Paraguay: President Santiago Pena under house arrest over bank crisis

Senators voted overwhelmingly to remove Pena for misconduct in office, clearing the way for Vice President Pedro Alliana to succeed him for the remainder of the presidential term ending in August 2028. Although Pena had resigned on Thursday, senators impeached and convicted him instead, stripping him of the lifetime Senate seat and immunity granted to former presidents.

Following the Senate vote, prosecutors ordered the arrest of the ousted president alongside former central bank chief Carlos Carvallo as part of a criminal investigation. Officials later confirmed Pena was placed under house arrest pending a decision on final charges.

Bank collapse triggers crisis

Pena's rapid downfall came amid mounting pressure over the collapse of digital lender Ueno, one of Paraguay's biggest banks, with which he had ties. The bank's accounts—used to process pension payments—are frozen, leaving millions of customers unable to access their money. Ueno also held hundreds of millions of dollars in public funds.

Ueno served about 2.94 million customers, roughly 60% of Paraguay's adult population. As of last month, the bank held roughly $800 million in public-sector deposits—about a quarter of its total deposits—including money from operators of Paraguay's giant hydroelectric dams.

Impeachment allegations

Thirty-five opposition lawmakers and ruling-party dissidents submitted impeachment articles in the 80-seat Chamber of Deputies, accusing Pena of conflicts of interest, misuse of pension funds, and institutional cover-ups linked to Ueno. Lawmakers cited two loans Pena received from Ueno as part of allegations of improper financial gain.

Pena sold his shares in Ueno Holding in April 2025. The motion also questioned his 2023 appointment of central bank chief Carvallo, who previously chaired Financiera Ueno. The central bank approved the company's conversion into a bank just 83 days after Carvallo's appointment.

Aftermath and investigations

Paraguay's central bank ordered a resolution or closure process after finding Ueno's solvency ratio had fallen below half the required minimum. The bank's app, card payments, and transfers stopped working, while branches closed, leaving customers queuing outside unable to withdraw their savings.

Authorities detained eight senior executives, including founder Miguel Vazquez and bank president Juan Manuel Gustale, and charged 27 bank officials and business associates with offenses including breach of trust and attempted fraud. Hundreds of employees protested demanding unpaid wages and severance.

Pena had sought to reassure customers in a video message, pledging legislation "that will return to every saver what they are entitled to as quickly as possible." The crisis forced him to cancel his attendance at the Ibero-American summit in Madrid.