Paraguay President Impeached, Arrested After Bank Collapse

Paraguay's Senate unanimously impeached President Santiago Peña on Friday night, with 44 senators voting to remove him from office following the collapse of a government bank that froze the savings of nearly half the nation's population. Shortly after his impeachment, local police arrested Peña on suspicion of breach of trust and abuse of power. Crowds protesting outside Congress cheered the Senate's decision, with some waving Paraguayan flags and shouting slogans against dictatorship. Peña, who visited Israel in 2024 to move his country's embassy to Jerusalem and spoke at the Knesset, had announced his resignation on Thursday due to the collapse of the digital bank Ueno, which he was linked to through private business interests. However, Congress rejected his resignation and proceeded with impeachment. The impeachment process effectively removes the immunity typically granted to former presidents.

The economic and political crisis triggered by the bank's collapse has left the deposits of approximately 3 million customers frozen. Peña, who held shares in the bank's parent company until last year, denies any wrongdoing. Angry crowds also surrounded his residence as police arrived to detain him, reportedly to prevent his escape. He was placed under house arrest pending a court appearance where he will face charges including breach of trust and abuse of public office for personal gain, a serious offense carrying a potential prison sentence of up to 10 years. Legislators accuse Peña of leveraging his political influence to channel hundreds of millions of dollars in public funds to the digital bank while in a conflict of interest, interfering with regulatory oversight, and participating in an institutional cover-up involving the Central Bank.

Following Peña's impeachment, Vice President Pedro Alliana was sworn in as his successor, serving until the end of the original term in August 2028. Alliana, who is also reportedly under investigation for his ties to the bank, acknowledged the nation's urgent needs and promised full compensation for citizens affected by the economic crisis. The public's anger had intensified daily since the bank's collapse, with thousands protesting in the capital, Asunción, calling for Peña's imprisonment. The bank's collapse prevented customers from withdrawing cash, accessing savings, or using their cards, impacting over a million Paraguayans who had opened their first bank account there. Even national football team players reported being unable to access their funds.

The repercussions extended beyond account holders, with a ride-hailing app shutting down and leaving 3,000 drivers jobless. Some depositors began receiving partial reimbursements, with initial payments covering deposits up to approximately $1,500. Deposits are insured up to about $35,000, a coverage that the Central Bank states encompasses 97% of Ueno's customers. The Central Bank has characterized the collapse as an isolated incident, asserting the broader financial system remains stable. However, Senator Rafael Filizzola described the situation as Paraguay's most significant corruption scandal in its democratic history, dealing a severe blow to the country, its citizens, and its international credibility.