Why Was Paraguayan President Santiago Peña Impeached And Placed Under House Arrest? All About The Case And Its Fallout

(MENAFN- Live Mint) Paraguay's Senate voted to impeach President Santiago Peña, following which he was placed under house arrest over the collapse of a major bank to which he had business links.

According to CNN, Paraguay's Attorney General opened three criminal cases against Peña and other former officials related to the bank crisis. The impeachment vote strips Peña of his parliamentary immunity.

Why was Paraguayan president impeached, placed under house?

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

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

The impeachment charged cite Peña's stake in Ueno's 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 finance company that became Ueno until Peña named him central bank chief in 2023.

Lawmakers also accused Santiago Peña of letting the state pension fund deposit $355 million at the bank, beyond legal limits.

All 44 senators present voted to remove Peña for misconduct in office, making him the second Paraguayan president ousted by impeachment since the end of Gen. 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 at one of his homes in Asunción until he appears before prosecutors Saturday morning on charges of breach of trust, influence peddling and using public office for personal gain, the most serious of which carry up to 10 years in prison.

The fallout

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

By Thursday afternoon, Peña had offered to resign as his conservative Colorado party turned on him, led by former President Horacio Cartes, the party chief and Peña's longtime mentor.

By Friday, he was under arrest, with impeachment denying 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 had aggressively courted the poor and unbanked with generous supermarket rebates, and more than 1 million Paraguayans opened their first bank account there, according to Ueno.

Even players on the national soccer team, which Ueno sponsored through its run to a World Cup upset of Germany this year, say they can't reach their money.

The fallout has spread well beyond savers. A ride-hailing app that relied on Ueno shut down, leaving 3,000 drivers without work.

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

Paraguay's bonds have posted some of the worst losses in emerging markets this week, and the guaraní has slid against the dollar.

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

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

A judge ordered six former directors, Vázquez among them, to be held in pretrial detention, and two others to be confined to their homes with electronic monitors. Authorities have 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 whether Carvallo had been taken into custody.

Ueno rose from obscurity to become one of Paraguay's largest banks by deposits in just a few years, with more than $800 million in public money turbocharging its expansion. It signed up more than two-thirds of the country's adults, its splashy logo appearing everywhere from the national soccer stadium to street vendors' bank cards.

Peña denies wrongdoing

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

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

Who leads the nation now?

Vice President Pedro Alliana was sworn in as president Friday to serve out the term, which ends in August 2028.

“The Paraguay we receive today has urgent needs,” said Alliana, who is also under investigation in connection with the bank and inherits a government under pressure to return depositors' money and punish those responsible.

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