ASUNCIÓN, Paraguay (AP) — Paraguayan President Santiago Pena failed to appear for his Senate impeachment trial Friday, despite promising to defend himself in person, as lawmakers moved toward a verdict that could remove him from office over the dramatic consequences bankruptcy of a bank linked to its administration.
Senators voted 39-3 to reject Peña’s request for an additional 72 hours to prepare his defense. He said he received the summons just hours before the hearing, along with some 300 pages of charges and evidence, giving him no time to review the case. Presidents impeached in recent years in other countries, including the United States and Brazil, have had weeks to prepare.
Peña is accused of using his political influence to pump hundreds of millions of dollars in public funds into the bank while allowing regulators to gloss over his financial irregularities.
His lawyers, Ricardo Preda and Adolfo Ferreiro, argued that senators should have accepted the resignation he presented to the Senate on Thursday instead of continuing with the trial. Opposition lawmakers insist Peña should be removed through impeachment proceedings.
The legal distinction is important. Paraguay’s Constitution grants democratically elected former presidents a lifetime seat in the Senate, as well as immunity from prosecution unless convicted in an impeachment trial. Prosecutors opened three criminal investigations into the bank’s failure on Thursday, including complaints against Peña, Vice President Pedro Alliana and current and former officials of the central bank and state pension fund.
“He has to go back, but not home. He has to go to a maximum security prison,” opposition senator Yolanda Paredes told reporters. “The public has had enough of impunity.”
Protests were planned for Friday after three straight days of mass demonstrations in which crowds demanding the return of their frozen savings and accountability for the bank collapse clashed with police firing rubber bullets and pepper spray.
“This is a huge betrayal of trust,” said Yinal López, an employee of the national electricity company, whose employees’ pension fund also had money in Ueno. “The president made fun of the people. He used their money, the people’s money, to do what he wanted.”
Bank collapse becomes political reckoning
In just three days, Ueno’s implosion plunged Paraguay into its deepest political crisis in more than a decade. Regulators seized the bank before dawn Tuesday. By Thursday afternoon, Peña had offered to resign as his own party turned against him, led by his longtime leader and mentor, the former president. Horacio Cards.
It was a stunning reversal of fortune for Peña, a telegenic technocrat and former International Monetary Fund economist who owes his rapid political rise to Cartes. The tobacco magnate, widely considered Paraguay’s richest man, governed from 2013 to 2018. He made Peña his finance minister and twice backed him for president over objections from rival party factions.
But once in power, Peña quietly built a power base capable of rivaling Cartes’, analysts say. Ueno Bank, which absorbed hundreds of millions of dollars in public funds, became the heart of his own business empire, and he wooed provincial governors with state money in an effort to free himself from his boss.
“It’s like a Shakespearean drama. He tried to displace his mentor, his political boss,” said Miguel Carter, director of DEMOS, a Paraguayan research center. “But he did it on very shaky grounds.”
The Cartes camp began to retreat. In September, senators loyal to the business tycoon demanded answers from the central bank over Ueno’s loans, citing leaked internal reports warning that the bank’s loans to related companies were putting its solvency at risk. When the bank collapsed this week, so did Peña’s influence, and Cartes, who himself had been sanctioned by the United States for alleged corruption, publicly supported his ouster.
“He had no political basis to fall back on and he was left behind,” said Andrew Nickson, a Paraguay expert at the University of Birmingham.
A bank built on public money
The impeachment charges focus on Peña’s ties to Ueno. In just a few years, Asunción’s little-known bank has become Paraguay’s fifth-largest bank in terms of deposits, its logo flashing on everything from the national soccer stadium to street vendors’ bank cards. Fueled by more than $800 million in public money, it has attracted more than two-thirds of the nation’s adults as customers.
In the charges, lawmakers point to Peña’s stake in Ueno’s holding company, which he formally divested under pressure last year, and the appointment of a former Ueno executive to head the central bank that regulates it. They also accuse him of letting the state pension fund deposit $355 million in the bank, beyond legal limits.
Peña has denied any wrongdoing, saying nothing illegal occurred while he owned shares in the company.
Analysts say Ueno’s meteoric rise was inseparable from his proximity to power, with the central bank – long the pillar of economic discipline so valued by investors in Paraguay – looking the other way.
“Peña’s central bank began to lose its credibility, to lose its neutrality, and then to relax all its control mechanisms to favor the group of companies that had Bank Ueno as one of its pillars,” said José Tomás Sánchez, professor of political theory at the National University of Asunción.
The cracks began to show in July, when the banks chief was ousted after warning in a departure memo that Ueno was funneling deposits into loans to his own companies. The memo quickly reached Cartes’ allies, who used it to pressure the central bank for answers. By October, reports valued these loans at around $150 million, and foreign investors were dumping Ueno’s bonds.
Accounts frozen, anger rising
The seizure of the insolvent bank left nearly 3 million Ueno customers unable to access their savings, withdraw money or use their bank cards. The digital lender had aggressively courted Paraguayans who had never had a bank account, and the damage affected all social classes. Even players of the national football team say their accounts are frozen, according to a statement released by team captain Gustavo Gómez.
“The ripple effect on the general population has been immense across the country,” Nickson said. “This has fueled the anger of many people in Paraguay who are not particularly aware of politics or don’t care much about it. That’s what makes things different.”
Some depositors started getting their money back on Thursday. The central bank said the first payments would be aimed at customers with deposits of up to 10 million collateral (about $1,600), who have no debt to Ueno and hold an account at another institution, and that other groups would follow. He calls the collapse an isolated case and insists the financial system as a whole is safe.
Former Ueno CEO Miguel Vázquez was charged with crimes including breach of trust and attempted fraud, and a judge ordered the pretrial detention of six bank directors. Police and prosecutors raided the company’s offices in Asunción and confiscated nine luxury vehicles from Vázquez’s home early Friday.
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DeBre reported from Salto, Uruguay and Batschke from Montevideo, Uruguay.
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