Paraguay in chaos, Ueno Bank crisis: protests and impeachment proceedings for Peña

The collapse of one of the country's main banking institutions blocked the savings of around three million citizens, triggering panic among account holders and violent protests in Asuncion. President Santiago Peña has announced his resignation, but Congress intends to proceed with impeachment.

The financial collapse of Ueno Bank, a banking institution founded in 2021, is throwing Paraguay into chaos. After the intervention of the Central Bank, around three million citizens were left without access to their savings, triggering panic among savers and violent demonstrations. Overwhelmed by the crisis and accused of conflict of interest due to his previous corporate ties to the bank, President Santiago Peña announced his resignation, but Congress announced that it will proceed with impeachment. A financial and political scandal that has left almost half of the Paraguayan population temporarily without money and risks having serious repercussions.

The collapse of Ueno Bank

In Paraguay the crisis exploded in all its strength and severity following the financial collapse of Ueno Bank. Born in 2021 as a fintech company and quickly transformed into one of the pillars of the national credit system, the bank had come to manage around 850 million dollars of public funds, including deposits from important state institutions and social security institutions, thanks to aggressive commercial strategies, advanced digital services and a massive advertising presence. Behind this rapid and apparently solid expansion, however, there were deep and important structural problems. In addition to serious irregularities in the accounting of assets, the supervisory authorities have recently discovered the disbursement of highly risky loans granted to companies directly linked to controlling shareholders, which also included Peña until March 2025. Once the balance sheets were re-established on the basis of financial reality, the institution's capital collapsed to less than half of the minimum required by law. Faced with this scenario, the Central Bank intervened on Tuesday by blocking accounts, cards and transfers to start the migration of deposits and recoverable assets to other banking institutions.

Savers' panic

The sudden blockade generated a wave of collective panic, with long queues of citizens in front of branches and millions of people temporarily unable to access their money for daily expenses. The economic and social consequences proved to be immediate: the Ministry of Labor estimates that around 7,000 jobs, both direct and induced, were overwhelmed by the collapse of the bank. To stem the emergency, Congress approved an extraordinary mechanism based on a state guarantee fund, designed to fully reimburse the accounts of 97% of customers, up to a threshold of approximately $36,000 per depositor.

Protests and clashes in the streets

The reassurances and buffer measures put in place by the institutions were in no way sufficient to allay citizens' concerns. The news of the freezing of accounts and the perception of a colluding system pushed thousands of savers and protesters to pour into the streets of the capital Asuncion, transforming the urban center into a theater of open protest against the government and the financial authorities. Anger at the sudden loss of access to their savings quickly fueled strong social tension, culminating in repeated and violent clashes with the police. The anti-riot police units intervened in war mode, resorting to the massive use of tear gas and water cannons to disperse the demonstrations and contain the most troublesome groups of demonstrators, determined to march towards the palaces of power. The climate of tension remains very high, fueled by the frustration of an entire population that demands immediate answers and an assumption of political responsibility for the financial crash.

Ties with politics

What transformed a serious financial crisis into an unprecedented institutional crisis in Paraguay were the deep ties that emerged between the Ueno leaders and the sphere of national political power. An economist by training and former official of the International Monetary Fund, the conservative president Santiago Peña – elected in 2023 from the ranks of the Colorado Party – had owned shares in Grupo Vazquez, the company directly linked to the control of the bank, until March 2025.

A fervent supporter of the free market and an economy open to private investment, Peña has maintained a line of close proximity to the United States and Israel in foreign policy, historically confirming diplomatic recognition of Taiwan in contrast to the majority of South American partners. Considered a key interlocutor and ally of the Trump administration in the region, Peña had been received in Washington just two weeks earlier by the US Treasury Secretary himself, Scott Bessent, to consolidate bilateral economic cooperation.

On the domestic front, however, the situation quickly worsened under the weight of accusations of conflict of interest, improper use of pension funds and alleged cover-up of the bank's financial problems. Further suspicions were also fueled by the appointment as head of the Central Bank of Carlos Carvallo, previously president of the financial company from which Ueno itself originated.

The investigations and Peña's position

To shed full light on the matter, the Paraguayan judiciary has opened three separate investigation files involving Peña himself and several public officials, while as many as 27 managers and figures linked to the credit institution have been formally indicted on charges ranging from abuse of trust to attempted fraud. Despite having firmly rejected every accusation and promised maximum collaboration with the investigators, the political position of the head of state has become unsustainable.

The resignation rejected and the impeachment

Overwhelmed by the pressure from the streets and the worsening of the political conflict, President Santiago Peña attempted an extreme move by publishing a video message on the X platform in which he formally announced his resignation, justifying it as an act of responsibility aimed at preserving the stability of the country and protecting democratic institutions. "I also want to apologize to the population if at some point I made a mistake. It was never my intention to betray the trust you placed in me", he declared in the message, reiterating that the absolute priority remains the return of savings to citizens blocked by the crash.

Despite the announcement, the National Congress however chose not to formally accept the resignation, deciding to continue with the impeachment procedure, the final outcome of which could arrive shortly. Behind this refusal there are very specific legal and political backgrounds: according to opposition parliamentarians, accepting voluntary resignation would in fact allow Peña to maintain the privileged status of senator for life, guaranteeing him the relevant immunities and significantly complicating any legal actions against him. Formal removal through impeachment would instead sweep away those protections, paving the way for direct criminal consequences.

In the event of a favorable outcome to the dismissal, presidential powers will temporarily pass to Vice President Pedro Alliana, a leading exponent of the Colorado Party itself, the political force that has governed Paraguay uninterruptedly since 1948, except for the period between 2008 and 2013.