Bank crash shakes Paraguay - the president is at risk of being ousted

In the streets of Paraguay's capital, Asunción, long queues ring outside the ATMs. People are trying to withdraw their money from other banks for fear that they too will be dragged into the financial scandal that has seen the assets of three million bank customers frozen. The great pressure has overloaded the banking system, which has also caused other banks' withdrawal systems to stop working.

During Thursday evening, many bank branches stayed open long after regular closing time to receive customers who wanted to open new accounts.

The banking crisis broke out on Tuesday night when Paraguay's central bank closed the digital bank Ueno Bank after discovering serious deficiencies in the bank's capital adequacy. The decision came as a shock to the nearly three million customers who suddenly could no longer access their money. Until then, Ueno Bank had been described as a financial success story. In just five years, it had grown to become Paraguay's largest bank in terms of number of customers. But behind the rapid expansion were hidden financial problems. The bank is suspected of having broken the rules for granting credit and granted loans to related companies without any collateral.

What makes the crisis even more serious is that the country's right-wing president Santiago Peña, who is politically allied with Argentina's ultra-liberal president Javier Milei, is suspected of being involved in the banking scandal. Peña has previously been a partner in the group behind Ueno Bank, and during his presidency, government authorities have invested close to eight billion kroner in the bank, including money from the country's pension system.

The president is also accused of having contributed to rule changes that made it easier for the bank to receive public funds. Suspicions of conflicts of interest are reinforced by the fact that just three weeks after taking office as president in 2023, Peña appointed the former head of Ueno Bank as the new head of Paraguay's central bank. Now he has resigned.

In an attempt to avoid prosecution, the president tendered his resignation yesterday, but it was not accepted by Congress. If it had been accepted, Peña would have been granted political immunity and could not be tried. Today, he will instead be deposed in an impeachment trial, which means that he can later be held accountable.

Opposition leader Efraín Alegre, who lost the 2023 presidential election to Peña, told Brazilian daily Folha de S. Paulo that the president and his vice president belong to a group of people who have "plundered the country's population." He claims the banking crisis is proof that Paraguay's political system has collapsed and accuses the president of accepting money from organized crime.

While the accusations against Peña are growing, rumors are circulating that the president has fled to Argentina. The president's spokesperson tells Paraguayan daily ABC Color that he does not know where the president is. Even the Speaker of the Congress states that he does not know where the President is.

- While we are debating, the media reports that the president has already set foot on Argentine soil, opposition member Johana Ortega said during the congressional session, according to La Nación.

The information is denied by the president himself.

- As the impeachment process continues, I will appear and exercise my right to defense, Peña said in a statement on Platform X.

He has asked Congress for a three-day adjournment to prepare his defense, which the Senate has denied him.