Salvador. The name should say it all: Ueno, a variation of the Spanish word “bueno”, i.e. good. The digital bank promised Paraguayans a better future. A bank account could be opened with just a few clicks. Anyone who previously kept their money under their mattress could suddenly pay with their smartphone.
In the supermarket, Ueno lured people with generous discounts on credit card payments. The digital bank sponsored football games, music festivals and motorsport events. Within a few years, it acquired 2.9 million customers - almost two-thirds of Paraguay's adult population.
Early Tuesday morning, the central bank took control of Ueno and initiated the resolution. Police arrested leading managers. Millions of customers were no longer able to access their accounts. Desperate crowds of people formed in front of the closed branches.
Just two days later, President Santiago Peña resigned. The 47-year-old economist, who has ruled the country since 2023, had held shares in a holding company linked to Ueno Bank until 2025. Now he has fallen over a corruption scandal, the focus of which was the very bank that, like no other company, had stood for his promise of a modern Paraguay.
Peña started with great ambitions. The US-educated economist had worked at the International Monetary Fund and wanted to make Paraguay attractive to foreign investors. He liked to talk about the “awakening giant”. In fact, the country developed into one of the most dynamic economies in South America. In 2025 the economy grew by 6.6 percent. Low taxes, comparatively solid state finances and cheap energy from the Itaipú hydroelectric power station attracted investors.
Ueno was a perfect fit for this departure. The company emerged from a traditional financing company in 2021 and received its banking license in 2023. It wanted to become the first Paraguayan unicorn, i.e. a start-up with a valuation of at least a billion dollars. But behind the shiny facade, a dangerous network of politics and private business apparently developed.
Under Peña, public deposits at Ueno increased massively. Most recently, around $850 million in state money was there, including funds from public pension schemes. A sister company, Itti, received numerous government contracts and thus access to sensitive population data.
Carlos Carvallo's role was particularly explosive. Before Peña appointed him central bank chief, Carvallo had headed the Ueno Bank. In his new position he was supposed to oversee the business of his former employer.
Regulators had discovered irregularities months before the collapse. Ueno is said to have lent around $150 million to smaller companies that were connected to the bank's shareholders and employees. Ultimately, the capital adequacy fell to less than half of the required minimum.
But the banking scandal alone would probably not have cost Peña his office. What was crucial was that his most powerful ally withdrew his support: Horacio Cartes.
The former president is the real power factor in Paraguay. The 70-year-old ruled from 2013 to 2018. The wealthy entrepreneur controls large parts of the Partido Colorado, the conservative party that has ruled the country with brief interruptions for almost eight decades. The dictator Alfredo Stroessner, who ruled from 1954 to 1989, also relied on the Colorados.
Cartes had once built up Peña politically. In his government, the young economist became finance minister. Cartes later supported his presidential candidacy. Without his powerful sponsor, Peña would hardly have reached the top of the state.
Both politicians maintain close relations with US President Donald Trump. When Cartes was hit with American financial sanctions under Joe Biden because of serious corruption allegations, he came under international pressure. But in October 2025, Trump lifted the sanctions again - a political rehabilitation of the controversial ex-president.
In Asunción, however, a power struggle between Cartes and Peña had been raging behind the scenes for some time: over control of the party, the distribution of state positions and the succession in the next presidential elections.
The collapse of the digital bank finally gave Cartes the opportunity to break with his former protégé. He withdrew support from Peña and supported impeachment proceedings. Such a procedure would also have consequences after Peña's resignation: Congress could thereby prevent him from receiving parliamentary immunity as a senator for life.
On Thursday, Peña announced his resignation. “No office should be placed above the well-being of Paraguay,” he said in a video message. He wants to protect the stability of the country and its democratic institutions. But his departure was less a voluntary gesture than the consequence of his political isolation.
The crisis is a serious setback for Paraguay. Experts believe the banking system is stable. But the scandal damaged the international reputation of a country that had just begun to break away from its traditional image. In Transparency International's 2025 Corruption Perception Index, only Venezuela performs worse than Paraguay among South American countries. Paraguay no longer wanted to be seen as just a location for smuggling, corruption and political patronage, but rather as a modern business location in the heart of South America.
According to the constitution, Vice President Pedro Alliana is supposed to finish his term in office by 2028. There was also a motion to impeach him, but it failed in the House of Representatives. Alliana is also a Colorado member.
