A banking crisis in Paraguay has rapidly escalated into a political storm, threatening President Santiago Peña's position and creating fresh uncertainty for the country's financial system. At the centre of the controversy is Ueno Bank, a fast-growing digital lender whose sudden collapse has left millions of customers struggling to access their money.
The fallout has also become a setback for US President Donald Trump, whose administration had viewed Paraguay as a key ally in Latin America.
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Here is how the Ueno scandal unfolded:
2021: Ueno Emerges As A Digital Banking Success
Launched in 2021, Ueno rapidly established itself as one of Paraguay's most prominent digital lenders. Its expansion gathered pace after a 2024 merger with Visión Banco, making it the country's sixth-largest bank by deposits.
By June 2026, the lender had around 3 million customers in a country of approximately 6.5 million people. It also attracted substantial government deposits, which accounted for nearly 29% of its total deposits by the end of June, according to Bloomberg.
2024-25: Early Warning Signs Emerge
In 2024, IDB Invest extended a nearly $20 million loan to Ueno. However, concerns surfaced when the development institution considered taking an equity stake in the bank.
During a 2025 visit, its officials reportedly flagged questionable lending practices, including loans between companies linked to controlling shareholder Miguel Vázquez's Grupo Vázquez.
March 2026: Record-Breaking Bond Sale
Ueno raised $350 million through an international bond issuance, marking a record corporate debt offering for Paraguay. However, the bank's financial position would soon come under intense scrutiny.
September 2026: Regulatory Concerns Become Public
Local newspaper ABC began publishing internal central bank documents and correspondence highlighting concerns over Ueno's lending practices.
The central bank subsequently opened a formal investigation and asked the lender to revise its accounts. The changes revealed that Ueno's solvency ratio had fallen below the mandatory 50% threshold.
November 3: Regulators Seize Ueno
Authorities intervened, declaring the bank insolvent and undercapitalised. Customers found themselves locked out of their accounts, triggering anxiety among depositors. Police also raided Vázquez's mansion, where luxury vehicles worth more than $1.4 million were reportedly found.
November 4-5: Political Fallout Intensifies
Central bank chief Carlos Carvallo, a former Ueno executive, resigned. Authorities also issued arrest warrants for eight bank executives.
Peña, who acknowledged having held a stake in Grupo Vázquez until March 2025, faced accusations of conflicts of interest and inadequate oversight, which he denied. Prosecutors also named him among those being investigated.
Paraguay's lower house subsequently voted unanimously to impeach him. Peña offered his resignation, while proceedings in the Senate remained politically contentious.
The crisis has also exposed divisions within the ruling Colorado Party and weakened Peña's position.
November 6: A Blow To Trump's Latin America Strategy
The controversy has wider geopolitical implications. US Secretary of State Marco Rubio had previously presented Paraguay as a model regional partner, while Treasury Secretary Scott Bessent met Peña in Washington just two weeks before the crisis.
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Trump had also lifted financial sanctions on former Paraguayan leader Horacio Cartes in October 2025.
The unfolding scandal now threatens Washington's efforts to expand its influence in a region where China has steadily increased its economic footprint.
Beyond Paraguay, the political turmoil comes amid a broader anti-incumbent and anti-rightward political wave being seen across several parts of the world, adding to the challenges facing conservative governments and their international allies.
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