Paraguayan authorities raided the home of former President Santiago Pena on Sunday. The search forms part of a broader investigation into the sudden collapse of Ueno Bank, one of the country's largest digital financial institutions. This aggressive move by police follows the bank's downfall, which has plunged the South American nation into its most severe economic and political instability in recent years.
Pena, who came to power in 2023 as an ally of US President Donald Trump, was removed from office on Friday. His dismissal came after the Ueno Bank collapse froze access to the savings of nearly three million customers. This figure represents almost half of Paraguay's total population of 6.5 million. The former president has denied any wrongdoing but now faces criminal charges related to the financial institution.
The Senate voted unanimously to remove Pena from office on Friday, rejecting his earlier attempt to resign the previous day. On Saturday, Judge Humberto Otazu ordered Pena to remain in pretrial detention at a military facility. The judge stated that this measure was necessary to ensure Pena stayed within Paraguay while the investigation continued. His lawyer, Ricardo Preda, indicated that Pena would plead not guilty and cooperate with investigators. Preda noted that a serious country is defined by its response to bank failures, not by the failures themselves, and criticized the attempt to oust the president without solid evidence.
Prosecutors have charged Pena with breach of trust and administration for personal gain. Each of these offences carries a potential prison sentence of up to 10 years. The allegations center on Pena's relationship with Ueno Bank, a digital lender launched in 2021 that expanded rapidly by serving previously underserved citizens. Pena held shares in the bank's parent company until March 2025. Prosecutors claim he used his political influence to direct government agencies and state-owned entities to deposit large sums of public money into the lender, despite known concerns about its financial health.
By June, Ueno Bank held approximately $850 million in public funds, including money from the state pension system. Regulatory reports had recently warned of excessive lending to specific companies, raising questions about the bank's solvency and its loans to businesses linked to executives. The indictment also states that Pena obtained two loans totaling approximately $500,000 in 2024 to build his mansion. His reported monthly mortgage payment of $38,000 was six times his presidential salary. Former Central Bank chief Carlos Carvallo, who previously headed Ueno, has also been charged with breach of trust, producing false public documents, and administration for personal gain. He has been placed in pretrial detention.
Vice President Pedro Alliana has been sworn in to replace Pena and will serve until August 2028. Alliana announced on Sunday that the government had refunded 1.2 million Ueno Bank customers whose funds were frozen. Approximately $158 million had been paid out so far, with more reimbursements expected later in the week. Pena has maintained that the bank's difficulties were a regulatory matter rather than a political one.
The crisis has left millions of Paraguayans struggling to access wages, savings, and pension payments. The central bank intervened after discovering that Ueno had breached minimum solvency requirements. The bank had issued $146 million in questionable loans to companies linked to its owner, and its corrected accounts showed capital had fallen below half the legal minimum. The scandal has sparked widespread protests, with thousands demanding access to their money and accountability from leaders. Some demonstrations have turned violent, with clashes between protesters and police. Opposition Senator Rafael Filizzola described the situation as the biggest corruption scandal in the country's democratic history.
The incident marks a significant turning point for Paraguay, highlighting tensions between political influence and financial regulation. As the new administration works to stabilize the economy and restore public confidence, the legal proceedings against Pena and other officials will likely dominate the national agenda for months to come. The outcome of these investigations may determine the long-term political landscape of the nation.
