Paraguay's President Impeached and Placed Under House Arrest Following Massive Bank Collapse

Paraguayan President Santiago Peña was placed under house arrest on Friday, minutes after Congress voted to impeach him following a severe banking crisis that left millions unable to access their money. Forty-four senators voted in favor of the impeachment, declaring Peña guilty of poor performance in his duties. Lawmakers rejected his attempt to resign on Thursday, a move he had made in an effort to retain special legal protections as a senator for life.

The Banking Crisis

The crisis erupted after the Central Bank suspended Ueno Bank due to irregularities and concerns about its solvency. The freeze locked 2.9 to 3 million people out of their accounts, affecting roughly 60% of the country's adult population who could no longer buy basic items like bread and water. Protests spread across Asuncion and other cities, with demonstrators clashing with police using tear gas and water cannons while demanding answers and the return of their savings. Retail sales dropped by as much as 80% as the panic unfolded.

Investigations and Allegations

The public prosecutor's office opened an investigation into Peña on Thursday for illicit enrichment, money laundering, and influence peddling. Investigators allege Peña used his political power to favor Ueno Bank, which expanded exponentially during his term. Shortly after taking office, Peña appointed Carlos Carvallo Spalding—a former CEO of Ueno—as head of the central bank. Spalding subsequently allowed Ueno to operate as a digital bank, putting it on a path to rapid growth. An arrest warrant was also issued for Spalding, and prosecutors noted Peña voluntarily allowed officers into his home. Vice-President Pedro Alliana was sworn in as the country's new leader.

Financial Ties

Peña owned about $1 million in shares bought in 2019 in a company that became Ueno Holding in 2022, retaining them until April 2025 as an investor. The bank aggressively grew by offering high returns and an easy account-opening system, securing state and pension funds totaling between $800 million and $860 million. Opposition senator Rafael Filizzola called the situation one of the biggest corruption scandals since the return of democracy. Meanwhile, Central Bank official Jose Maciel stated that advance payments of up to $1,600 began on Thursday for depositors without loans who have accounts at other institutions.

Context

Central banks typically step in to freeze institutions and protect the financial system when a major lender faces severe solvency issues. In Paraguay, as in many nations, the sudden collapse of a dominant digital bank creates widespread immediate hardship because everyday commerce relies heavily on electronic accounts and accessible digital transactions.