Paraguay's president tangled up in Ueno banking crisis

A bank holding more than $800 million in Paraguayan public deposits has collapsed, plunging the country into a political crisis.

Lawmakers have rejected President Santiago Peña's resignation after a unanimous vote to begin impeachment proceedings against him.

Paraguay’s attorney general has ordered three criminal investigations into Ueno Bank, including the president's connection to the digital lender.

It only took two days for Paraguayan president to resign after a banking crisis blocked nearly half of the small South American country's population from accessing their money.

The central bank's takeover of Ueno Bank plunged the country into a political crisis, sparking protests and a move to unanimously launch impeachment proceedings against President Santiago Peña in Congress.

The US-allied leader beat them to the punch by resigning on X minutes beforehand.

It all came crashing down on Monday when regulators investigating Ueno Bank uncovered alleged excessive lending to companies linked to its controlling shareholder, Grupo Vázquez, and expenses wrongly counted as assets.

By Tuesday, the central bank seized control of the digital lender due to a severe capital shortfall, and authorities issued arrest warrants for eight of Ueno's top executives.

The bank's president Miguel Vazquez turned himself into police and central bank president Carlos Carvallo stepped down at Mr Pena's request.

Mr Carvallo, who was president of Ueno's predecessor, was appointed the top job at the central bank — the agency charged with supervising Ueno — by Mr Peña.

As recently as last month, Mr Peña defended Ueno which reported holding roughly $800 million in public deposits, including money from the state pension and health fund and the operators of Paraguay's giant hydro-electric dams.

Mr Peña, a former International Monetary Fund economist, also owned shares in the group that controlled the digital lender until last year.

On Wednesday Mr Peña enacted a law to return most deposits within five days.

Thirty-five lawmakers meanwhile filed a motion to impeach him.

By Thursday, Mr Pena's own Colorado Party turned against him, with party leader Horacio Cartes announcing that he backed impeachment.

The Chamber of Deputies opened a session to debate the motion, but no sooner had it started than Mr Peña posted a video on X announcing his resignation.

Minutes later, the 78 deputies present unanimously approved the impeachment motion against Mr Peña.

Both houses have since declined to accept his offer to resign, pressing forward with a trial that could result in the president's removal from office.

Opposition senators said allowing him to resign would preserve his eligibility to become a senator for life and grant him with legal protections preventing his prosecution.

If the presidency remains vacant, Vice President Pedro Alliana will complete the term until 2028.

Paraguay's Attorney General Emiliano Rolón Fernández has ordered three criminal investigations into the Ueno Bank crisis, including allegations involving Mr Peña and other current and former government officials.

The investigations will examine authorities' oversight of the bank, their handling of its failure and the placement of public funds in the lender.

Mr Peña said he would cooperate with investigators.

"Whatever the outcome of this process, I will act with responsibility and respect for the Constitution," he said on X.

Ueno Bank, exploded from an obscure local fintech company into a mid-sized Paraguayan bank in less than five years, claiming more than 60 per cent of Paraguay's adults as customers.

Ueno Bank says it has over 3 million customers in a country of 6.4 million people and manages millions of dollars in pensions and other state funds.

Soon after winning its banking licence in 2023, Ueno seemed to be everywhere.

The digital lender, a rebranded version of a decades-old finance company, lured customers with generous cash-back offers on groceries as it grew to more than 70 locations, sponsored Paraguay's national soccer team and plastered its name on the country's main stadium.

The bank's rapid expansion made it one of Paraguay's most visible financial success stories.

Its collapse has triggered days of protesting in the country.

"Santiago Peña and the Colorado Party have stolen all our savings," said Luis Pineda, one of the protesters marching to Congress.

Police used tear gas and water cannons to disperse the crowds who shouted "give us our money back".