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

On Friday, outside Congress in Asuncion, a roar went up from a plaza packed with depositors, retirees and students in national soccer jerseys. Inside, all 44 senators present had just voted to remove President Santiago Pena for misconduct in office. The crowd waved Paraguayan flags, sang, hugged and chanted "Dictatorship never again!" Pena became the second Paraguayan president removed by impeachment since Gen. Alfredo Stroessner's 35-year dictatorship ended in 1989.

Hours later he was placed under house arrest at one of his homes in the capital, on suspicion of breach of trust, influence peddling and using public office for personal gain. The most serious charges carry up to 10 years in prison. He is to appear before prosecutors Saturday morning. Police ringed the house Friday night while crowds gathered outside, vowing to keep vigil until morning so he could not escape. Pena has denied wrongdoing. In a farewell message before the verdict, he 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 waiting for answers.

The trigger was Ueno Bank, which regulators seized before dawn on Tuesday. Customers could no longer withdraw cash, reach their savings or use their cards. The lockout touched nearly half of Paraguay's 6 million people. Ueno was a digital lender that had courted the poor and unbanked with supermarket rebates; by its own count, more than 1 million Paraguayans opened their first bank account there. Even members of the national soccer team, which Ueno sponsored, say they cannot reach their money.

The damage has spread. A ride-hailing app that depended on Ueno shut down, leaving 3,000 drivers without work. The state power company says $21 million in loans from the Inter-American Development Bank and Taiwan, meant for public works, is trapped in the bank. Paraguay's bonds have had some of the worst losses in emerging markets this week, and the guarani has slid against the dollar. Some depositors began getting money back Thursday, starting with those holding up to 10 million guaranies, about $1,500. Deposits are insured up to about $35,000, which the central bank says covers 97% of Ueno's customers. It calls the collapse an isolated case and says the wider financial system is safe.

Lawmakers say Ueno grew on public money: more than $800 million in public funds helped it become one of the country's largest banks by deposits within a few years, signing up more than two-thirds of adults. The impeachment charges cite Pena's stake in Ueno's holding company, which he divested under pressure last year, and his 2023 appointment of Carlos Carvallo, who had run the finance company that became Ueno, to lead the central bank that regulated it. They also accuse him of letting the state pension fund deposit $355 million there, beyond legal limits. Prosecutors have ordered Carvallo's arrest; it was not immediately clear whether he had been taken into custody. Pena defended the bank until weeks before it failed, telling reporters last month that a regulatory inquiry did not mean it would close and accusing the media of frightening people.

Politics decided the speed of the fall. Pena, a former IMF economist, owed his rise to Horacio Cartes, a tobacco magnate and party chief of the conservative Colorado Party, who made him finance minister and twice backed him for president. Analysts say Pena tried to build his own power base, with Ueno as its linchpin. Cartes' loyalists in the Senate began questioning the central bank about Ueno's lending to related companies in September. When the bank collapsed, Cartes called for Pena's ouster. Pena offered to resign Thursday afternoon, but impeachment denied him the immunity resignation would have preserved. Only weeks earlier he had met Treasury Secretary Scott Bessent in Washington.

Separately, prosecutors have charged 27 people from Ueno, including founder and former CEO Miguel 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 confined to home with electronic monitors. Authorities seized luxury cars, a yacht and two small planes linked to Vazquez. Protesters chanted "Santi Pena to Tacumbu," naming the prison where Vazquez is held.

Vice President Pedro Alliana was sworn in Friday to serve until August 2028. He said the country he receives has urgent needs, though he is himself under investigation in connection with the bank. His government must now return depositors' money and answer demands for accountability.