Paraguay President Peña resigns over catastrophic bank collapse

Paraguay President Santiago Peña has announced his resignation after the collapse of a major bank with close links to his administration.

The banking scandal had left half of the country’s population of six million unable to access their money.

In a video statement released online yesterday, Peña, a conservative economist, stated that he was stepping down from his post to ensure stability.

Calling the decision “one of the most difficult moments of his life”, Peña said: “I apologise to the public if I have disappointed you. It was never my intention to betray the trust you placed in me.”

Peña was facing an impeachment vote in the lower house of Congress in connection with the bank’s collapse, which lawmakers characterised as “systematic dereliction of duty”.

Minutes after his announcement, lawmakers voted unanimously to proceed with the impeachment process.

Earlier on Thursday, the prosecutor general’s office announced that it was evaluating a formal criminal complaint filed against the president by lawmakers.

Elected in 2023, the 47-year-old Peña was a staunch South American ally of the Trump administration.

Ueno Bank, which sits at the centre of the scandal, was taken over by the Central Bank of Paraguay early on Tuesday after regulators determined that the lender was no longer solvent.

Millions of Paraguayans soon realized that they could no longer withdraw cash, make digital payments, or use their debit cards for grocery shopping.

“When I woke up on Tuesday, I was completely helpless, without a single peso in my pocket,” said Benicia Sosa, 56, who joined a protest outside the Congress building on Wednesday night.

A day labourer from Luque, on the outskirts of the capital Asunción, Sosa said that her husband and eight children were all locked out of their Ueno accounts.

Sosa said she had been drawn by Ueno’s promotional offer, which provided cardholders with up to 40% cashback at supermarkets.

Sosa also noted that she regretted voting for Peña, who had pledged to revive the economy and create half a million jobs.

“I was foolish. The economy is going to hell,” the worker said during the demonstration at the presidential palace.

Over a few decades, Ueno evolved from a loan-sharking business operating out of a dilapidated market in Asunción into a youth-oriented banking app and a major financial player at times compared to Revolut or Nubank.

However, sceptics have long argued that this rags-to-riches rise was achieved through public resources and high-level connections.

When Peña assumed office in August 2023, he appointed Ueno’s former chairman, Carlos Carvallo, as head of the Central Bank.

Months later, the Central Bank officially granted Ueno a licence to operate as a brick-and-mortar bank. Carvallo also stepped down on Tuesday.

As of the end of October, Ueno, which is not capitalised in company filings and roughly translates to “good”, announced that it had approximately 2.9 million customers.

It also held more than $800 million in public funds, which included around 10% of the state pension fund.

Ueno sponsored the Paraguay national football team, alongside dozens of other businesses and brands.

Its sister company, Itti, expanded by securing dozens of public procurement contracts involving citizens’ data.

Last year, Peña announced that he had officially divested from another affiliated entity, Ueno Holding, following criticism that his shares gave rise to a conflict of interest. Peña maintained that nothing illegal had occurred.

Even so, analysts pointed out that the bank’s proximity to power aroused regulatory suspicions and attracted hostility from rivals.

Concerns surfaced in September when lawmakers loyal to Horacio Cartes, a powerful former president, demanded that the Central Bank answer questions regarding Ueno.

Cartes also leads the Colorado Party, which has governed Paraguay for almost all of the past 80 years.

Peña previously served as finance minister under Cartes, a tobacco magnate sanctioned by the Biden administration over corruption allegations.

According to Paraguayan-American political scientist Miguel Carter, however, the two men fell out over who would lead the party into the 2028 elections.

Reports emerging in October indicated that Ueno had extended roughly $150 million in loans to small firms connected to its own executives and employees.

This situation risked breaching banking regulations and endangering its balance sheet.

Worried about solvency, foreign investors began offloading Ueno’s bonds.

This month, Ueno offered additional perks to savers holding cash in their accounts.

Last week, the company announced that it had raised $100 million from investors and its Luxembourg-registered holding company, denying reports of an imminent intervention.

The speed of Ueno’s collapse surprised even its critics, evoking memories of the 1995 crisis that wiped out half of Paraguay’s banks.

Speaking at a press conference, Central Bank Governor Carvallo, who resigned on Tuesday, stated that the broader financial system was secure and that Ueno customers would be able to recover their funds “as soon as possible”, up to a limit of approximately $38,000.

Analysts observed that this threshold also applies to businesses, meaning that companies holding substantial cash deposits in the bank could also face bankruptcy.

Next in line to succeed Peña is Vice-President Pedro Alliana, who is likewise a member of the Colorado Party.

Yet some lawmakers argued that Peña should not be permitted to leave the presidency so easily.

Under the constitution, should his resignation be accepted, Peña would become an honorary senator entitled to parliamentary immunity. That status would shield him from investigations.

Local media reports suggested that Peña might be considering fleeing the country with US assistance, emulating the escape of Flávio Bolsonaro, the candidate who lost Brazil’s presidential election last month.

Last night, the presidential office dismissed the circulating “rumours” without going into detail. The US Embassy in Asunción referred inquiries to the State Department.