- Pedro Alliana sworn in as president until August 2028.
- Pena placed under house arrest over suspected breach of trust.
- Impeachment strips Santiago Pena of lifetime Senate seat, immunity.
Paraguay’s Senate on Friday impeached and removed President Santiago Pena from office over the collapse of a major digital bank that froze the accounts of nearly three million customers, triggering widespread protests and plunging the South American country into a political crisis.
Vice President Pedro Alliana was sworn in as the country’s new president later on Friday, taking over the remainder of Pena’s term, which runs until August 2028.
Pena, 47, was subsequently placed under house arrest on suspicion of breach of trust, following an order by prosecutors shortly after his removal from office. Authorities said he would remain at his home until he could be brought before the Attorney General’s Economic Crimes and Anti-Corruption Unit.
The Senate declared Pena guilty of poor performance in his duties, with all 44 senators present voting for his removal. One senator was absent.
The decision came despite Pena having offered his resignation on Thursday, as lawmakers pressed ahead with impeachment proceedings that would strip him of the parliamentary immunity normally granted to former presidents.
Under Paraguay’s constitution, elected former presidents become lifetime senators, enjoying parliamentary immunity from prosecution. By removing Pena through impeachment rather than accepting his resignation, lawmakers prevented him from acquiring that status, leaving him exposed to criminal proceedings.
Pena did not attend his Senate trial, despite previously pledging to defend himself. His lawyers argued that he had been denied sufficient time to prepare his defence and challenged the proceedings, reserving the right to appeal to Paraguay’s Supreme Court and international human rights bodies.
The president had requested an additional 72 hours to prepare his case, but senators rejected the request by 39 votes to three.
The crisis erupted after the Central Bank took control of Ueno Bank on Tuesday, citing breaches of minimum solvency requirements and concerns over its financial position. The intervention froze accounts and bank cards belonging to nearly three million customers, leaving many unable to access their savings.
The lender, which grew rapidly into one of Paraguay’s largest banks, had attracted customers through its digital-first model and served many people who had previously lacked access to banking services.
The collapse has raised questions over the bank’s links to the political establishment and the handling of public funds.
Pena previously held a stake in Grupo Vazquez, the conglomerate that controlled Ueno, but said he sold his shares last year. Lawmakers accused him of a conflict of interest, using political influence to channel public funds into the bank and failing to ensure adequate regulatory oversight.
The impeachment charges also concerned the appointment of former Ueno executive Carlos Carvallo to head the Central Bank and allegations that the state pension fund had deposited hundreds of millions of dollars at the lender beyond legal limits.
According to an Associated Press report, Ueno had accumulated more than $800 million in public funds, including around $355 million from the state pension fund.
Pena denied wrongdoing and apologised to the public on Thursday, saying he had never intended to betray the trust placed in him.
“It was never my intention to betray the trust you placed in me,” he said in a televised address.
He later said his departure was intended to prevent further division and instability in the country.
‘Hurt’
The bank’s collapse brought thousands of people onto the streets of Asuncion and other cities for several consecutive nights, demanding access to their savings and accountability from those responsible.
Around 250 protesters gathered outside Congress ahead of Friday’s Senate vote, with one holding a placard reading: “Pena in prison.”
On Thursday, police used tear gas and water cannons to disperse demonstrators in the capital.
“Santiago Pena has hurt so many Paraguayans, so many families, business owners and small business people, including my own son, who had savings in Ueno Bank,” Cynthia Farina told AFP at a protest.
The government has begun releasing advance payments to some affected depositors.
Jose Maciel of the Central Bank’s Deposit Guarantee Fund told AFP that initial payments began on Thursday afternoon, with eligible customers set to receive up to around $1,600 in the first phase.
The initial payments are intended for customers without outstanding loans who have accounts at another Paraguayan bank or financial institution through which they can receive the money.
Further beneficiaries will be announced progressively, Maciel said.
The Central Bank has said deposits of up to approximately $37,000 per customer are protected under the country’s deposit guarantee scheme, covering nearly all of Ueno’s customers.
Investigations widen
The scandal has also triggered investigations into the bank’s operations and the role of government officials and regulators.
Prosecutors have opened three criminal investigations into the lender’s collapse, including its regulatory oversight, the handling of its financial difficulties and the placement of public funds in the institution.
Twenty-seven people, including Ueno’s controlling shareholder Miguel Vazquez and several executives, have been charged in connection with suspected financial crimes. Eight bank executives were initially targeted by arrest warrants, while six directors were reported to be in pretrial detention.
Authorities have also ordered the arrest of former Central Bank chief Carvallo, whom Pena appointed to lead the financial regulator.
Carvallo resigned following the intervention in Ueno, while Central Bank President Carlos Carvallo and Interior Minister Enrique Riera were among senior officials whose departures deepened the political fallout.
Prosecutors also raided the offices of technology company ITTI, which is part of Grupo Vazquez, seizing computers, hard drives and other material as part of the investigation.
The collapse has had repercussions beyond Paraguay’s banking sector. Around 1,000 ITTI employees in neighbouring Argentina were suspended for 30 days without pay.
Ueno also sponsored several first-division football clubs and Paraguay’s national team, whose players said they had also been affected by the bank’s failure.
The United States Embassy in Paraguay expressed solidarity with the Paraguayan people on Friday but did not directly comment on Pena’s removal.
The crisis has also exposed divisions within the ruling Colorado Party, whose lawmakers backed Pena’s impeachment. Former president Horacio Cartes, a powerful party figure and Pena’s former political patron, also supported his removal after the scandal erupted.
Alliana, 52, a veteran of the conservative Colorado Party and former speaker of the lower house, now faces the task of restoring confidence in the government and financial system while investigations into the bank’s collapse continue.
He is also under investigation in connection with the scandal, although an opposition attempt to impeach him was shelved by lawmakers on Thursday.
