‘Very strange, very sad’: Paraguay bank collapse fells a presidency and leaves millions broke

Santiago Peña’s links to Ueno Bank scrutinized after crisis led to his house arrest and froze millions of bank accounts

Pedro Volpe had just woken up last Tuesday when he saw a message from a friend asking whether his bank account was down, too.

It was a day after payday, and Volpe, 50, a writer and lawyer, opened his banking app and panicked: he could not even see his balance.

Volpe was among nearly 3 million Paraguayans, about 60% of the country’s adult population, whose accounts had been frozen overnight. All were customers of Ueno Bank, a digital lender that aggressively expanded across the South American country in recent years, and which, on Monday night, the central bank ordered into resolution over insolvency.

Ueno is at the centre of a political and economic crisis that has brought Paraguay’s banking system to the brink of collapse. On Friday, it led to the impeachment and house arrest of the rightwing president, Santiago Peña.

Peña had resigned the day before in a vain attempt to retain the special jurisdiction afforded to former presidents – who, under the constitution, become senators for life. Lawmakers stripped him of the seat anyway, meaning Peña will face criminal proceedings in the ordinary courts.

In just a few days, he went from being a market favourite among Latin American presidents and one of Donald Trump’s key allies in the region to facing fierce mass protests, being voted out and placed under house arrest.

The now former president is the subject of an investigation by the public prosecutor’s office over alleged favouritism towards Ueno, which, in just a few years since Peña took office in 2023, went from an obscure digital lender to the bank of choice for most Paraguayans.

“It was very easy to use and to open an account,” said Volpe, recalling that everything could be done quickly on a mobile phone. The bank also offered far more generous investment returns than its competitors did.

“Now I’m having to work miracles to pay my bills,” added Volpe. “A lot of people can’t even afford basic everyday things like food; luckily, I still had some money saved elsewhere, but that has only got me this far. I don’t know what I’ll do next week.”

Ueno was so popular – sponsoring the national football team, the league and the country’s biggest football clubs – and served such a large share of the population that businesses have already reported an overall fall in sales of up to 80% this week. Media outlets belonging to the same financial group as the bank had their operations suspended, including radio stations and the century-old newspaper La Tribuna.

The impact on ordinary Paraguayans was perhaps even wider reaching. The media freeze saw 300 workers having their salaries suspended, initially for 90 days. About 32,000 pensioners whose public pension funds had been invested in the bank were left without payments.

“A lot of people are also not working because they can’t get paid or make payments,” said the historian and political analyst Fabián Chamorro. “Meanwhile, the protests were growing every day, and Peña’s impeachment was the way congress found to prevent a popular explosion.”

A former finance minister and ex-employee of the central bank and the International Monetary Fund, Peña was elected by promising to restore a “great Paraguay” and attract foreign investment.

Soon after taking office at age 44 as the youngest president in Paraguay’s democratic history, he appointed Carlos Carvallo Spalding, who had until then been Ueno’s CEO, to lead the central bank. Less than three months later, Spalding authorised Ueno, then a finance company, to become a digital bank.

Peña himself had about $1m in shares he bought in 2019 in a company that would become Ueno Holding in 2022, the parent company of the conglomerate that controlled Ueno Bank. Even after becoming president, he only disposed of the shares in April 2025. He said he had bought them purely as an “investor”.

“During Peña’s administration, Ueno began receiving various benefits, and the government relaxed the rules to allow public funds to be invested in the bank,” said Chamorro. An estimated $800m to $860m in state and pension funds were invested in Ueno.

A series of internal central bank reports pointing to irregularities – including loans to companies within the same group – were revealed by local media in recent months, but Peña dismissed them as a “false media campaign” against his government.

With the bank having less than half the solvency required to meet its obligations, the central bank ordered it into resolution only after mounting pressure from other banks and opposition lawmakers.

Spalding resigned and, like Peña, was ordered arrested on Friday night. During the week, police had already arrested eight senior executives and directors of Ueno and its controlling group on suspicion of concealing the bank’s deteriorating financial position for months.

The public prosecutor’s office is investigating Peña on suspicion of illicit enrichment, money laundering and influence peddling. He denies all the allegations, and his lawyers said there is no evidence he directed the allocation of pension funds to the bank.

Meanwhile, most affected people still have no access to their own money.

A guarantee fund covers deposits of up to $38,000, which would apply to more than 90% of individual account holders. On Friday, the central bank began making payments to customers with up to $1,565, no outstanding debts and an existing account at another institution.

Paola Benítez, a 25-year-old chef from the capital, Asunción, met all three requirements, but by late Friday afternoon had not yet recovered the money she had been saving for her wedding.

“This has made me a bit anxious, a bit desperate too, because honestly, who am I supposed to go to and ask about this? It’s very strange, very confusing, very sad,” she said.