How one bank’s collapse is upending Paraguay, trapping savings and threatening its president

Hours after Paraguay's central bank seized Ueno Bank, a major digital lender that became a household name in less than five years, President Santiago Peña was facing impeachment, protesters clashed with riot police, and the bank's executives had been detained. The swift collapse of a bank claiming more than 60% of Paraguay's adults as customers has sent shock waves through the country's financial system.

Political Fallout

By Thursday morning, a rebellion by several members of Peña's own conservative Colorado Party had become a party-wide revolt. Both of the ruling party's main factions in the lower house pledged to back impeachment, with a debate scheduled for Thursday, after former President Horacio Cartes, the party's powerful leader, withdrew his support for Peña.

Impeachment requires a two-thirds majority of lower house lawmakers present to send the case to the Senate, where another two-thirds vote would be needed to remove Peña, a 47-year-old former International Monetary Fund economist.

Regulatory Failures

On Wednesday, before his own party turned against him, Peña had sought to move past the scandal in a video message, accepting no blame and promising to protect depositors' savings. He also approved emergency payouts to depositors and named a new central bank chief.

Questions Remain

The political upheaval and promises of relief leave a bigger question unanswered: how a bank linked to the president, who until last year had a stake in Ueno's holding company, could grow so rapidly despite repeated warnings about its dubious lending practices.

For many Paraguayans, the answer lies in the uncomfortable proximity of Peña's long-ruling Colorado Party to the country's regulators and business elite. "Santiago Peña and the Colorado Party have stolen all our savings," said protester Luis Pineda. "We are fed up with 70 years of plunder."

As of last month, Ueno reported holding roughly $800 million in public deposits, about a quarter of its total, including money from the state pension and health fund and operators of Paraguay's giant hydroelectric dams.