Paraguay Bank Collapse Exposes State-Entrenched Power

Nearly 3 million Ueno customers lost access to savings and bank cards after regulators took control of the bank, while allegations of public money and political influence now reach Paraguay’s ousted president. On Saturday, Nov. 7, Santiago Peña went to the attorney general’s office in Asunción for questioning and was charged in connection with the banking scandal. Prosecutors are seeking pretrial detention for Peña and former Central Bank chief Carlos Carvallo. The people who entrusted their money to a bank entwined with state institutions are left waiting for answers—and access to their funds.

Jessica Aquino, 32, told AFP, “Justice has been done. Now we want him to give us back our money and go to jail.” Cynthia Farina told AFP that “Santiago Peña has hurt so many Paraguayans, so many families, business owners and small business people, including my own son, who had savings in Ueno Bank.” Thousands demonstrated in Asunción and other cities demanding their money and accountability. Hundreds outside Congress celebrated Peña’s impeachment; one protest sign read, “Peña in prison.”

Who Held the Levers

The Senate impeached Peña on Friday, Nov. 6, and Vice President Pedro Alliana was sworn in as president. Forty-four of 45 senators voted for impeachment, with one lawmaker absent. Senate President Basilio Nunez declared Peña “guilty of poor performance in his duties.” Peña had offered his resignation on Thursday, Nov. 5, but lawmakers rejected it, saying they wanted to prevent him from leaving office with political immunity. An arrest order followed his removal, and authorities placed him under house arrest.

The allegations include breach of trust and administration for personal gain; Peña has denied wrongdoing. Prosecutors are also examining alleged influence-peddling and misappropriation of funds. The attorney general said the investigation concerns “acts related to the supervision and resolution of Ueno Bank SA and the placement of public funds in said entity.” Peña says he’ll defend himself “with arguments and evidence,” cooperate with institutions, and provide requested information.

The scandal centers on Peña’s ties to Ueno’s controlling business group, Grupo Vázquez. He held a stake in the parent company until March 2025, according to Al Jazeera, and has said he sold his stake in Grupo Vázquez then. He denies ever being a direct shareholder or investor in Ueno Bank. Opposition lawmakers accused him of a conflict of interest and alleged he used political influence to direct public funds to Ueno while shielding it from regulatory scrutiny. Peña denied the conflict-of-interest accusation and argued the bank’s problems were a regulatory matter.

Public Money, Private Losses

Ueno grew rapidly during Peña’s presidency, partly through an injection of more than $800 million in public funds. The bank said it managed between $800 million and $850 million for state institutions and pension-related bodies. Prosecutors allege the state pension fund deposited $355 million at Ueno, above legal limits. They also point to Peña’s 2023 appointment of Carlos Carvallo, a former executive at the company that later became Ueno, to head Paraguay’s central bank. Carvallo was charged Saturday with breach of trust, producing false public documents and administration for personal gain.

Regulators took control of Ueno on Tuesday, Nov. 3, over solvency concerns. On Nov. 2, the central bank’s board unanimously voted to begin a resolution process, placing the bank under intervention so officials could verify its financial position, preserve assets and determine how to handle obligations. The process doesn’t itself mean liquidation is complete or establish how much creditors will recover. The Central Bank of Paraguay said adjustments made during remediation drove the bank’s solvency ratio below half the required minimum; Ueno had reported a 14.5% regulatory capital ratio in a September public letter, above the 12% minimum.

Prosecutors charged 27 people linked to Ueno and related companies with alleged financial crimes. Loans and overdrafts to companies connected to the controlling group are under review. Prosecutors say some loans were large relative to borrowers’ ability to pay, had extended terms or lacked sufficient collateral or documentation. They’re also investigating transfers to other group companies and a loan portfolio sale worth about $74.4 million that may have been indirectly financed with the bank’s own funds. Outstanding balances under review reportedly exceeded $166 million. These remain allegations, not findings of guilt.

A Partial Lifeline, Not an Answer

Congress passed a law allowing an advance of up to 40 minimum monthly wages, about $19,100, after overdue debts are deducted. The Deposit Guarantee Fund covers up to 75 minimum monthly wages per person and institution, about $35,700. The central bank said the first payment group would include depositors with balances up to about $1,565 who didn’t owe money to Ueno. On Saturday, it said 1.2 million customers had received partial or full reimbursement of insured deposits. José Maciel of the Central Bank’s Deposit Guarantee Fund said later beneficiaries “will be announced progressively over the course of the payment process.”

The Social Security Institute (IPS) said about 32,000 retirees and pensioners received benefits through Ueno and that it would coordinate with other banks to move payments. It said November benefits and the annual supplementary payment would arrive on schedule, funded by employer and worker contributions rather than its investments. The IPS said it would form a legal team to protect its resources. The Supreme Court said Ueno had not transferred about $39,200 in judicial and registry fees collected shortly before the resolution and said it would seek recovery.

Alliana, from the same conservative Colorado Party as Peña, promised affected depositors would be “fully compensated” and said he would serve as president until 2028. An opposition motion to impeach Alliana over the crisis failed to gain congressional approval; Al Jazeera said he was himself under investigation in connection with the bank’s collapse. The scandal also brought the departures of Central Bank President Carlos Carvallo and Interior Minister Enrique Riera, while eight Ueno executives were arrested. About 1,000 employees of ITTI, a technology company within Grupo Vázquez, were suspended for 30 days without pay.

Peña said depositor payments “cannot be left pending based on what happens to me,” and called for the investigation and return of funds to proceed in parallel. Paraguay’s national football team, sponsored by Ueno, said its members “were also victims of this situation.” Former president Horacio Cartes, a tobacco magnate who served from 2013 to 2018, was described by Bloomberg as having an opportunity to regain power and influence ceded to his protégé. The names at the top may change. The people waiting for their money are still the ones carrying the cost.