Pedro Volpe had just woken up last Tuesday when he saw a message from a friend asking if his bank account was also down.
It was the day after payday, and Volpe, 50, a writer and lawyer, opened his banking app and panicked: He couldn’t even see his balance.
Volpe was among nearly 3 million Paraguayans, or about 60 percent of the country’s adult population, whose accounts were frozen overnight. All were clients of Ueno Bank, a digital lender that has expanded aggressively in the South American country in recent years and which the central bank on Monday evening ordered into insolvency resolution.
Ueno is at the center of a political and economic crisis that has brought Paraguay’s banking system to the brink of collapse. On Friday, this led to the impeachment and house arrest of right-wing President Santiago Peña.
Peña had resigned the day before in a vain attempt to retain the special jurisdiction granted to former presidents – who, under the constitution, become senators for life. Lawmakers removed him from his seat anyway, meaning Peña will face criminal charges in regular courts.
In just a few days, he went from being a market favorite among Latin American presidents and one of Donald Trump’s key allies in the region to facing violent mass protests, being shunned and under house arrest.
The now former president is under investigation by prosecutors for alleged favoritism toward Ueno, which, just a few years after Peña took office in 2023, went from an obscure digital lender to the bank of choice for most Paraguayans.
“It was very easy to use and open an account,” Volpe explained, recalling that everything could be done quickly on a mobile phone. The bank also offered much more generous investment returns than its competitors.
“Now I have to work miracles to pay my bills,” Volpe added. “Many people can’t even afford basic everyday things, like food; luckily I still had some money saved elsewhere, but that didn’t get me to this point. I don’t know what I’ll do next week.”
Ueno was so popular – sponsoring the national football team, the league and the country’s biggest football clubs – and served such a large part of the population that companies have already reported an overall drop in sales of up to 80% this week. Media belonging to the same financial group as the bank have had their activities suspended, including radio stations and the century-old newspaper La Tribuna.
The impact on ordinary Paraguayans may have been even greater. The media freeze saw the pay of 300 workers suspended, initially for 90 days. Around 32,000 retirees whose public pension funds had been invested in the bank found themselves without payments.
“Many people also don’t work because they can’t get paid or make payments,” said historian and political analyst Fabián Chamorro. “Meanwhile, the protests intensified every day and the impeachment of Peña was the way Congress found to prevent a popular explosion.”
A former finance minister and former employee of the Central Bank and the International Monetary Fund, Peña was elected on a promise to restore a “great Paraguay” and attract foreign investment.
Shortly after taking office at age 44 as the youngest president in Paraguay’s democratic history, he appointed Carlos Carvallo Spalding, who until then had been CEO of Ueno, to head the central bank. Less than three months later, Spalding licensed then-financial company Ueno to become a digital bank.
Peña himself held about $1 million in shares that he purchased in 2019 in a company that would become Ueno Holding in 2022, the parent company of the conglomerate that controlled Ueno Bank. Even after becoming president, he did not dispose of the shares until April 2025. He said he purchased them only as an “investor.”
“Under Peña’s administration, Ueno began receiving various benefits, and the government relaxed rules to allow public funds to be invested in the bank,” Chamorro said. It is estimated that between $800 million and $860 million of state funds and pension funds were invested in Ueno.
A series of internal central bank reports pointing to irregularities – including loans to companies in the same group – have been revealed by local media in recent months, but Peña called them a “false media campaign” against his government.
With the bank having less than half the solvency required to meet its obligations, the central bank ordered its resolution only after growing pressure from other banks and opposition lawmakers.
Spalding resigned and, like Peña, was arrested Friday evening. During the week, police had already arrested eight senior executives and directors of Ueno and its control group on suspicion of concealing the bank’s deteriorating financial situation for months.
The public prosecutor’s office is investigating Peña on suspicion of illicit enrichment, money laundering and influence peddling. He denies all allegations and his lawyers have said there is no evidence he directed the allocation of pension funds at the bank.
Meanwhile, most of those affected still have no access to their own money.
A guarantee fund covers deposits of up to $38,000, which would apply to more than 90% of individual account holders. On Friday, the central bank began making payments to clients with up to $1,565, no outstanding debts and an existing account at another institution.
Paola Benítez, a 25-year-old chef from the capital Asunción, met all three conditions, but as of Friday afternoon she had yet to recoup the money she had saved for her wedding.
“It made me a little anxious, a little desperate too, because honestly, who do I go to to ask questions about this? It’s very strange, very confusing, very sad,” she said.
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