On Friday, the Senate of Paraguay took the extraordinary step of impeaching President Santiago Pena, triggered by a severe banking crisis that has left millions of citizens unable to access their personal deposits. This significant political upheaval paves the way for Vice President Pedro Alliana to assume the presidency for the remainder of Pena’s term, which concludes in August 2028.

Details of the Impeachment

The impeachment was a decisive response to allegations of misconduct in office, with lawmakers voting overwhelmingly in favor of Pena’s removal. Notably, by opting for impeachment instead of simply accepting his resignation, the Senate has denied Pena the privileges associated with a lifetime Senate seat and the immunity typically granted to former presidents, exposing him to potential legal repercussions.

Subsequent to the impeachment vote, prosecutors initiated the arrest of Pena, along with former central bank chief Carlos Carvallo, as part of an ongoing criminal investigation. Official sources later confirmed that Pena has been placed under house arrest while the public prosecutor’s office deliberates over the charges to be filed against him.

Background on the Banking Crisis

The root of Pena’s political downfall can be traced back to the collapse of Ueno, a prominent digital bank closely tied to him. The freezing of Ueno’s accounts has caused substantial distress, leaving millions of customers, including pensioners, without access to their funds. Ueno held substantial public assets, including hundreds of millions in government-related accounts.

Following the loss of support from key political figures such as Congress President Basilio Nunez and conservative Colorado Party leader Horacio Cartes, Pena submitted his resignation on Thursday. However, this action did not prevent legislators from pursuing impeachment measures, with accusations ranging from conflicts of interest and misuse of pension funds to institutional cover-ups related to Ueno.

The Fate of Ueno Bank

Ueno catered to approximately 2.94 million clients, representing around 60% of Paraguay’s adult population. Recent assessments from the central bank indicated that Ueno’s solvency ratio had plummeted to less than half of the regulatory minimum. Consequently, Ueno’s operational functionalities, including its app and in-branch services, have been suspended, resulting in extensive queues of customers seeking to withdraw their savings.

Government Response and Ongoing Investigations

In light of the banking crisis, authorities have detained several executives from Ueno, including its founder, Miguel Vazquez, and the bank’s president, Juan Manuel Gustale. A total of 27 bank officials and associates are facing criminal charges related to trust breaches and attempted fraud.

Amid these challenges, Pena attempted to restore public confidence by promising timely legislative action to reimburse affected depositors. However, the crisis ultimately forced him to withdraw from attending the Ibero-American summit in Madrid.