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Paraguayan President Santiago Peña was impeached and subsequently placed under house arrest. This comes amid a rapidly developing political and financial crisis caused by the collapse of Bank Ueno this week.
Pena, 47, was detained on Friday just minutes after senators, including his party, voted to remove the country's president from office.
The President of Paraguay was planning to resign himself, but was unable to. And now impeachment and charges of malfeasance will cause him to lose his lifelong Senate seat, as well as the immunity typically enjoyed by former presidents.
The crisis began earlier this week. The country's central bank intervened in the activities of Bank Ueno, a fast-growing digital bank whose services were used by almost half of the country's population. Many of these people previously did not have access to bank accounts, writes Reuters.
The bank was urgently closed due to a solvency crisis. As a result, millions of clients lost access to their funds, which provoked a huge scandal, CNN notes.
Authorities have questions about Ueno's lending practices and the bank's ties to Paraguay's political and financial elite, Reuters points out. Until last year, the country's president was a shareholder in the holding company that owns the bank, and Central Bank Chairman Carlos Carvalho headed Ueno until 2023.
As a result, the head of the Central Bank resigned this week, and arrest warrants were issued for eight executives of Bank Ueno. Prosecutors also issued an arrest warrant for Carvalho on Friday. President Pena was summoned to the Senate to give explanations, but he did not appear, sending in his place lawyers who questioned the legality of the hearings.
“The impeachment procedure has no chance of success, since Santiago Pena has already resigned,” said one of the president’s lawyers, Adolfo Ferreiro. However, the Senate did not accept the resignation, continuing the impeachment proceedings and voting almost unanimously to remove Pena from office. 44 out of 45 senators voted in favor.
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Lawmakers based their decision on issues related to his ties to the failed bank. The Senate also promptly swore in Vice President Pedro Alliana, who became the new President of Paraguay. Meanwhile, authorities placed Pena under house arrest.
By the time of his arrest, dozens of protesters had gathered outside his home in Asunción. The police cordoned off the area around. Prosecutors, speaking outside the ousted president's home, said the charges were still being finalized but could include abuse of office for personal gain, Reuters writes. Pena was ordered to appear at the prosecutor's office on Saturday morning.
The impeachment charges alleged that Peña engaged in conflicts of interest, manipulated regulatory oversight processes, misused pension funds, and participated in a cover-up scheme.
Pena himself denies all the accusations, insisting that the discussion was only about regulatory issues. The central bank also denies that there is a conflict of interest in the case, arguing that Carvalho did not make any decisions regarding Bank Ueno.
Among those who lost access to their accounts were pensioners receiving government benefits through Ueno. On Friday, small groups of protesters gathered in front of the Central Bank building, chanting: “Give us back our money!”
Earlier this week, Peña approved measures to speed up payments to affected depositors, and some began receiving their funds on Thursday.
The prospect of a protracted crisis has attracted the attention of investors, most notably from neighboring Brazil, Paraguay's largest economic partner. A Brazilian government source told Reuters that the main goal is to prevent social instability in Paraguay and ensure that the banking crisis is resolved without widespread unrest.
"Outcry over frozen savings will intensify if Pena's departure is perceived as granting him immunity from liability or if payments to savers and retirees are delayed," said Mariano Machado, lead analyst at Verisk Maplecroft.
Pena will remain under house arrest until a judge determines where he will be held during criminal proceedings, CNN reports, citing prosecutor Christian Benitez.
He became head of state in 2023 at the age of 44, becoming one of the youngest presidents in Paraguayan history. During the presidency of Horacio Cartes in 2015-2017, Pena served as Minister of Finance and headed the Central Bank.
“I have decided to resign from the post of President of the Republic. I do this, thinking about the stability of our country, social peace and the need to preserve state institutions,” said his address regarding his resignation, which the senators never accepted.
Pena is called a staunch ally of the administration of US President Donald Trump. He has embraced Trump's policy priorities, including on immigration and security.
“We remain committed to the long-term ties between the American and Paraguayan people and look forward to continuing close cooperation on shared priorities,” CNN quoted a US State Department spokesman as saying about the removal of the Paraguayan president.
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