Ueno Bank collapse sparks political crisis and impeachment move in Paraguay
The accounting black hole at Ueno Bank swallows public funds, leaves thousands of citizens without access to their deposits and pushes Paraguay into its worst institutional crisis in years.
A sudden blank white screen surprised the almost three million Ueno Bank customers in the early hours of Tuesday 3 November. At around 03:24, the app of the Paraguayan institution, a key player in the system that manages multimillion-dollar state funds and has grown at a breakneck pace in its three years of existence, stopped displaying users' accounts and showed a single message instead: "We cannot display the balance".
At the same time, the Central Bank of Paraguay issued a hard-hitting statement on its social media accounts: the institution was placed under intervention and its liquidation process was opened. This "resolution procedure" against Ueno Bank responded to a major financial alert after a critical collapse in its solvency ratio was detected, which had fallen below 50%.
The impact was immediate and triggered an unprecedented political earthquake for the government of Santiago Peña. Since Tuesday, crowds of outraged users have gathered outside the headquarters in Asunción and the 75 branches across the country, determined to save their money.
The scene outside the branches, which were closed and guarded, has turned into one of extreme tension and despair. The anguish at the doors translated into everyday emergencies that quickly became untenable. Some people, in tears, begged to withdraw their funds to pay for medicines for a seriously ill child; a few kilometres away, a construction worker was just as desperate when he realised that without access to his savings he would not even be able to buy food for his children that day.
The spectre of a corralito
The institution held around 850 million dollars (about 758 million euros) in public funds, including the funds of the Social Security Institute that underpin workers' pensions and healthcare coverage. The spectre of a corralito in the Argentine style immediately set alarm bells ringing among the population. "Who will answer for a lifetime's savings? Will there be impunity?" read the placards of protesters holding their ground outside the offices.
The whole country held its breath ahead of the press conference by the Central Bank of Paraguay (BCP). The official confirmation was categorical: "We proceeded to close the institution; neither the app, nor the cards, nor any service is active as of today", said board member Liana Caballero. The authorities' attempts to calm tempers by reminding people that the law provides for a guarantee fund to reimburse each client up to 75 minimum wages (about 228 million guaraníes or 37,700 dollars, roughly 33,620 euros) were in vain; suspicion and mistrust had already taken full hold of the streets.
Impeachment move against Peña and judicial clampdown
The political opposition accuses the BCP leadership of being complicit by omission in the fraud, but the coup de grâce is aimed directly at the head of state. Santiago Peña has been thrust into the eye of the storm: at the request of 35 legislators, the Chamber of Deputies will meet tomorrow in an extraordinary session to vote on whether to open impeachment proceedings against him. The viability of the process will depend on securing 53 votes in the lower house and, subsequently, the backing of two thirds of the Senate.
The indictment accuses Peña of "poor performance of his duties", backed by serious charges ranging from conflict of interest and the alleged embezzlement of pension funds to the institutional shielding of the Central Bank. In the midst of the storm, the president cancelled all his official engagements on Wednesday and chose to remain silent until late in the afternoon, when he resurfaced online to announce the departure of the head of the central bank and to demand that the courts establish responsibility.
The judicial net closed in on Wednesday with the arrest of eight senior executives of the institution, among them its chief executive officer, Miguel Vázquez. At the same time, the knock-on effects soon hit the real economy: the Association of Importers and Retailers warned of an immediate 35% slump in sales at the country's major retailers. With money blocked and inaccessible, domestic consumption ground to a halt overnight.
Football, advertising and an inevitable collapse
In a country of just over six million inhabitants, the Ueno Bank app went far beyond the financial sphere. Owned by the influential Grupo Vázquez and recognisable by its unmistakable neon green look, the institution prided itself on having buried the heavy bureaucracy of the traditional agrarian republic. Its presence was ubiquitous in the media and in the sponsorship of the country's leading football clubs, such as Cerro Porteño and Olimpia, as well as the emblematic Defensores del Chaco stadium.
Only a few days earlier, the bank had been boasting of an ambitious 100 million dollar capitalisation plan. However, behind the advertising front and the sporting patronage, the Superintendency of Banks came up against a stark and unsustainable accounting reality: the institution was unable to meet a statutory reserve requirement of 70 million dollars (62.427 millones de euros) demanded by the central bank. The financial collapse was a matter of numbers, the subsequent explosion a case of sheer political gunpowder.
An economist with a technocratic profile and a former International Monetary Fund official, Santiago Peña came to power in 2023 promising to turn the country into a magnet for foreign capital. Although under his leadership Paraguay has posted one of the strongest economic growth rates in South America, the sudden banking collapse has left the president facing the most critical moment of his tenure.
