Pedro Alliana was sworn in as Paraguay’s new president on Friday, just as authorities placed his impeached predecessor, Santiago Peña, under house arrest. The latest developments come amid a fast-moving political and financial crisis triggered by the collapse of a digital bank.
Prosecutors speaking outside Peña’s home in Asunción said charges were still being determined but could include influence peddling. Peña was ordered to appear at the prosecutor’s office on Saturday morning.
Paraguay new president takes office as Peña is detained
Peña was removed from office about an hour before his detention, in a unanimous Senate vote. Lawmakers cited questions over his past links to ueno, the collapsed digital bank that had provided accounts to nearly half of Paraguay’s population.
Peña had offered his resignation on Thursday, but the Senate chose to complete the impeachment process rather than accept it. It then moved swiftly to install his second-in-command, Alliana.
By the time of the arrest, dozens of protesters had gathered outside Peña’s residence, and police set up a security cordon around the property.
Ueno bank collapse: how the crisis led to Peña’s removal
The turmoil began earlier this week, when Paraguay’s central bank intervened in ueno. Many of its customers had never previously held a bank account.
Ueno grew rapidly after launching in 2021, but questions emerged over its lending practices and its ties to the country’s political and financial elite. These included Peña, a shareholder in ueno’s holding company until last year, and central bank chief Carlos Carvallo, who headed ueno until 2023.
Prosecutors also issued an arrest warrant for Carvallo on Friday. He resigned earlier this week as authorities launched last-ditch proceedings to stop the lender from dissolving. Eight former ueno executives have already been detained. Peña’s interior minister, chief of staff and two advisers have also resigned.
The impeachment charges alleged that Peña:
- had conflicts of interest
- manipulated regulatory oversight
- diverted pension funds
- took part in an institutional cover-up involving the central bank
Peña denied wrongdoing and described the affair as a regulatory issue. The central bank denied any conflict of interest, saying Carvallo recused himself from all decisions related to ueno.
Paraguay new president faces protests over frozen deposits
The crisis has spilled onto the streets. Demonstrators have flocked to downtown Asunción demanding accountability and faster compensation for depositors whose savings remain frozen. On Friday, small groups gathered opposite the central bank’s headquarters, chanting “We want our money.”
Those locked out of their accounts include pensioners who receive state benefits through ueno. Earlier this week, Peña approved legislation to speed up payments, and some account holders began recovering funds on Thursday.
Brazil and investors watch the Paraguay new president’s transition
The prospect of a lengthy political transition has drawn investor attention, especially in neighboring Brazil, Paraguay’s largest economic partner. Regulators have sought to reassure markets by guaranteeing most deposits and containing risks to the wider financial system.
A Brazilian government source told Reuters that Brazil’s immediate concern is avoiding social instability in Paraguay and resolving the banking crisis without wider unrest.
“Protests over frozen savings will intensify if Peña’s exit appears to grant him impunity or if payouts to depositors and pensioners stall,” said Mariano Machado, Americas principal analyst at Verisk Maplecroft.
