Paraguay's Congress rejects president's resignation, presses ahead with impeachment over bank collapse

Paraguay's Congress rejected President Santiago Peña's attempt to resign this week and instead voted to put him on trial for impeachment, deepening a political crisis triggered by the collapse of one of the country's largest digital banks. The Chamber of Deputies approved the impeachment case against Peña by a vote of 78 to zero on Thursday, clearing the two-thirds threshold required to send the matter to the Senate, which sits as the trial court and must also reach a two-thirds majority to remove him from office.

The vote came only hours after Peña went on live television Thursday and announced he was stepping down, framing the move as necessary to preserve "national stability" and protect democratic institutions. A separate joint session of Congress convened to formally accept that resignation collapsed when legislators from Peña's own Colorado Party walked out, denying it a quorum. Horacio Cartes, the former president and Colorado Party strongman, said on social media that the party would not shield what he called the "theft" of public, private and pension funds, and would back the impeachment rather than let Peña exit on his own terms. Peña remains in office for now, pending the Senate proceeding.

A bank collapse at the center

The crisis traces to the central bank's decision, taken late on the night of November 2, to place Ueno Bank into resolution after finding its solvency ratio had fallen to less than half the legal minimum. Regulators formally took control the next day. Ueno is a digital lender majority-owned by Grupo Vázquez that grew in a few years from a niche lender into a mid-tier bank with roughly 3 million customers — equivalent to about 60 percent of Paraguay's adult population, in a country of roughly 6.5 million people. It held an estimated $800 million to $850 million in public money, including close to $380 million belonging to the Instituto de Previsión Social, the state pension and health fund.

Customers found themselves locked out of their accounts and unable to withdraw or transfer money. Deposit insurance covers balances up to 228.3 million guaraníes, or about $38,000, which regulators estimate fully protects roughly 97 percent of depositors, but initial payouts are capped at about 10 million guaraníes (roughly $1,700) minus any debts owed to the bank. Some 32,000 pensioners who received state benefits through Ueno are being transferred to another institution. Paraguayan prosecutors ordered the arrest of eight people linked to the bank, including its president, Juan Manuel Gustale, and its chief executive, Federico Miguel Vázquez Villasanti.

From conflict of interest to impeachment

The accusation that reached the Chamber floor was filed by 35 lawmakers and, according to the Chamber's own account of the filing, rests on four main claims: a conflict of interest stemming from Peña's past involvement in Ueno's parent holding company; his appointment of Carlos Carvallo — Ueno's former president — to head the central bank; his promotion of changes to conflict-of-interest law; and allowing hundreds of billions of guaraníes in social-security funds to concentrate in Ueno beyond regulatory limits. Peña was a business partner in the group that owned the bank until March 2025, and has said he sold his stake and had no further relationship with it; Ueno has said the same. Carvallo, who led the bank's predecessor until 2023, resigned as central bank chief at Peña's request on November 3 but has stayed on temporarily to oversee the resolution process.

Vice President Pedro Alliana faced a parallel impeachment request over allegations he helped shield the bank legislatively and endorsed the placement of pension funds there, but that motion fell short of the two-thirds threshold and did not advance — a split that underscored how specifically the Colorado Party's anger is aimed at Peña rather than at his administration as a whole.

"Nuestra prioridad es que ellos recuperen sus haberes y puedan cobrar ese dinero de manera inmediata" — Raúl Latorre, president of Paraguay's Chamber of Deputies, on depositors' right to recover their money.

Who is affected

The immediate toll falls on roughly 3 million account holders, a share of the population unusually large for a single bank's failure, among them public employees and pensioners whose benefits were channeled through Ueno. Economists have noted the unusual concentration of state money in one private lender raised questions before the collapse: Fitch Ratings had already shifted its outlook on Ueno to negative in October, and the bank had announced plans to raise $100 million in new capital less than a week before regulators stepped in. The episode has also weighed on Ueno's dollar bonds and on Paraguayan sovereign bonds more broadly, and comes as Paraguay ranks 150th of 182 countries on Transparency International's corruption perceptions index — a context opposition lawmakers have invoked directly in their case against Peña.

To limit the damage to ordinary depositors, Peña and congressional leaders agreed to fast-track legislation allowing the national Guarantee Fund to accelerate payouts, a bill the Senate had already approved and the Chamber of Deputies took up in an extraordinary session on November 4. Latorre, the Chamber's president, said at the time that recovering depositors' savings "de manera inmediata" was the priority, while also saying that anyone found to have broken the law should face justice.

What comes next

With the Chamber's accusation approved, the case moves to the Senate, which under Paraguay's constitution acts as the trial body and must also muster a two-thirds majority to convict and remove a sitting president. The Chamber elected eight deputies to argue the case as prosecutors before that body. Peña has said he will cooperate with investigators and wants public money guaranteed and returned, while rejecting what he has called media-driven fearmongering about the bank's finances before its collapse. Senate President Basilio Núñez, by contrast, has defended Peña and placed the blame on the central bank's oversight failures, a sign the trial's outcome is not a foregone conclusion even with the lower chamber's lopsided vote.

A further complication for Peña is procedural: Paraguayan former presidents normally become senators for life with legal immunity, but that protection lapses if they are convicted at an impeachment trial, meaning Congress's refusal to let him simply resign has, if anything, raised his legal exposure rather than lowered it. Three separate criminal investigations ordered by the attorney general's office — covering bank oversight, the placement of public funds, and the central bank appointment — continue alongside the political proceedings. For millions of Ueno customers, the more immediate question is simpler: how quickly the promised guarantee-fund payments reach accounts that have been frozen for days.