Paraguay's president faces possible criminal charges as bank collapse triggers political turmoil

Paraguayan President Santiago Peña is under criminal investigation following the collapse of a major digital bank, prosecutors announced, following the South American leader’s resignation and impeachment Thursday. Paraguay President Santiago Peña resigns amid Ueno Bank collapse.

(AP Photo/Heather Khalifa)The crisis at Ueno Bank turned Peña’s long-ruling Colorado Party against him, a stunning reversal for the former International Monetary Fund economist who had enjoyed the backing of the country's most powerful politicians and was welcomed in Washington just weeks ago as a key ally of the Trump administration.

Minutes after Peña’s announcement, the lower house voted 78-0 to impeach him, sending the charges to the Senate. Congressional leaders will continue voting Friday on whether to accept Peña's resignation, which would clear the way for Vice President Pedro Alliana to be sworn in without waiting for a Senate trial.

Opposition senators are continuing to demand that Peña be removed from office, arguing that allowing him to resign would preserve his eligibility to become a senator for life, with legal protections that could prevent his prosecution, should Paraguay’s Attorney General Emiliano Rolón Fernández opt to file charges.

Rolón has ordered three criminal investigations into the Ueno Bank crisis, including allegations involving Peña and other current and former government officials, the prosecutor’s office said Thursday. The investigations will examine authorities’ oversight of the bank, their handling of its failure and the placement of public funds in the lender.

Peña said in a video posted to X that he was stepping down in the interest of “the stability of our country, social peace and the need to preserve our democratic institutions.” Even Peña’s mentor, Colorado Party leader and former President Horacio Cartes, backed impeachment, saying the party would not side with “the plundering of public and private funds and pensioners’ money.” The United States Treasury sanctioned Cartes in 2023 over bribery allegations, but the Trump administration lifted the sanctions last year.

Peña, who until last year held a stake in a company linked to Ueno, expressed contrition. But he stopped short of accepting responsibility for the turmoil, which has left millions of depositors, retirees and workers scrambling to recoup their frozen savings and unpaid wages.

“I want to apologize to the people if I have failed them at any point,” he said. “It was never my intention to betray the trust they placed in me." Ueno Bank, which exploded from an obscure finance company to a household name in less than five years, claimed more than 60% of Paraguay’s adults as customers.

Many Paraguayans are left asking how a bank linked to the president could grow so rapidly in size and importance despite repeated warnings about its lending practices. The answer lies in the uncomfortable proximity of Peña’s Colorado Party to the country’s regulators and business elite, a weakness that has endured even as steady economic management and rapid growth recently earned Paraguay coveted investment-grade credit ratings.

“Santiago Peña and the Colorado Party have stolen all our savings,” said Luis Pineda, one of the protesters marching to Congress on Wednesday. “We are fed up with 70 years of plunder.” Soon after winning its banking license in 2023, Ueno seemed to be everywhere in Paraguay.

The digital lender, a rebranded version of a decades-old finance company, lured customers with generous cash-back offers on groceries as it grew to more than 70 locations, sponsored Paraguay's national soccer team and plastered its name on the country's main stadium.

Government money poured into Ueno’s coffers under Peña. He also appointed Carlos Carvallo, president of Financiera Ueno, the predecessor to Ueno Bank, to run the central bank, the agency charged with supervising the digital lender.

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 the operators of Paraguay’s giant hydroelectric dams.

But worries were escalating inside the central bank. In June, its inspectors found a pattern of risky lending to insiders, reported ABC Color, a leading Paraguayan newspaper. Ueno had extended large sums to companies tied to its owners, beyond what the law allows and without enough collateral to cover the debts if they went bad.

As recently as last month, Peña defended Ueno and the central bank’s oversight, dismissing the concerns as a smear campaign that was spooking the public.