Paraguay's Peña Ousted by Senate, Placed Under House Arrest After Ueno Bank Collapse

On Friday, the Paraguayan Senate voted to remove President Santiago Peña from office, and within hours prosecutors had ordered him held under house arrest on suspicion of breach of trust. All 44 senators present voted against him on a charge of misconduct in office. He is the second Paraguayan president removed by impeachment since the country returned to democracy in 1989. Earlier that day he had failed to show up for his own trial, despite promising to defend himself in person.

The verdict came three days after regulators took over Ueno Bank. The takeover locked nearly half of Paraguay's more than 6 million people out of their savings and bank cards, and it set off the country's worst political crisis in more than a decade. Prosecutors ordered Peña to stay at home until he appears before their economic crimes unit on Saturday. Silvia González, one of the prosecutors leading the case, said authorities had confirmed he was at home and making himself available for legal proceedings. Breach of trust carries up to five years in prison, or up to 10 in serious cases. The 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 overlooked risky insider lending. The charges cite his stake in Ueno's holding company, which he divested under pressure last year, and his appointment of Carvallo. They also say he allowed the state pension fund to deposit $355 million at the bank, beyond legal limits. Peña has denied wrongdoing. In a farewell message he wrote that he did not want his presence to be a cause of greater division or instability, and that he said goodbye with gratitude, without ignoring the anguish of those waiting for answers. Vice President Pedro Alliana was sworn in to serve out the term, which ends in August 2028. Alliana is also under investigation in connection with Ueno's collapse.

For ordinary Paraguayans, the collapse was immediate. Customers could no longer withdraw cash or use their cards. The digital lender had courted the poor and unbanked with generous supermarket rebates, and more than 1 million people opened their first bank account there, according to Ueno. Even players on the national soccer team, which Ueno sponsored, say their accounts are frozen. Some depositors began recovering money Thursday, starting with those holding up to 10 million guaraníes, about $1,500. Deposits are insured up to about $35,000, which the central bank says covers 97% of customers; it calls the failure an isolated case and says the wider financial system is safe.

As senators deliberated, protesters marched through downtown Asunción chanting "Santi Peña to Tacumbú," a reference to the main prison where Ueno's founder and former CEO, Miguel Vázquez, is held. Yinal López, who works at the state electricity company, whose employee pension fund had money at Ueno, called it an enormous betrayal of trust. Prosecutors have separately charged 27 people, Vázquez 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 Vázquez's home, plus a yacht and two small planes linked to him.

Ueno had risen from obscurity to become one of Paraguay's largest banks by deposits in 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. Analysts say high-level connections helped shield it from scrutiny. José Tomás Sánchez of the National University of Asunción argued the central bank lost credibility and neutrality under Peña. Peña defended the bank until weeks before it failed, telling reporters last month that a regulatory inquiry did not mean it would close.

His fall was fast. In late October he met Treasury Secretary Scott Bessent in Washington. Regulators seized Ueno before dawn Tuesday. By Thursday afternoon he had offered to resign as the Colorado party turned on him, led by former President Horacio Cartes, his 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 Peña had tried to build his own power base apart from Cartes, with Ueno as its linchpin. Cartes, once sanctioned by the U.S. Treasury over alleged corruption, struck back and publicly called for his ouster.

Next, Peña appears before prosecutors Saturday, while Alliana inherits pressure to return depositors' money and punish those responsible.