Paraguay's Senate on Friday removed President Santiago Pena from office over the collapse of the digital lender Ueno Bank, and he was placed under house arrest in Asuncion.1,4,8
Pena had offered to resign on Thursday as depositors lost access to savings and protests spread, but senators put the resignation on hold and voted instead to impeach and convict him for misconduct, a step that stripped him of the lifetime Senate seat and immunity granted to former presidents and left him open to prosecution. Vice President Pedro Alliana was then sworn in as interim president.1,4,7
The vote was 44 in favor with one senator absent, with all 44 senators present voting to remove him. Senate President Basilio Nunez said Pena was found guilty of "dereliction of duty." The impeachment charges alleged conflicts of interest, manipulated regulatory oversight, diverted pension funds and an institutional cover-up involving the central bank.1,8
Prosecutors ordered the arrest of Pena alongside former central bank chief Carlos Carvallo as part of a criminal investigation, and Pena was placed under house arrest at one of his homes in Asuncion pending a decision by the public prosecutor's office on final charges. Prosecutor Silvia Margarita Gonzalez Vester said Pena is due to be questioned on Saturday over allegations of breach of trust, influence peddling and misappropriation of funds, and he was ordered to remain at home until he appears before prosecutors Saturday morning on charges including breach of trust, influence peddling and using public office for personal gain, the most serious of which carry up to 10 years in prison.1,4,8
Lawmakers accuse him of using his political influence to steer hundreds of millions of dollars in public funds into Ueno while regulators overlooked risky insider lending. Pena, who owned shares in a group that controlled the bank but sold them last year, has denied wrongdoing. His defense lawyer Ricardo Preda described the allegations as a "reckless accusation" that was "irresponsible and opportunistic."1,7,8
In an address on Thursday, Pena said he was sorry and that "it was never my intention to betray the trust you placed in me." In a farewell message before the verdict, he wrote, "I say goodbye with gratitude, without ignoring the anguish of those who are waiting for answers today," and said he did not want his "presence to be a cause of greater division or instability." His priority, he added, is "the peace of mind of Paraguayans who entrusted their savings to our financial system."1,7,8
The Central Bank said it took over Ueno due to a severe capital shortfall, in order to "protect depositors and preserve the stability of the financial system." The seizure froze withdrawals, savings and card payments for an estimated three million depositors, including pensioners, or nearly half of the country's 6 million people, leaving more than half the population without access to savings after the bank was seized. The central bank calls the collapse an isolated case and insists the broader financial system is safe.1,4,7,8
The fallout spread beyond savers. The digital lender had courted the poor and unbanked with supermarket rebates, and more than 1 million Paraguayans opened their first bank account there, according to Ueno. Even players on the national soccer team, which Ueno sponsored through its run to a World Cup upset of Germany this year, say they cannot reach their money. A ride-hailing app that relied on Ueno shut down, leaving 3,000 drivers without work, while the state power company says $21 million in loans from the Inter-American Development Bank and Taiwan earmarked for public works is trapped at the bank. Paraguay's bonds posted some of the worst losses in emerging markets this week and the guarani slid against the dollar. Some depositors began recovering money Thursday, starting with those holding up to 10 million guaranies (about $1,500), and deposits are insured up to about $35,000, which the central bank says covers 97% of Ueno's customers.8
Protests grew through the week in Asuncion. Thousands gathered outside Congress on Thursday shouting "Give back the money," and earlier demonstrations featured clashes with police, who used tear gas and water cannon. On Friday, crowds packed into the plaza outside Congress waved flags, sang and chanted "Dictatorship never again!" as the verdict came down, ending what had been seen as one of South America's most stable presidencies and marking the second removal of a president by impeachment since the end of Gen. Alfredo Stroessner's 35-year dictatorship in 1989. As senators deliberated, protesters marched demanding frozen savings back, chanting "Santi Pena to Tacumbu!" a reference to the capital's main prison. Police ringed Pena's house Friday night as crowds gathered outside, and officers maintained a security cordon around the property.1,4,7,8
"My family ran out of money, we don't have any cash. Santi (Pena) is a criminal, he has to go to jail," 21-year-old student protester Andres Maldonado said. "Ueno approved a loan for us to buy our first house. But the funds were never disbursed, and now we have nowhere to live," 26-year-old Nadia Gonzalez, a mother of three, told AFP. "This was an enormous betrayal of trust," said Yinal Lopez, a worker at the state electricity company, whose employee pension fund also had money at Ueno. "The president has made a mockery of the people," Lopez said. Long lines of people trying to withdraw money snaked down Asuncion's streets on Tuesday and Wednesday.7,8
Pena requested three extra days to prepare his defense after being served the evening before with a 15-page indictment with around 300 pages of appendices, writing on X, "This is not due process." Senate President Basilio Nunez said Pena's bid for a three-day delay "did not receive the necessary votes, so the extension is rejected." Congress had called an extraordinary session of both chambers Thursday to decide whether to accept Pena's resignation or proceed with impeachment, but the session failed to reach a quorum. A later session scheduled the trial to begin Friday morning, with the aim to conclude it Friday as a way to "reassure the public," ruling party Senator Derlis Maidana told reporters. Senator Rafael Filizzola said, "We are facing 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." Opposition lawmaker Raul Benitez stated, "A criminal scheme has been set up here that has dedicated itself to draining a bank, under the protection of institutions he controlled as president of the republic."1,7
Other officials also left their posts. Pena had requested the resignation of central bank president Carlos Carvallo, who consented, and set a five-day limit for the return of funds. Carvallo, who ran the finance company that became Ueno until Pena named him central bank chief in 2023, was subject to an arrest order, though it was not immediately clear whether he had been taken into custody. Pena's Interior Minister Enrique Riera also resigned Thursday, with Carlos Benitez appointed to replace him in the interim. In a separate case against Ueno's executives, prosecutors have charged 27 people, including founder and former CEO Miguel Vazquez, with crimes such as breach of trust and attempted fraud, with six former directors including Vazquez held in pretrial detention in Tacumbu and two others confined to their homes with electronic monitors, and authorities have seized luxury cars, a yacht and two small planes.4,7,8
Alliana will serve the rest of the presidential term, which ends in August 2028. "Compatriots who are now going through a difficult time as a result of the financial collapse will be fully compensated," Alliana said. "The Paraguay we receive today has urgent needs," Alliana said. Pena remains under house arrest until the Saturday questioning and the prosecutor's decision on final charges, and analysts say he is likely to now be prosecuted over the bank's collapse.1,4,8
