Paraguayan president ousted and arrested amid banking crisis

All 44 senators present voted to impeach Peña for misconduct, marking the second instance of a Paraguayan president being removed from office since the country’s return to democracy in 1989.

The crisis began three days prior when regulators seized control of Ueno Bank, effectively freezing the savings and bank card access of nearly half of Paraguay’s population, exceeding 6 million people. Prosecutors have ordered Peña to remain at his home until he appears before an economic crimes unit on Saturday. Silvia Gonzalez, one of the lead prosecutors, confirmed his presence and cooperation with authorities.

Breach of trust, the charge against Peña, carries a potential sentence of up to five years in prison, with a possible increase to ten years for aggravated cases. Carlos Carvallo, formerly the finance company executive and later central bank chief under Peña, also faces arrest orders.

Lawmakers allege Peña leveraged his position to direct hundreds of millions of dollars in public funds to Ueno, while regulatory oversight was seemingly ignored. Peña has consistently denied any wrongdoing. Pedro Alliana, the former Vice President, was sworn in as president Friday, assuming the remainder of the term, which extends until August 2028. He now faces the challenge of restoring financial stability and accountability.

In a farewell statement, Peña expressed hope that his departure would mitigate further instability. “I do not want my presence to be a cause of greater division or instability,” he stated. Public demonstrations have erupted, with protesters demanding the return of frozen savings and accountability for Ueno’s failure, chanting slogans like “Santi Peña to Tacumbu!” – a reference to the capital’s main prison, where Ueno’s founder, Miguel Vazquez, is currently detained.

The bank’s collapse has had a widespread impact, with customers unable to access cash or use their bank cards. Ueno aggressively targeted the unbanked population, attracting over 1 million new account holders through incentives. Even Paraguay’s national soccer team, sponsored by Ueno during their surprising World Cup victory over Germany this year, has seen their accounts frozen.

Deposits are insured up to approximately $35,000, covering 97 percent of Ueno’s clientele, according to the central bank, which maintains that the financial system remains stable despite the isolated incident. Prosecutors have charged 27 individuals, including Vazquez, with offenses like breach of trust and attempted fraud. Six former directors, including Vazquez, are being held pretrial, while two others are under house arrest. Authorities have seized luxury assets belonging to Vazquez, including vehicles, a yacht, and aircraft.

Ueno’s rapid growth, fueled by over $800 million in public funds, allowed it to become a major player in Paraguay’s banking sector. The impeachment charges include Peña’s previous stake in Ueno’s holding company and his appointment of Carvallo to the central bank. Analysts suggest these connections facilitated a lack of regulatory scrutiny despite growing financial concerns.