44 lawmakers impeach Paraguay’s president after Ueno Bank collapse and political crisis

Key Facts

All 44 senators present in Paraguay voted unanimously on Friday, November 6, to impeach President Santiago Peña for poor performance of his duties. Peña became the second Paraguayan president to be ousted through impeachment since the end of Alfredo Stroessner’s dictatorship in 1989. Vice President Pedro Alliana took over after being sworn in to complete the term through August 2028. Alliana said: "The Paraguay we are taking over today has urgent needs." The transfer of power came as the country grappled with the fallout from the collapse of Ueno Bank, which shook the financial system and triggered a political crisis the Associated Press described as the worst in more than a decade.

Regulators seized Ueno Bank three days before the vote after its solvency ratio fell below 50% of the required minimum. The central bank said placing the bank into a resolution process was intended to protect depositors and preserve financial-system stability. It said the bank’s deterioration was an isolated case that did not reflect the broader state of Paraguay’s financial system. The characterization came as authorities worked to manage the bank’s collapse in an orderly manner, amid concerns about its effect on confidence. Markets are also watching the transfer of deposits and the recovery of public funds held at the bank.

The first round of deposit-guarantee payments began on Thursday for depositors with balances of no more than 10 million guaraníes, under central bank terms. The conditions include having no debt with the bank and holding an account at another bank or financial institution in the country. The guarantee cap is 228.3 million guaraníes per person, and the central bank said this level covers about 97% of Ueno’s depositors, according to an initial estimate. The law requires payment within 15 days of the bank’s seizure, with the deadline extendable once. In a statement on the first round of payments, the central bank said eligible depositors must "have deposits of up to 10.000.000 guaraníes."

Ueno had about 3 million customers, equivalent to nearly 60% of the country’s adult population. The bank said it held between 800 and 850 million dollars in public funds, including about 380 million dollars invested by the government pension and health fund. Those funds add to the importance of managing the crisis for state institutions, alongside individuals’ accounts. The fallout also reached everyday economic activity: a ride-sharing platform that relied on the bank shut down, leaving 3,000 drivers without work. The state electricity company said loans worth 21 million dollars, earmarked for public works and provided by the Inter-American Development Bank and Taiwan, were stuck at Ueno.

Accountability has also extended to bank officials and the ousted president. Prosecutors charged 27 people in a separate case involving Ueno executives, including the bank’s founder, with crimes including breach of trust and attempted fraud. The prosecutor’s office also ordered the arrest of Peña and former central bank president Carlos Carvallo as part of a criminal investigation linked to the bank’s collapse. Peña was taken for questioning on Saturday and placed under house arrest over charges including breach of trust, influence-peddling and using his office for personal gain. Peña denied wrongdoing.

The crisis weighed on Paraguayan assets: the country’s bonds recorded some of the steepest losses in emerging markets during the week, and the guaraní fell against the dollar, the Associated Press reported. The agency did not specify the size of the moves in bonds or the currency. S&P Global Ratings said the political transition could slow fiscal consolidation, but said any fiscal deviation beyond its baseline scenario was likely to be limited. It said it would continue to monitor the crisis’s effects. Meanwhile, the central bank said in a Saturday update that 1.2 million Ueno customers had received partial or full compensation for their insured deposits.

Payments and investigations remain in focus alongside the new government’s fiscal agenda. The central bank said Ueno’s situation did not reflect the broader state of the banking system, while S&P Global Ratings is monitoring the political transition’s effect on fiscal consolidation. Among the developments ahead is an indefinite nationwide strike that the country’s largest teachers’ union plans to begin on Monday, demanding protection for public pension funds. The union has more than 40,000 members. The action comes as funds from the pension and health fund deposited at Ueno remain central to debate over protecting public resources.