Paraguay’s president quits after millions of people’s savings frozen in bank crisis

Santiago Peña’s rightwing administration had authorised Ueno Bank to drastically expand operations before collapse

Paraguay’s rightwing president, Santiago Peña, resigned on Thursday after a political and financial crisis collapsed the South American country’s banking system in recent days.

At the centre of the crisis is Ueno Bank, which in just a few years under Peña went from an obscure digital bank to one of the country’s largest lenders, claiming to have about 60% of Paraguay’s adult population as customers.

Last Monday, the central bank ordered Ueno into resolution over insolvency, freezing the deposits of 3 million customers, leaving hundreds of thousands of families without access to money for food and basic daily expenses. Bank executives were arrested, and people took to the streets in massive protests.

In power since August 2023 and with a term running until 2028, the 47-year-old economist was already facing impeachment proceedings that had broad support.

“Dear compatriots, today I address you at one of the most difficult moments of my life. With my heart set on Paraguay and with the conviction that our republic must always come before any person or circumstance, I have decided to submit my resignation as president of the republic,” said Peña in a video.

Ueno Bank began as a finance company in the 1970s and, in 2021, was bought by Grupo Vázquez, one of Paraguay’s largest business and industrial conglomerates. At the end of 2023, it received authorisation from the central bank, already under Peña’s administration, to operate as a digital bank.

The bank rapidly expanded its operations, attracting customers with generous cash-back offers on groceries and sponsoring Paraguay’s national football team. On Wednesday, the players released a letter “demanding” a “forceful response” from the government and the justice system.

The bank came to manage between $800m and $850m in deposits from state and pension entities, including retirement funds, prompting criticism over conflicts of interest because of Peña’s previous shareholding ties to Ueno Holding.

Peña said that, as an economist, he had merely made an “investment”, but that he had already disposed of all his shares. When the local press pointed to possible improper favouritism in directing state and pension funds to the bank, he called it a “false media campaign” aimed at weakening his government.

On Wednesday, opposition lawmakers and even members of Peña’s Colorado party filed an impeachment motion holding the president responsible for the collapse. He had been a shareholder in the group that ran the bank until early last year and, in recent months, had reportedly been ignoring warnings from the central bank and the media about its operations.

Political pressure intensified on Thursday morning when the ex-president Horacio Cartes, his former ally, posted a message endorsing the impeachment.

“We will not stand on the side of the theft of public, private and pensioners’ funds. We must think of the people and of the values we uphold in the Colorado party. We support the impeachment of the president of the republic, Santiago Peña, in order to restore the institutional order of the republic,” he wrote.

Other lawmakers followed suit and began debating impeachment when Peña released a video announcing his resignation.

“I do so thinking of the stability of our country, social peace and the need to preserve our democratic institutions,” said the now former president.

“I also want to apologise to the people if at any point I failed them … But today my priority is only one thing: the peace of mind of Paraguayans who trusted their savings to our financial system … My greatest wish is that the return of those funds is guaranteed,” he added.

Opposition senator Rafael Filizzola called the case “the biggest fraud carried out from political power in the democratic era … This is a bank created from political power, to use public money for private businesses linked to political power, with the president of the republic at the head of it,” he told 1020 AM radio.

Peña, a former finance minister who promised to rebuild a “great Paraguay”, was a key ally of the US president, Donald Trump, in the region – one of the few Latin American presidents to attend Trump’s second inauguration. US officials, including the secretary of state, Marco Rubio, repeatedly praised him as a “strategic partner”, and Peña recently flew to Washington to discuss critical minerals and economic cooperation. Neither Rubio nor Trump has yet commented on Peña’s resignation.

Vice-President Pedro Alliana automatically assumes the presidency to complete the constitutional term until August 2028.

About an hour after Peña’s announcement, the lower house unanimously approved the impeachment motion, which now goes to the senate. If approved, even after his resignation, he would lose his senate seat and, with it, parliamentary immunity, leaving him to face any criminal proceedings in the ordinary courts.