ASUNCIÓN, Paraguay (AP) — Paraguayan prosecutors on Friday ordered the arrest of ousted President Santiago Peña and former central bank chief Carlos Carvallo in a criminal investigation into alleged breach
of trust and other offenses tied to the collapse of Ueno Bank.
The order was issued soon after the Senate removed Peña from office. In a letter to the national police commander, prosecutors asked police to carry out the detention order. Under it, Peña is to be held at his home until he is brought before prosecutors in the economic crimes and anti-corruption unit. Carvallo is to be held at a police facility.
THIS IS A BREAKING NEWS UPDATE. Check back for updates. AP’s earlier story follows below.
ASUNCIÓN, Paraguay (AP) — Paraguay’s Senate ousted President Santiago Peña on Friday over the collapse of a major bank tied to his government, bringing a dramatic end to one of South America’s most stable presidencies.
In a unanimous vote, the 44 senators present voted to remove Peña for misconduct in office, clearing the way for Vice President Pedro Alliana to succeed him. The verdict came just three days after regulators seized Ueno Bank, freezing nearly 3 million customers’ access to their savings and triggering a political crisis.
Lawmakers accused Peña of using his political influence to steer hundreds of millions of dollars in public funds into Ueno while regulators overlooked risky insider lending. Peña has denied wrongdoing.
His removal also bars him from the lifetime Senate seat granted to elected former presidents under Paraguay’s Constitution, denying him the parliamentary immunity that would accompany it. Prosecutors have already opened criminal investigations targeting Peña, current and former central bank and pension fund officials, and Alliana.
Peña had submitted his resignation Thursday, but Congress did not accept it. His lawyers, Ricardo Preda and Adolfo Ferreiro, argued that lawmakers should have approved his departure instead of pressing ahead with the impeachment trial. Opposition lawmakers insisted on removal to prevent him from leaving office with immunity.
“He must go, but not home. He must go to a maximum-security prison,” opposition Sen. Yolanda Paredes told reporters. “The public is fed up with impunity.”
In a farewell message released shortly before the verdict Friday, Peña expressed hope his departure would spare Paraguay further harm.
“I do not want my presence to be a cause of greater division or instability,” he wrote. “My responsibility is to put the country above my personal fate.”
Public outrage has become more thunderous by the day. Thousands of protesters demanding their frozen savings back and accountability for Ueno’s failure have clashed with police firing rubber bullets and pepper spray this week. Paraguay’s largest teachers’ union, which has more than 40,000 members, plans to begin an indefinite national strike Monday to press for protection of public pension funds.
“This was an enormous betrayal of trust,” said Yinal López, a worker at the state electricity company, whose employee pension fund also had money at Ueno. “The president made a mockery of the people. He used their money, the people’s money, to do whatever he wanted.”
Ueno’s implosion has plunged Paraguay into its deepest political crisis in more than a decade — and at dizzying speed. Regulators seized the bank before dawn Tuesday. 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, his interior minister, chief of staff, legal adviser and political adviser had all quit.
It was a staggering reversal of fortunes for Peña, a telegenic technocrat and a former International Monetary Fund economist who owed his rapid political ascent to Cartes. The tobacco magnate, among Paraguay’s richest men, made Peña his finance minister and twice backed him for president over rival factions’ objections.
Once in office, though, Peña quietly amassed a rival power base, analysts say. Ueno Bank, flush with public deposits, became the centerpiece of both his business empire and his effort to win over provincial governors as he sought to escape Cartes' shadow.
“It's like a Shakespearean drama. He tried to displace his mentor, his political patron,” said Miguel Carter, director of DEMOS, a Paraguayan research center. “But he did so on very fragile grounds.”
Cartes struck back. In September, senators loyal to him demanded answers from the central bank about Ueno’s lending, citing leaked internal reports that warned its loans to related companies put its solvency at risk. When Ueno collapsed this week, so did Peña’s leverage, and Cartes, once sanctioned by the U.S. Treasury over alleged corruption, publicly called for the ouster of his erstwhile protégé.
“Cartes put the nail in the coffin,” said Andrew Nickson, a Paraguay expert at the University of Birmingham. “Peña had no political base to rely on, and he was left high and dry."
Ueno rose from obscurity to become Paraguay’s fifth-largest bank 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.
The impeachment charges cite Peña’s stake in Ueno’s holding company, which he divested under pressure last year, and his appointment of a former Ueno executive to run the central bank that regulated it. Lawmakers also accuse him of letting the state pension fund deposit $355 million at the bank, beyond legal limits.
Analysts say those high-level connections helped shield Ueno from regulatory scrutiny even as concerns about its finances grew.
“For the last 20 years, the central bank has been one of the two pillars that gave Paraguay international credibility in managing its economy," said José Tomás Sánchez, a political theory professor at the National University of Asunción. “And under Peña, it began to lose credibility, lose neutrality and then relax all its control mechanisms to favor the business group that had Ueno Bank as one of its pillars.”
Overnight, 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 their accounts are frozen.
"The ripple effect on the general population has been immense," Nickson said. “That has fueled the ire of many people in Paraguay who are not particularly politically aware or very interested in politics."
Some depositors began recovering their money Thursday, starting with those holding up to 10 million guaraníes (about $1,600). Deposits are insured up to about $37,000, which the central bank says covers nearly all of Ueno’s customers. It calls the collapse an isolated case and insists the broader financial system is safe.
Prosecutors have charged 27 people, including Ueno’s controlling shareholder, Miguel Vázquez, with crimes including breach of trust and attempted fraud, and six bank directors are in pretrial detention. Authorities have seized nine luxury cars from Vázquez’s home, along with a yacht and small planes linked to him, and searched executives’ homes in a gated community outside the capital.
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DeBre reported from Salto, Uruguay, and Batschke from Montevideo, Uruguay.
