Paraguay’s President Santiago Peña was removed from office by Congress on Friday and placed under house arrest, days after regulators seized Ueno Bank, a digital lender that had become the country’s sixth-largest bank by deposits. The collapse has locked savers out of their accounts; the bank’s controlling shareholder is in jail, and protests have filled the capital, Asunción.
Ueno, a digital-first lender that had brought more than one million Paraguayans into the formal financial system, was declared insolvent by regulators early Tuesday. Its collapse has left savers locked out of accounts, while the fate of government funds remains unclear; it came just two weeks after Peña met with US Treasury Secretary Scott Bessent in Washington.
Problems at Ueno came to light in early September when local newspaper ABC published internal central bank documents flagging concerns about its lending practices. The central bank opened a formal inquiry and forced the bank to revise its books, revealing its solvency ratio had fallen below the required minimum.
Local media reported that regulators found Ueno had given out loans to companies tied to its controlling shareholder’s holding company that far exceeded legal limits. The controlling shareholder, Miguel Vázquez, one of Paraguay’s richest men, is now in jail. The central bank director, a former Ueno official, resigned.
The political fallout was swift. Peña had defended the bank and denied wrongdoing. Vice President Pedro Alliana was sworn in as president and called for immediate reimbursement to depositors, starting with the most vulnerable. The scandal has exposed divisions within the Colorado Party, which has dominated Paraguayan politics for decades, with former leader Horacio Cartes having called for Peña’s impeachment.
The scandal is also a blow to US President Donald Trump’s efforts to expand influence in Latin America. Secretary of State Marco Rubio had held up Paraguay as a model for the region, citing the government’s longstanding loyalty to Taiwan. The Inter-American Development Bank’s investment arm, IDB Invest, which gave Ueno a nearly $20 million loan in 2024, has not been fully repaid, according to people familiar with the matter. People familiar said IDB Invest’s 2025 visit raised red flags; the team had found similar issues with intracompany loans.
Luis Breuer, a former official with Paraguay’s central bank and the International Monetary Fund, said the central question is how the political situation will unfold. He said instability in the government could lead to “a systemic impact on the economy that affects everyone, not just depositors at one institution.”
Analysis
Why This Matters
- Over one million Paraguayans have lost access to their savings, and billions in government deposits are frozen, posing a severe economic challenge.
- The collapse of a pro-US government in Paraguay could reduce American influence in a region where China is gaining ground.
- The crisis has exposed the vulnerability of rapid fintech growth when oversight fails and the political instability that can result from regulatory capture.
Background
Paraguay is one of South America’s poorest nations but had projected political and economic stability to attract foreign investment. The Colorado Party has held power for most of the past 70 years. Ueno Bank was a digital success story, bringing first-time users to the banking system, but its rapid growth masked problems with related-party lending and solvency.
Key Perspectives
Santiago Peña: Denied any wrongdoing and had defended the bank’s oversight before the collapse.
Pedro Alliana: Called for immediate reimbursement of depositors, starting with the most vulnerable.
Horacio Cartes: Called for Peña’s impeachment, deepening the rift within the Colorado Party.
Luis Breuer (former central bank and IMF official): Said the central question is how the political situation will unfold and warned of possible systemic economic impacts.
What to Watch
- Whether Alliana’s government can process deposit insurance payments quickly enough to avoid a loss of confidence.
- The criminal investigation into Miguel Vázquez and other Ueno executives for potential corruption or fraud.
- The position of the new Paraguayan government on Taiwan and US relations, given the precedent of Trump’s lifting of sanctions on Cartes.
Checked
12 claims in this story checked against 1 source: 12 supported.
Show each claim
- SupportedLuis Breuer said instability could have “a systemic impact on the economy that affects everyone, not just depositors at one institution.”The Age - Latest News: “instability in the government could lead to “a systemic impact on the economy that affects everyone, not just depositors at one institution.””
- SupportedParaguay’s president was removed after the Ueno Bank scandal.The Age - Latest News: “President Santiago Peña, formerly an investor in the bank’s parent company, was removed from office by Congress and placed under house arrest.”
- SupportedUeno’s collapse toppled a trusted Trump ally.The Age - Latest News: “How a bank scandal toppled a trusted Trump ally.”
- SupportedThe Ueno collapse reverberated through Paraguay’s politics.The Age - Latest News: “Fifteen months later, the bank’s swift collapse is reverberating through the country’s politics, business community and the lives of everyday savers”
- SupportedCongress removed President Santiago Peña on Friday.The Age - Latest News: “Paraguay’s Senate voted to end Peña’s presidency on Friday and swore in Pedro Alliana, his vice president, to replace him.”
- SupportedPeña was placed under house arrest.The Age - Latest News: “President Santiago Peña, formerly an investor in the bank’s parent company, was removed from office by Congress and placed under house arrest.”
- SupportedRegulators seized Ueno Bank and declared it insolvent early Tuesday.The Age - Latest News: “Early Tuesday, regulators seized the bank and declared it insolvent and under capitalised.”
- SupportedUeno had become Paraguay’s sixth-largest bank by deposits.The Age - Latest News: “It became Paraguay’s sixth-largest bank by deposits following its 2024 merger with Visión Banco and an aggressive push for government funds.”
- SupportedSavers were locked out of their Ueno accounts.The Age - Latest News: “the lives of everyday savers who woke up this week to find they’d been locked out of their accounts.”
- SupportedUeno’s controlling shareholder, Miguel Vázquez, was in jail.The Age - Latest News: “Controlling shareholder Miguel Vázquez, one of Paraguay’s richest men, is in jail.”
- SupportedMore than one million Paraguayans opened their first bank account through Ueno.The Age - Latest News: “More than 1 million Paraguayans – in a country of just over 6 million – opened their first bank account through Ueno, according to the lender.”
- SupportedIDB Invest had not been fully repaid on its nearly $20 million loan to Ueno.The Age - Latest News: “Even IDB Invest, which gave a nearly $20 million loan to Ueno in 2024, hasn’t been fully repaid, according to the people familiar.”
