Paraguay: The banking crisis becomes a state crisis

At 1:16 p.m. local time, Paraguay's President Santiago Peña posted a video on his social media channels - he later described it as one of the hardest moments of his life.

"I have taken the decision to step down from my position as President of the Republic. I am doing so with a view to the stability of our country, social peace and the need to preserve our democratic institutions."

Impeachment proceedings against Peña

Minutes after his announcement, Paraguay's lawmakers voted unanimously to begin impeachment proceedings against him. And angry citizens who have not had access to their savings since Tuesday protested in front of Congress.

"It's really a shame," says one woman. "We have to take to the streets and demand not only that Peña go to prison, but also the head of the central bank. The entire gang that allowed it to get to this point must go to prison!"

Very influential bank

Paraguay is in a serious crisis. The ouster of the 47-year-old president, an economist who has been in office since 2023, follows the collapse of digital bank Ueno.

Within three years, it had risen from a simple money lender to one of the most important banks in Paraguay, modern, digital, with an easy-to-use app. In 2023, Ueno became a sponsor of the Paraguay national football team. Today it has 2.9 million customers, more than half of Paraguay's adult population - and pension payments were also processed through it.

"Laws passed that benefited the bank's owners"

There have long been speculations that this rise was aided by public money and influential contacts. President Peña appointed former Ueno President Carlos Carvallo to head the central bank.

Until March last year, Peña himself was still a shareholder in the group, as Luis Ortiz, a sociologist from the National University of Asunción, explains. "He enacted laws and took actions that ultimately benefited the bank's owners, directors and shareholders."

Risky lending

Local media reported on inconsistencies in the granting of loans. Peña always rejected allegations of possible conflicts of interest. But the bank's proximity to politics aroused mistrust, which was further fueled by a power struggle for the leadership of the Colorado Party, which has been in power in Paraguay for almost 80 years - with a short interruption.

MPs around the influential ex-president and current party leader Horacio Cartes called for a review by the supervisory authorities. It turned out that the bank did not have the required capital - the central bank then initiated resolution proceedings.

When announcing his resignation, Peña said that citizens' savings were safe and that the financial system was stable: "I have only one priority today: the peace of our citizens who have entrusted their savings to our financial system."

Not protected from prosecution if removed from office

But the uncertainty is great. The crisis is a setback for a country that has recently become increasingly attractive for investors. Characterized by great poverty and corruption, Paraguay recently received praise for its reforms; the economy grew by more than six percent in 2025. On Thursday evening, Congress said it would not accept Peña's resignation because it would give him parliamentary immunity and protection from prosecution.

If he is removed from office, things will look different, explains Myrian Gonzalez from Paraguay's National University. "However, if proceedings are brought against him - for example because he is removed from office as a result of a political judgment - then he will be in a similar position to any other citizen: he must be held accountable for his misconduct and can be brought to justice more quickly."

Rumors that Pena planned to leave the country were denied by the president's office, according to the New York Times.