Paraguay President Pena steps down as banking crisis sows political chaos

ASUNCION – Paraguayan President Santiago Pena resigned on Nov 5 after the collapse of digital lender ueno triggered a political and financial crisis, froze access to millions of accounts and rattled investor confidence in one of South America’s most stable economies.

Pena stepped down hours before lawmakers moved ahead with impeachment proceedings, after losing support within his own conservative Colorado Party.

In a statement on social media, the leader said that he would appear before Senate impeachment proceedings to “exercise my right to a defence”.

He said he would do so “not out of personal pride, but because being accountable and providing explanations is also a responsibility I owe to the Paraguayan people”.

He urged a quick solution for those left unable to access their accounts.

“Clarifying the facts and resolving the payments are obligations that must advance at the same time,” he said.

Sovereign bond prices fell after Pena’s resignation, while Paraguay’s guarani currency weakened past 6,500 per US dollar before closing at 6,490, down nearly 5% on the day.

The turmoil began earlier this week after Paraguay’s central bank intervened in ueno, saying the fast-growing digital bank had breached minimum solvency requirements.

The fallout has already forced out the central bank chief and led to arrest warrants for eight ueno executives, who later turned themselves in.

Ueno grew from a niche fintech into a mid-sized bank serving around three million customers in a country of 6.5 million people.

It also administered roughly US$850 million (S$1 billion) in public funds, including money linked to state institutions and pensions.

Its collapse has left customers unable to access accounts and raised acute political pressure because many Paraguayans relied on the bank for savings, payments and benefits.

“Pena is playing with savers’ money,” ueno account holder Felipe Rodriguez said, choking up.

“This cannot go unpunished.”

He also accused Vice-President Pedro Alliana of involvement.

Alliana, next in line for the presidency, has distanced himself from Pena in recent days, and said he is pausing his own presidential ambitions until the financial crisis is resolved.

“Ueno approved a loan for us to buy our first house. But the funds were never disbursed, and now we have nowhere to live,” 26-year-old Nadia Gonzalez, a mother of three, said.

Long lines of people trying to withdraw their money from ueno branches snaked down the streets of the capital Asuncion on Nov 3 and 4.

Political ties

Opposition lawmakers accused Pena of conflicts of interest, misuse of pension funds, and helping shield the bank from scrutiny.

Pena has denied wrongdoing, and said the affair is a regulatory issue that should be handled by the courts.

“My greatest wish is that the return of those funds be guaranteed, that the deposit guarantee fund fulfil its purpose, and that public funds – as well as the resources that belong to all Paraguayans – be protected,” he said.

Pena, an economist who was elected in 2023, has faced intense political scrutiny because of his past business ties to the collapsed bank.

He was a shareholder of Grupo Vazquez, the group that owned the bank until March 2025.

Pena has repeatedly rejected suggestions of improper ties.

He has described the controversy as the political escalation of what began as a technical and regulatory issue and has argued that any wrongdoing should be addressed through the courts.

In a note to clients, J.P. Morgan said the ueno developments had “rapidly acquired a political dimension”, adding that risks to the wider financial system would hinge on “the speed and transparency” of the authorities’ response. REUTERS