Paraguay leadership in limbo as impeachment trial starts against president

Paraguay leadership in limbo as impeachment trial starts against presidentASUNCION, - Paraguay's Senate launched impeachment proceedings against President Santiago Peña on Friday, as a political and financial crisis triggered by the collapse of a digital bank deepened.

Peña submitted his resignation on Thursday following the collapse of the bank, called ueno, to which he had former business links. His resignation has not been formally accepted by the Senate and he remains the president while impeachment proceedings continue.

The turmoil began earlier this week when Paraguay's central bank intervened in ueno, a fast-growing ​digital bank that had provided accounts for nearly half the population, many of them people who had not previously had access to a bank account.

But questions had emerged over ueno's lending practices and its ties to Paraguay's political and financial elite — including Peña, who until last year was a shareholder in ueno's holding company, and the central bank chief, who had headed ueno until 2023.

This week, the central bank chief resigned and arrest ​warrants were issued for eight ueno executives as authorities launched last-ditch proceedings to prevent the lender dissolving. Peña had been summoned to speak before the Senate on Friday.

But he did not appear and sent his lawyers in his stead, who questioned the validity of the hearings. "This impeachment proceeding has no chance of success now that Santiago Peña has submitted his resignation," said Adolfo Ferreiro, one of the president's lawyers.

Vice President Pedro Alliana is set to succeed Peña but has yet to be sworn in. The impeachment charges allege that Peña had conflicts of interest, manipulated regulatory oversight, diverted pension funds and participated in an institutional cover-up involving the central bank.

Peña has denied any wrongdoing and said the affair was a regulatory issue. The political crisis has spilled onto the streets, with demonstrators flocking to downtown Asuncion on Thursday night demanding accountability for ueno's collapse and faster compensation for depositors whose savings remain frozen.

Small groups of protesters gathered opposite the headquarters of the central bank on Friday morning, chanting "We want our money." Those who have been unable ​to access their accounts include pensioners who receive state benefits through ueno.

Peña earlier this week approved legislation to help accelerate payments to affected depositors and some account holders began recovering their money on Thursday night. Prospects for a lengthy political transition have drawn attention from investors, especially in neighboring Brazil, Paraguay's largest economic partner.

Regulators have sought to reassure markets by guaranteeing most deposits and containing risks to the wider financial system. A Brazilian government source told Reuters that Brazil's immediate concern was avoiding social instability in Paraguay and ensuring the banking crisis is resolved without triggering wider unrest.

"Protests over frozen savings will intensify if Peña's exit appears to grant him impunity or if payouts to depositors and pensioners stall," said Mariano Machado, Americas principal analyst at Verisk Maplecroft. An impeachment conviction would strip Peña of immunity and potentially expose him to criminal investigations related to the banking scandal.

Prosecutors have already opened criminal cases against Peña in connection with ueno. Officials said ueno's top executives were transferred on Friday to one of Paraguay's main prisons for detainees awaiting trial. This article was generated from an automated news agency feed without modifications to text.