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Former Paraguayan President Santiago Peña could face up to 15 years in prison after the collapse of a major bank sparked the country’s biggest political crisis in years, according to CNN.
Digital lender “Ueno Bank” shut down last week over concerns about its solvency, leaving millions of customers unable to access their money. Peña, who had business ties to the bank until last year, announced he would resign after the collapse, but Congress voted to impeach him instead.
Peña, an economist and supporter of US President Donald Trump, faces criminal charges over the crisis. Prosecutors allege a conflict of interest, and he is being held in pretrial detention at a military facility while the investigation continues.
Paraguay’s central bank voted last Monday to place “Ueno Bank” into resolution after finding that its solvency ratio had fallen below the required minimum. The following day, it seized the lender and froze the accounts of nearly 2.9 million customers in a country of 6.1 million people.
After days of protests, anxiety and long lines at the bank, Peña said on Thursday that he would resign, saying he wanted to reassure Paraguayans and restore stability.
Both chambers of Congress met in a joint session to consider his resignation, but adjourned without a decision after several lawmakers left during the vote. Had lawmakers accepted his resignation, Peña would have received immunity and special protections.
Instead, the lower chamber voted unanimously to impeach him on Thursday afternoon, saying he should face charges over the financial crisis. The Senate voted to remove him from office on Friday, and Vice President Pedro Alliana was sworn in as president soon afterwards.
Charges and investigation into Peña
Peña has been charged with breach of trust and administration for personal gain, each carrying a maximum sentence of 10 years, prosecutor Nancy Salomón said. Under Paraguay’s penal code, if he is convicted on both charges, the sentence for the second conviction is halved, meaning he could serve up to 15 years.
The former president denies wrongdoing. He held shares in “Grupo Vázquez”, the main shareholder of “Ueno Bank”, and sold his stake last year.
Prosecutors allege that while president, Peña “intervened in decisions related to the placement, renewal and maintenance of public and pension funds in Ueno Bank”, an institution whose business group he allegedly had economic and corporate ties with.
Peña was initially placed under house arrest before being transferred to a military facility for pretrial detention. CNN said it had contacted him and his lawyer, Ricardo Preda, for comment on the charges.
Prosecutors also allege that the bank granted Peña “two simultaneous loans” in May 2024 worth $580,000 to finance construction of his summer home in San Bernardino, about 50 kilometres (31 miles) from the capital, Asunción.
Authorities searched the property on Sunday and found what Salomón described to CNN as a “highly sophisticated security vault”, which they were expected to open on Tuesday. They also found computers, devices and potentially important documents at Peña’s residence.
Alliana takes office amid calls for change
Peña was one of Trump’s staunchest allies in Latin America. A member of the conservative Colorado Party, he aligned with many of Trump’s political priorities, particularly immigration and security.
Earlier this year, the White House invited Peña to a summit in Miami with other right-wing Latin American leaders close to Trump. The White House said the gathering was intended to “promote freedom, security and prosperity”.
Peña had built strong ties with the Trump administration through defence and regional-coordination deals, including a “safe third country” agreement that allows asylum seekers from the United States to be transferred to Paraguay.
After Peña announced his resignation on Thursday, a US State Department spokesperson said relations between the two countries remained strong: “We remain committed to the enduring relationship between the American and Paraguayan people and look forward to continuing our close cooperation on shared priorities.”
Alliana, who survived an impeachment vote in the lower chamber on Thursday, previously served as a congressman, leader of the Chamber of Deputies and governor of Ñeembucú. Before joining the Colorado Party, he was a businessman and an athlete who was part of Paraguay’s national basketball team. He will serve as president for the next two years.
After taking the oath of office on Friday, Alliana said he would assume the role with “humility, responsibility and a deep commitment to all Paraguayans”. On Tuesday, he held a roundtable meeting with his ministers to discuss a way forward.
“I ordered the ministers of the Executive Branch to work as a team, with austerity and zero tolerance for corruption. The state’s resources belong to the people and must be managed responsibly,” he said on X.
Many Paraguayans have welcomed Peña’s impeachment but are unhappy that his vice president succeeded him. Demonstrators in parts of the capital have called for every member of the government to leave, using the slogan “Out with them all!”
Alliana has replaced leaders at several government ministries. Among the new appointees is Jorge Schreiner, whom Congress approved as president of the central bank, replacing Carlos Carvallo, who has also been charged by prosecutors in the “Ueno” case.
Prosecutors say their goal is for “Ueno Bank” depositors to recover all their savings. Alliana said recovering lost funds would be a priority.
He earlier announced that the government had paid most of the bank’s customers about $330 million from Paraguay’s Deposit Guarantee Fund, a safety net intended to protect depositors in the event of insolvency.
“We will work until every family regains the peace of mind they deserve,” he said.
Analysts say the crisis has damaged Paraguay’s reputation as a stable South American economy and could affect other parts of society, including the labour market and social security system.
