loyal to Cartes pressed the central bank over leaked internal reports warning that Ueno's loans to related companies threatened its solvency. Cartes, once sanctioned by the U.S. Treasury over alleged corruption, publicly called for Peña's ouster after the collapse.

In a farewell message, Peña wrote that he did not want his presence to cause more division or instability. Vice President Pedro Alliana was sworn in Friday to serve until August 2028. He is himself under investigation over Ueno, and he inherits pressure to return depositors' money and punish those responsible. Peña's appearance before prosecutors on Saturday is the next step to watch.