ASUNCIÓN, Paraguay (AP) — Paraguayan President Santiago Pena is the subject of a criminal investigation following collapse of a major digital bankprosecutors announced, following the resignation and dismissal of the South American leader on Thursday.
The crisis at Ueno Bank has turned Peña’s long-ruling Colorado Party against him, a stunning turnaround for the former International Monetary Fund economist who had enjoyed the support of the country’s most powerful politicians and was welcomed to Washington just weeks ago as a key party ally. Trump administration.
Minutes after Peña’s announcement, the lower house voted 78-0 to impeach him, sending the charges to the Senate. Congressional leaders will continue voting Friday on whether to accept Peña’s resignation, which would clear the way for Vice President Pedro Alliana to be inaugurated without waiting for a Senate trial.
Opposition senators continue to demand that Peña be removed from office, arguing that allowing him to resign would preserve his eligibility to become a senator for life, with legal protections that could prevent his prosecution, should Paraguay’s attorney general, Emiliano Rolón Fernández, choose to file charges.
Rolón has ordered three criminal investigations into the Ueno Bank crisis, including allegations involving Peña and other current and former government officials, the prosecutor’s office announced Thursday.
The investigations will examine authorities’ oversight of the bank, their handling of its bankruptcy and the placement of public funds with the lender.
Peña said in a video posted on X that he was resigning in the interest of “the stability of our country, social peace and the need to preserve our democratic institutions.”
Even Peña’s mentor, Colorado Party leader and former president Horacio Cartes, supported impeachment, saying the party would not side with the “looting of public and private funds and retirees’ money.” The United States Treasury Cards sanctioned in 2023 following corruption allegations, but the Trump administration lifted sanctions last year.
Peña, who until last year held a stake in a company linked to Ueno, expressed contrition. But he has not accepted responsibility for the unrest, which has left millions of savers, retirees and workers scrambling to recover their frozen savings and unpaid wages.
“I want to apologize to the people if I failed to do so at any point,” he said. “I never intended to betray the trust they placed in me.”
From star lender to foreclosed bank
Bank Ueno, which grew from an obscure financial company to a household name in less than five years, counted more than 60 percent of Paraguay’s adults as customers. Many Paraguayans are wondering how a bank linked to the president was able to grow so quickly in size and importance despite repeated warnings about its lending practices.
The answer lies in discomfort proximity de Peña Colorado Day to the country’s regulators and the business elite, a weakness that lasted even as stable economic management and rapid growth have recently earned Paraguay coveted investment-grade credit ratings.
“Santiago Peña and the Colorado Party stole all our savings,” said Luis Pineda, one of the protesters who marched toward Congress on Wednesday. “We have had enough of 70 years of looting. »
Shortly after obtaining his banking license in 2023, Ueno seemed to be everywhere in Paraguay. The digital lender, a rebranded version of a decades-old financial company, lured customers with generous cash-back offers on groceries as it expanded into more than 70 locations, sponsored Paraguay’s national soccer team and put its name on the country’s main stadium.
Government money flowed into Ueno’s coffers under Peña. He also named Carlos Carvallo, president of Financiera Ueno, the predecessor of Ueno Bank, to head the central bank, the agency responsible for overseeing the digital lender.
Last month, Ueno said he held about $800 million in public deposits, about a quarter of his total, including money from the state pension and health fund and the operators of Paraguay’s giant hydroelectric dams.
But concerns were growing within the central bank. In June, its inspectors discovered a pattern of granting risky loans to insiders, ABC Color, one of Paraguay’s main newspapers, reported. Ueno had granted large sums to companies linked to its owners, beyond what the law allows and without sufficient security to cover the debts in the event of bankruptcy.
As recently as last month, Peña defended Ueno and central bank oversight, calling the concerns a smear campaign that frightened the public.
Long queues outside branches but customers are stuck
But on Monday, everything fell apart. Regulators investigating Ueno’s loans to companies linked to its owners found poorly documented loans, the central bank said, as well as expenses the bank had wrongly considered assets.
Once the accounts were corrected, Ueno’s capital, which banks must retain to absorb losses, fell to less than half the legal minimum. The central bank announced the seizure of the lender on Tuesday, beginning a process of transferring deposits and recoverable assets to other banks before liquidating what remained.
Ueno’s app, cards and transfers went dark and its branches locked their doors, leaving desperate depositors to queue outside. On Wednesday, the rush to open new accounts elsewhere crashed other banks’ mobile apps, fueling public panic.
The authorities called for calm. Under a law rushed through Congress on Wednesday, a state guarantee fund must reimburse stranded depositors within five business days, starting Thursday for small accounts of up to about $1,600. The fund insures up to about $36,000 per customer, which the central bank estimates will cover the entire balances of about 97% of customers.
On Thursday, a judge ordered six Ueno executives, including founder Miguel Vázquez and bank president Juan Manuel Gustale, to be jailed pending trial and two others placed under house arrest. Prosecutors charged 27 bank officials and associates with breach of trust and attempted fraud.
Gustale’s lawyer rejected the accusations, arguing that top executives relied on staff to make lending decisions. “The president or the board of directors is not responsible for deciding who will benefit from a particular loan,” José Fernández Zacur told local media.
Protesters in the streets
Still in their Ueno uniforms, young employees burned their credit cards and insulted Peña in front of the Labor Ministry on Thursday, demanding severance and unpaid wages. Peña’s resignation did not succeed in calming them.
“Let the impeachment process take place and let him lose his immunity,” Adolfo Villalba, one of the protesters, said Thursday.
The Labor Ministry estimates that the collapse affected around 7,000 direct and indirect jobs within the bank and its related businesses.
Many saw Ueno’s collapse as a case study in official corruption. Only Venezuela ranks lower in South America according to Transparency International’s latest perceived corruption index.
“This is a new attack on honest and hardworking citizens, people whose small savings are the result of years of work,” said Belarmino Balbuena, one of thousands of people who marched in front of Congress in the capital, Asunción, on Wednesday.
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Jorge Sáenz contributed to this story. DeBre reported from Buenos Aires, Argentina.
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