Paraguay's Impeached President Pena Placed Under House Arrest As VP Alliana Takes Over

Paraguay's banking crisis has triggered a major political upheaval, with impeached President Santiago Pena placed under house arrest following the collapse of Ueno Bank, a digital lender serving nearly three million customers. Vice-President Pedro Alliana has been sworn in as his successor, while prosecutors investigate alleged misconduct, breach of trust and misuse of public funds.

The crisis began when Paraguay's Central Bank took control of Ueno Bank on November 3, citing concerns about its financial position. The intervention froze accounts and disrupted payments, leaving nearly 3 million people in a country of 6.5 million unable to access their savings. The bank also held approximately $850 million in public funds, including money belonging to state institutions and pension-related bodies.

Controlled by the Grupo Vazquez conglomerate, Ueno expanded rapidly after acquiring Financiera El Comercio in 2021, launching its digital banking brand in 2022 and merging with Vision Banco in 2024. However, regulators reportedly identified risky loans to companies linked to its owners, poorly documented transactions and inadequate collateral. Its capital subsequently fell to less than half the legally required minimum.

The collapse affected pensioners, government employees and businesses. The state pension and healthcare fund reportedly had around $380 million in deposits and investments with Ueno, while nearly 32,000 retirees receiving payments through the bank faced disruptions. The government introduced a state guarantee mechanism to reimburse depositors, with initial payments beginning on November 5. The crisis also put thousands of jobs at risk.

The scandal became political because of Pena's connections to Grupo Vazquez. The 47-year-old economist, a former International Monetary Fund (IMF) economist and finance minister, had previously held a stake in the conglomerate. He maintains that he sold it in March 2025 and denies wrongdoing.

Pena announced his resignation on November 5, saying he wanted to protect Paraguay's stability and democratic institutions. However, lawmakers continued impeachment proceedings. On November 6, 44 of 45 senators voted to remove him, declaring him guilty of poor performance in office. The conviction also stripped him of the lifetime Senate seat and legal immunity he could otherwise have retained after resigning.

Alliana was sworn in and will serve until August 2028. However, he too faces scrutiny over alleged links to the bank, which he denies.

Minutes after his removal, Pena was placed under house arrest pending questioning by prosecutors investigating possible influence peddling, breach of trust and misuse of public office. Former central bank chief Carlos Carvallo was also ordered arrested. Prosecutors have charged 27 bank officials and associates, while eight former executives, including founder Miguel Vazquez and bank president Juan Manuel Gustale, have been detained.

Meanwhile, thousands have protested in Asuncion and other cities, demanding access to their savings and accountability. Even members of Pena's Colorado Party backed his impeachment. The US Embassy expressed solidarity with Paraguay's people as the country grappled with the fallout.