Why was Paraguayan President Santiago Peña impeached and placed under house arrest? All about the case and its effects

The Paraguayan Senate voted to impeach President Santiago Peña, after which he was placed under house arrest due to the collapse of a major bank with which he had business ties.

According to CNN, Paraguay’s attorney general has opened three criminal cases against Peña and other former officials related to the banking crisis. The impeachment vote strips Peña of parliamentary immunity.

Why was the Paraguayan president indicted, placed under the house?

Santiago Peña was ousted by the Senate over the collapse of a government-linked bank that has locked out nearly half of the country’s 6 million people from their savings, according to the Associated Press.

Lawmakers accused the president of using his political influence to funnel hundreds of millions of dollars in public funds to Ueno Bank while regulators overlooked risky insider lending.

The indictment mentions Peña’s stake in the Ueno holding company, which he divested under pressure last year, and his appointment of Carlos Carvallo to run the central bank that regulated it.

Carvallo ran the financial company that became Ueno until Peña appointed him head of the central bank in 2023.

Lawmakers also accused Santiago Peña of having the state pension fund deposit $355 million in a bank beyond legal limits.

All 44 senators present voted to impeach Peña for misconduct in office, making him the second Paraguayan president to be ousted by impeachment since the end of General Alfredo Stroessner’s 35-year dictatorship in 1989.

He was placed under house arrest on suspicion of breach of trust and influence peddling, among other charges, the report added.

Peña was ordered to remain in one of his homes in Asunción until he appears before prosecutors on Saturday morning on charges of breach of trust, influence peddling and use of public office for personal gain, the most serious of which carries a prison sentence of up to 10 years.

Fallout

Ueno was seized before dawn on Tuesday, sending shock waves through the financial system and triggering the country’s worst political crisis in more than a decade.

On Thursday afternoon, Peña offered to resign after being turned against him by his conservative Colorado party, led by former president Horacio Cartes, the party’s chief and Peña’s longtime mentor.

He was arrested on Friday and the prosecution denied him the immunity he would have enjoyed if the Senate had accepted his resignation.

When regulators seized the bank, Ueno customers could no longer withdraw cash, access their savings or use their cards to buy anything.

The digital lender aggressively courted the poor and the unbanked with generous discounts at supermarkets, and more than 1 million Paraguayans opened their first bank account there, according to Ueno.

Even the players on the national soccer team that Ueno sponsored during this year’s World Cup in Germany say they can’t reach their money.

The fallout spread far beyond savers. A ride-hailing app that relied on Ueno to shut down, putting 3,000 drivers out of work.

The state-owned power company says it has $21 million in loans from the Inter-American Development Bank and Taiwan, earmarked for public works, trapped in the bank.

Paraguayan bonds posted some of the worst losses in emerging markets this week and the guarani fell against the dollar.

Some depositors began claiming their money on Thursday, starting with those with up to 10 million warrants (about $1,500). Deposits are insured up to about $35,000, which the central bank says covers 97% of Ueno customers. He calls the collapse an isolated case and insists the wider financial system is safe.

In a separate case against Ueno executives, prosecutors reportedly charged 27 people, including Ueno founder and former CEO Miguel Vázquez, with crimes such as breach of trust and attempted fraud.

A judge ordered six former directors, including Vázquez, to be held in pretrial detention and two others to be locked up in their homes with electronic monitors. Authorities seized luxury cars, a yacht and two small planes linked to Vázquez.

Prosecutors also ordered the arrest of Carlos Carvallo. It was not immediately clear if Carvallo was taken into custody.

Ueno rose from obscurity to become one of the largest banks in Paraguay thanks to deposits within a few years, with more than $800 million in public money fueling its expansion. More than two-thirds of the country’s adults subscribe to it, and its logo has appeared everywhere from the national football stadium to street vendors’ bank cards.

Peña denies wrongdoing

In a farewell message before sentencing, Peña said he did not want his “presence to be the cause of more division or instability.”

“I say goodbye with gratitude, without ignoring the agony of those who are waiting for answers today,” he wrote.

Who is leading the nation now?

Vice President Pedro Alliana was sworn in as president on Friday to serve out a term that ends in August 2028.

“The Paraguay we are getting today urgently needs,” said Alliana, who is also under investigation in connection with the bank and inherited a government under pressure to return depositors’ money and punish those responsible.