Paraguay’s ousted President Santiago Peña was placed under house arrest Friday on charges of breach of trust and influence peddling, hours after the Senate unanimously voted to remove him from office over the collapse of a major digital bank with close ties to his government. The swift downfall of the former International Monetary Fund economist, who had been a key U.S. ally, followed a political crisis triggered by the seizure of Ueno Bank, which left millions of people unable to access their savings.
Bank Collapse Triggers Political Earthquake
The crisis erupted Tuesday when Paraguay’s central bank seized Ueno Bank, citing a solvency ratio that had fallen below half the legal minimum. The digital lender, which had exploded from obscurity to become one of Paraguay’s largest banks in just a few years, had attracted roughly 60% of the country’s adult population as customers.
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The bank’s implosion froze the savings of millions and sparked nationwide protests. Demonstrators marched on Congress, some carrying mock U.S. dollar bills depicting President Peña, and the crowds shouted, We want your head, Peña!
while signs branded him the enemy of savers
and pleaded, Give us back our money.
Riot police fired pepper spray and rubber bullets to push demonstrators back. The turmoil also roiled Paraguay’s currency, with the dollar surging about 10% against the guaraní.
Peña’s Resignation and Impeachment
As pressure mounted, Peña lost the support of his own Colorado Party, led by his longtime mentor, former President Horacio Cartes. Cartes, who was sanctioned by the U.S. Treasury in 2023 over bribery allegations, publicly called for Peña’s ouster, condemning the plundering of public and private funds and pensioners’ money.
When things happen in Latin America, sometimes they happen very fast. Santiago Peña, Paraguay's president until yesterday, is now under arrest:https://t.co/GGRFKkcOTN
On Thursday, Peña announced his resignation on television, stating, It was never my intention to betray the trust they placed in me.
However, lawmakers moved swiftly to impeach him instead of accepting his resignation, a move designed to strip him of the lifetime Senate seat and immunity that would have come with a voluntary departure. The lower house voted unanimously to trigger impeachment proceedings, and the Senate followed with a unanimous 44-0 vote Friday, with the senate president saying Peña was found guilty of dereliction of duty.
Allegations of Corruption and Regulatory Failure
Lawmakers and prosecutors accuse Peña of deploying his political power to direct hundreds of millions of dollars in public funds into Ueno while regulators failed to see risky lending practices. The bank managed US$800 million to US$850 million in public money, including about US$380 million invested by Paraguay’s state pension and health fund.
I have to remind myself that other countries do sometimes hold their presidents accountable for crimes and corruption. Something to aspire to. https://t.co/kfCMYb8RMc pic.twitter.com/O6M8dP1CI4
A key controversy is Peña’s own ties to the bank. He had owned about US$1 million in shares bought in 2019 in a company that became Ueno Holding, the parent of Ueno Bank. He sold the shares only in April 2025, after taking office. Soon after becoming president in 2023, Peña appointed Carlos Carvallo, a former CEO of Ueno, to head the central bank—the very agency tasked with supervising the digital lender. Three months later, Carvallo allowed Ueno to become a digital bank, paving its rapid expansion. Both Peña and Carvallo face criminal charges; Peña is under house arrest, and prosecutors also ordered Carvallo’s arrest.
Central bank inspectors had found a pattern of risky lending to insiders as early as June 2025, reporting that Ueno had extended large sums to companies tied to its owners beyond legal limits. On a single day in September 2025, nearly $39 million had gone to three such companies, according to a report by ABC Color, a leading Paraguayan newspaper.
Alliana Sworn in as President
Vice President Pedro Alliana was sworn in as president Friday to serve out the remainder of Peña’s term, through 2028. Compatriots who are now going through a difficult time as a result of the financial collapse will be fully compensated,
Alliana said, inheriting a government under pressure to return depositors’ money and hold those responsible accountable. Authorities have begun repaying insured deposits, starting with eligible customers holding up to 10 million guaraníes (about $1,600). Deposits are insured up to about $38,000, which the central bank says covers 97% of Ueno’s customers.
Prosecutors have charged 27 bank officials and business associates with crimes including breach of trust and attempted fraud. A judge has ordered six Ueno executives, including founder Miguel Vázquez, jailed pending trial, and two others placed under house arrest. Authorities have also seized nine luxury cars from Vázquez’s home, along with a yacht and small planes connected to him. The political fallout continues, with Paraguay’s largest teachers’ union, which has more than 40,000 members, planning an indefinite national strike Monday to demand protection of public pension funds.
[Paraguay’s president quits after millions of people’s savings frozen in bank crisis] “Santiago Peña’s rightwing administration had authorised Ueno Bank to drastically expand operations before collapse“https://t.co/yuycS6Kl3g
Senator Rafael Filizzola described the crisis as the biggest corruption scandal in our democratic history – a tremendous blow to the state, to private citizens, and to the country’s credibility and image.
The event has dealt a severe blow to Paraguay’s international credibility, coming just as the country had achieved investment-grade status and was positioning itself as a regional financial hub.
Earlier coverage: Paraguay's President Santiago Peña resigns after Ueno bank collapse
Ousted Paraguayan President Santiago Peña is under house arrest on suspicion of breach of trust. He was detained shortly after the Senate removed him from office following a bank collapse. https://t.co/EXWR8dAi2V
