Paraguay ousts president Peña as Ueno Bank collapse freezes accounts

what happened

Paraguay's Senate voted without dissent to oust President Santiago Peña, who was then taken before prosecutors on Saturday. The removal came just three days after authorities took over Ueno Bank, leaving close to 3 million account holders unable to reach their savings. Vice President Pedro Alliana assumed the post and began naming cabinet ministers the same day.

Seeking Alpha, citing the Associated Press, reports that prosecutors ordered arrests on Friday for Peña and former central bank head Carlos Carvallo in a probe into alleged breach of trust. Lawmakers claim Peña steered hundreds of millions of public dollars into Ueno, while regulators allegedly ignored risky loans to insiders. The ex-president rejects the accusations. The central bank reported that 1.2 million depositors have already received part or all of their guaranteed balances.

Demonstrations and clashes with police continue. The country's largest teachers' union plans an open-ended walkout starting Monday to press for protection of public pension funds.

why it matters

For investors, the key questions concern bank supervision, the recovery of state money and whether the new government can rebuild confidence. Repayments could ease the strain, but a lengthy banking disruption and protests may hurt economic activity. The guarani and Paraguayan assets remain in focus.

market impact

Paraguayan banks and the guarani: political crisis raises risk for depositors and the economy

tags

instruments