The Downfall Of Santiago Pena

The ouster on Friday of Paraguay’s Santiago Pena as the country’s president in connection with a financial scandal is a cautionary tale against the blatant abuse of power by the world’s high and mighty in collusion with craven public officials. The dramatic downfall of the former International Monetary Fund economist came within days of the collapse of the government-backed Ueno Bank, which has since been taken over by Paraguay’s Central Bank, declaring it insolvent. The 47-year-old former finance minister had held stakes until last year in a company related to Ueno, fuelling concerns over conflict of interest. The country’s congress decided on Friday unanimously to launch impeachment proceedings, strip Pena of immunity, and place him under detention. Even as the sordid episode was unravelling, some 3 million of Ueno’s hapless customers, roughly half the country’s population, were locked out of their savings.

Pena has been accused of syphoning off millions of dollars of public money into the prominent digital bank, while officials overlooked risky insider lending to the tune of $150 million. An ally of US President Donald Trump, the beleaguered Pena has been accused of breach of trust and influence peddling. Indeed, the nexus and misconduct could not have been more blatant. Soon after he assumed the presidency in 2023, Pena appointed Carlos Carvallo, the one-time head of a finance company that became Ueno Bank, as head of the country’s central bank. Within the next few months, the central bank issued Ueno a formal licence to operate as a bricks-and-mortar bank. Its subsequent rapid expansion was bound to raise eyebrows sooner than later, as Ueno took on ordinary consumers with attractive supermarket discounts and even sponsored Paraguay’s national soccer team besides several big brands.

The tobacco magnate, Horacio Cartes, Pena’s one-time mentor and the nation’s former president, who controversially but unsuccessfully sought to violate the constitutional single 5-year term in 2017, has seized the moment to settle scores. Cartes was also punished with sanctions by the Biden administration on corruption allegations. The two former presidents have reportedly fallen out in a dispute over who should lead the governing conservative Colorado Party, which has ruled the country for decades, in the 2028 elections. Amid the deepening personal rift, Cartes could not have asked for more credible grounds to exert pressure on regulators to investigate Ueno’s records or to endorse the Congressional impeachment move.

The overthrow of Pena has plunged the South American state into chaos after a decade of relative stability and impressive economic growth. Vice President Pedro Alliana, himself under a cloud of suspicion, has been sworn in as the new president for the remainder of the current term in 2028. But the latest saga in Asuncion underscores the need for governments to remain cautious over the assessments of ratings agencies and for greater self-scrutiny by the latter.