ASUNCION: Paraguay’s Senate has impeached and removed President Santiago Pena from office following the collapse of a major digital bank that left nearly three million customers unable to access their accounts.
Vice President Pedro Alliana was sworn in as the new president on Friday. He will complete Pena’s remaining term, which runs until August 2028.
Pena was later placed under house arrest on suspicion of breach of trust. Prosecutors ordered him to remain at his residence until he appears before the Attorney General’s Economic Crimes and Anti-Corruption Unit.
All 44 senators present voted in favour of removing Pena, while one senator was absent. Lawmakers found him guilty of poor performance in office.
The decision came despite Pena offering to resign a day earlier. Senators continued with the impeachment proceedings, which also prevented him from receiving the lifetime Senate membership and parliamentary immunity normally granted to former presidents under Paraguay’s constitution.
Pena did not attend the Senate trial. His lawyers argued that he had not been given enough time to prepare his defence. They also challenged the proceedings and reserved the right to appeal to the Supreme Court and international human rights bodies.
The political crisis erupted after the Central Bank took control of Ueno Bank on Tuesday over concerns about its financial position and alleged breaches of minimum solvency requirements. The move froze customers’ accounts and bank cards, affecting nearly three million people.
The bank had expanded rapidly through its digital banking model and served many customers who previously had limited access to financial services. Its collapse sparked public anger and raised questions about its connections to influential political figures.
Pena previously held shares in Grupo Vazquez, the conglomerate that controlled Ueno Bank. He said he sold his stake last year. However, lawmakers accused him of having a conflict of interest and using political influence to direct public funds towards the lender.
The impeachment charges also included allegations of weak regulatory oversight and concerns over the appointment of former Ueno executive Carlos Carvallo as head of the Central Bank.
Lawmakers further questioned the state pension fund’s deposits at the bank, which reportedly exceeded legal limits. According to an Associated Press report, Ueno had received more than $800 million in public funds, including around $355 million from the state pension fund.
Pena denied any wrongdoing and apologised to the public in a televised address. He said he had never intended to betray the trust of the people and described his departure as an attempt to prevent further political division.
The bank’s collapse triggered several nights of protests in Asuncion and other cities. Thousands of people demanded access to their savings and accountability from those responsible. Police used tear gas and water cannons to disperse demonstrators in the capital on Thursday.
Authorities have started releasing advance payments to eligible depositors. The first phase provides payments of up to approximately $1,600 to qualifying customers who meet the required conditions.
The Central Bank has said deposits of up to around $37,000 per customer are protected under the country’s deposit guarantee scheme. The protection is expected to cover nearly all Ueno customers.
Meanwhile, prosecutors have launched three criminal investigations into the bank’s collapse, focusing on its operations, regulatory supervision and the handling of public funds.
Twenty-seven people, including the bank’s controlling shareholder Miguel Vazquez and several executives, have been charged in connection with suspected financial crimes. Authorities have also ordered the arrest of former Central Bank chief Carvallo.
The scandal has widened beyond the banking sector, affecting businesses and employees linked to the conglomerate. Around 1,000 employees of technology company ITTI in neighbouring Argentina were reportedly suspended for 30 days without pay.
The crisis has also exposed divisions within the ruling Colorado Party, whose lawmakers backed Pena’s removal. Former president Horacio Cartes, a powerful party figure and Pena’s former political patron, also supported the impeachment.
Alliana now faces the challenge of restoring public confidence in the government and financial system as investigations into the bank’s collapse continue. He is also facing scrutiny over alleged links to the scandal, although an opposition effort to impeach him was shelved.
