Bank collapse freezes millions' money and topples Paraguay's president in impeachment

When Ueno Bank's services abruptly stopped working in the early hours of Tuesday morning, daily life ground to a halt for millions of people in Paraguay. The bank had about 2.9 million customers, roughly 60 percent of the country's adult population. The central bank put the number of depositors at about 1.8 million.

By Saturday, authorities said almost 1.2 million customers had received an advance payment under the state's deposit guarantee fund. But many were still waiting for their money. With the bank's ATMs shuttered, everyday transactions were disrupted across the country.

The collapse also led to the impeachment and removal of President Santiago Peña on Friday, when the Senate voted him out over allegations linked to the bank's failure. Vice President Pedro Alliana was sworn in as his successor.

Peña was known as a close ally of US President Donald Trump. The episode has also exposed a power struggle inside the ruling Colorado Party.

On Friday, hundreds of people gathered to protest outside the Congress building in Asunción. They voiced anger not only at being unable to access their money, but also at what they saw as a broader failure of accountability.

Elizabeth González, a 28-year-old barista at a café in downtown Asunción, a few blocks from Congress, said people no longer had any trust. Earlier, one customer had walked into the café and insisted on paying in cash, because he no longer trusted any bank.

González said that if Paraguayans themselves were not confident right now, foreign investors would be even less so. Protesters had begun gathering near Congress after the bank's collapse was announced on Tuesday.

Elodia Saveredo, a 71-year-old housewife who sells her own handicrafts online, said she had come to the protest not because the crisis affected her personally, but because it affected all of Paraguay.

Batarram Caballero, a 23-year-old fifth-year biochemistry student and president of the student centre at the National University of Asunción, said classmates had money frozen that they needed for basic expenses. She said it may not have been a lot of money, but it was money for their bus fare and for their food.

Caballero said it was very discouraging to hear about her classmates' situation and not be able to do anything, because she did not have the resources to help them.

Ueno Bank launched as a fintech in 2021 and began operating as a bank in November 2023. Slick marketing, a digital model built around convenience and cashback deals, and accounts that could be opened on a phone helped it become one of the country's most important financial institutions in a short time.

Caballero believes the crisis was foretold by an intense campaign in the days before accounts were frozen. She said customers were bombarded with messages telling them to put their money there, and there were also rumours about what was already in store.

The bank also held substantial public funds. The Social Security Institute, known as IPS, had around 355 million dollars invested in Ueno, roughly 9 percent of its portfolio. The sums involved have raised questions about how such a young bank came to hold so much public money.

Manuel Ferreira, an economist and former finance minister, told local outlet ABC Color that the collapse raised fundamental questions about how the bank managed its assets. He said that in a typical bank, shareholders provide only a small portion of the money behind its assets, while the bulk comes from customer deposits.

Ferreira said marketing and discounts helped attract customers but did not create lasting assets. A bank's principal asset, he said, was its loan portfolio: money owed by borrowers. But in Ueno's case, many of those loans had gone to companies directly linked to the bank's controlling owners, Grupo Vásquez, including 146 million dollars in loans made to just three companies.

He also said Ueno's promissory notes appeared to have been signed by the same people on both sides. With customers still waiting for their money, the return of deposits and accountability for those responsible have now become Paraguay's biggest questions.