Paraguay President Under House Arrest Following Major Banking Collapse

Paraguay is facing a major national crisis after the sudden collapse of Ueno Bank, a digital lender that served millions of people. Following the bank's failure, Congress impeached President Santiago Peña, who was then placed under house arrest. This dramatic series of events has left approximately 2.9 million people—about 60% of the country’s adult population—unable to access their own money for basic needs like food and water.

According to The Guardian, the crisis began when the government suspended Ueno Bank due to serious financial irregularities. The bank had grown very quickly after the government allowed it to become a digital bank. The Guardian reports that the president appointed a former CEO of Ueno to lead the country’s central bank, which is the organization responsible for regulating banks. This official, Carlos Carvallo Spalding, is now also included in the arrest warrant.

Legislators accused President Peña of using his political influence to help the bank grow. NPR reports that lawmakers found him guilty of malfeasance in office, which means doing something illegal or dishonest while in a position of power. Prosecutors have accused him of crimes including money laundering, influence peddling, and a breach of trust. While Peña has denied any wrongdoing, he did post a message on social media apologizing to the people of Paraguay for failing them.

Before the impeachment was finished, Peña tried to resign from his position. He hoped that by resigning, he would gain the special legal protections given to former presidents in Paraguay. However, lawmakers refused to accept his resignation. This decision meant that he remained subject to the ordinary courts and could be arrested. On Saturday morning, the former president appeared before prosecutors to answer questions regarding the investigation.

The impact of the bank's failure goes beyond individual savings. According to political analyst Hugo Duarte, the government had invested a large amount of public pension funds—money meant for retired workers—into Ueno Bank because it had the “blessing of the presidency.” Estimates suggest that between $800 million and $860 million in state and pension funds were held by the bank. NPR notes that the central bank seized control of Ueno because its solvency ratio—a measure of a company’s ability to pay its long-term debts—no longer met legal standards.

As the situation developed, protests broke out across the country, including in the capital city of Asunción. Some of these protests involved violent clashes with police. In response to the growing anger, the new president, Pedro Alliana, was sworn in on Friday. He is expected to serve out the rest of the term until August 2028. In a recent speech, Alliana promised that his government would take immediate action to help compensate the people who lost their money during the collapse.

This is not the first time a leader has been removed from office in Paraguay, but the scale of this financial crisis is unprecedented. For many citizens, the primary concern remains the safety of their savings. While the government works to stabilize the situation, the legal process against the former president continues. Prosecutors have stated that Peña was cooperative when police arrived at his home to carry out the arrest warrant. As the investigation moves forward, the country remains focused on finding answers for the millions of people who are still waiting to regain control of their financial lives.