Paraguay's President Resigns. Why, and What Comes Next?

Ueno Bank, a digital lender, grew in just five years to become a major financial player in Paraguay with 3 million customers, meaning more than 60 percent of the country’s residents. It managed roughly $800 million in public money, just under half of which came from Paraguay’s state pension and health funds. 

In June, regulators flagged Ueno for risky lending, particularly to companies tied to the bank’s owners. By November, Ueno’s solvency ratio, or its capital versus its risk-weighted assets, slipped below the legal threshold after regulators investigated and corrected its balance sheets. On November 2, Paraguay’s Central Bank voted to put the bank into resolution and pass its management to national regulators. The following day, customers found themselves locked out of their accounts, which accelerated panic and amplified protests in the capital, Asunción.

Peña is a shareholder in a company that, until last year, owned Ueno. Moreover, as president, he had appointed an Ueno executive to head Paraguay’s central bank. In congressional sessions, lawmakers accused Peña of conflict of interest, misuse of pension funds, and covering up the collapse. Peña initially denied involvement, but ex-President Horacio Cartes released a statement on behalf of Peña’s Colorado Party encouraging the president to resign.

Shortly after Peña’s November 5 video resignation, Congress voted unanimously to impeach the president. They did not, however, pass a motion to also impeach his vice president, Pedro Alliana.

Alliana, the former president of the Chamber of Deputies and governor of Ñeembucú, assumed the presidency following Peña’s resignation. 

He will next have to manage the financial fallout from the Ueno collapse and Peña’s resignation, which has included depreciated sovereign bonds and a weakening of the national currency. 

Already, Congress has approved a new Central Bank president and a process to pay Ueno depositors.