On November 7, Paraguay’s prosecutor officially charged former President Santiago Peña with several serious allegations, including breach of trust and administration for personal gain. The prosecutor’s office has also requested a pre-trial preventative detention order against him.
In parallel, Carlos Carvallo, who previously served as the head of the Central Bank, has also been indicted and is subject to a request for preventive detention. This legal action stems from a massive corruption and conflict-of-interest scandal triggered by the collapse of Ueno Bank, the country’s largest digital bank.
Reports from news agencies, including Reuters, indicate that the prosecution accuses Peña of abusing his position while in office to facilitate the placement of approximately $800 million in public funds — which includes the national pension fund, healthcare fund, and funds from hydroelectric projects — into Ueno Bank. Notably, Peña held shares in the parent company of Ueno Bank until March 2025, which presents a severe conflict of interest.
Upon taking office, Peña appointed Carlos Carvallo, a former head of Ueno Bank, as the president of the Central Bank. Subsequently, the Central Bank, as the financial regulatory authority, was criticized for its failure to oversee Ueno Bank’s operations, particularly regarding the approval of $150 million in unsecured loans to affiliated companies. The prosecution not only charged Carvallo with breach of trust but also added charges of forgery, accusing him of concealing significant liquidity gaps within the bank, which ultimately led to a bank run and its eventual closure.
In response to the national protests and the political crisis ignited by the collapse of Ueno Bank, Peña attempted to resign in a televised address on November 5, citing the need to “maintain national stability.” However, Congress rejected his resignation, explaining that if he were allowed to voluntarily resign, he would automatically gain the title of “lifelong senator” under the constitution, along with criminal immunity.
On November 6, Congress overwhelmingly voted to impeach Peña, stripping him of the presidency and legal immunity. Following this, Vice President Pedro Alliana was sworn in as president, tasked with completing the remaining term until August 2028.
Peña’s rise in the political arena was largely supported by the influential figure of the ruling Colorado Party, former President Horacio Cartes. However, as the scandal deepened and the affiliation with Cartes’s faction weakened, congressional factions swiftly pivoted to support the impeachment, leaving Peña without political backing.
After his removal, Peña was arrested by law enforcement. Due to a large gathering of radical demonstrators outside his residence, authorities relocated him for security reasons to a military base affiliated with the Presidential Escort Regiment in Asunción for temporary detention.
Paraguayan prosecutors have indicated that if convicted on the two major charges Peña faces, each could result in a prison sentence of up to ten years. A pre-trial judge is expected to convene shortly to determine whether to grant the prosecution’s request for pre-trial detention.
Ueno Bank has reported that more than half of Paraguay’s adult population, roughly three million people, are its clients. The sudden takeover of the bank has left many grassroots citizens, public servants, and retirees unable to access their living expenses, leading to consecutive days of bloody clashes between police and civilians in the capital, Asunción.
In response to the crisis, the Paraguayan Central Bank has activated the national deposit guarantee fund. As of Saturday, they had issued compensation amounting to approximately $16 million to nearly 1.2 million small depositors, in an effort to curb the spread of systemic financial risk.