Paraguay Senate removes President Santiago Peña over Ueno Bank collapse

Paraguay’s Senate ousted President Santiago Peña on Friday over the collapse of a major bank tied to his government, bringing a dramatic end to one of South America’s most stable presidencies. Paraguay's Senate removed President Santiago Peña after the Ueno Bank collapse.

(AP Photo/Heather Khalifa)In a unanimous vote, the 44 senators present voted to remove Peña for misconduct in office, clearing the way for Vice President Pedro Alliana to succeed him. The verdict came just three days after regulators seized Ueno Bank, freezing nearly 3 million customers’ access to their savings and triggering a political crisis.

Lawmakers accused Peña of using his political influence to steer hundreds of millions of dollars in public funds into Ueno while regulators overlooked risky insider lending. Peña has denied wrongdoing. His removal also bars him from the lifetime Senate seat granted to elected former presidents under Paraguay’s Constitution, denying him the parliamentary immunity that would accompany it.

Prosecutors have already opened criminal investigations targeting Peña, current and former central bank and pension fund officials, and Alliana. Peña had submitted his resignation Thursday, but Congress did not accept it.

His lawyers, Ricardo Preda and Adolfo Ferreiro, argued that lawmakers should have approved his departure instead of pressing ahead with the impeachment trial. Opposition lawmakers insisted on removal to prevent him from leaving office with immunity.

“He must go, but not home. He must go to a maximum-security prison,” opposition Sen. Yolanda Paredes told reporters. “The public is fed up with impunity.” In a farewell message released shortly before the verdict Friday, Peña expressed hope his departure would spare Paraguay further harm.

“I do not want my presence to be a cause of greater division or instability,” he wrote. “My responsibility is to put the country above my personal fate.” Public outrage has become more thunderous by the day. Thousands of protesters demanding their frozen savings back and accountability for Ueno’s failure have clashed with police firing rubber bullets and pepper spray this week.

Paraguay’s largest teachers’ union, which has more than 40,000 members, plans to begin an indefinite national strike Monday to press for protection of public pension funds. “This was an enormous betrayal of trust,” said Yinal López, a worker at the state electricity company, whose employee pension fund also had money at Ueno.

“The president made a mockery of the people. He used their money, the people’s money, to do whatever he wanted.” A bank collapse becomes a political reckoning Ueno’s implosion has plunged Paraguay into its deepest political crisis in more than a decade — and at dizzying speed.

Regulators seized the bank before dawn Tuesday. By Thursday afternoon, Peña had offered to resign as his conservative Colorado party turned on him, led by former President Horacio Cartes, the party chief and Peña’s longtime mentor.

By Friday, his interior minister, chief of staff, legal adviser and political adviser had all quit. It was a staggering reversal of fortunes for Peña, a telegenic technocrat and a former International Monetary Fund economist who owed his rapid political ascent to Cartes.

The tobacco magnate, among Paraguay’s richest men, made Peña his finance minister and twice backed him for president over rival factions’ objections. Once in office, though, Peña quietly amassed a rival power base, analysts say.

Ueno Bank, flush with public deposits, became the centerpiece of both his business empire and his effort to win over provincial governors as he sought to escape Cartes' shadow. “It's like a Shakespearean drama. He tried to displace his mentor, his political patron,” said Miguel Carter, director of DEMOS, a Paraguayan research center.

“But he did so on very fragile grounds.” Cartes struck back. In September, senators loyal to him demanded answers from the central bank about Ueno’s lending, citing leaked internal reports that warned its loans to related companies put its solvency at risk.

When Ueno collapsed this week, so did Peña’s leverage, and Cartes, once sanctioned by the U.S. Treasury over alleged corruption, publicly called for the ouster of his erstwhile protégé. “Cartes put the nail in the coffin,” said Andrew Nickson, a Paraguay expert at the University of Birmingham.

“Peña had no political base to rely on, and he was left high and dry." Ueno rose from obscurity to become Paraguay’s fifth-largest bank by deposits in just a few years, with more than $800 million in public money turbocharging its expansion.

It signed up more than two-thirds of the country’s adults, its splashy logo appearing everywhere from the national soccer stadium to street vendors’ bank cards.