The Financial and Political Crisis in Paraguay: Yet Another Sign of the Failure of the Liberal Economic Model

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By Thania Saucedo

Paraguay is undergoing one of the most significant political and financial crises in its recent history. The Central Bank of Paraguay’s intervention in Ueno Bank—following the detection of serious irregularities in its operations and solvency issues—triggered a crisis that quickly expanded beyond the banking sector. Today, it has direct consequences for the government of Santiago Peña* and has triggered an impeachment process that calls into question the very future of the president himself.

To understand what is happening, it is necessary to explain a few key points. Ueno Bank experienced exponential growth in recent years, coinciding with the start of Santiago Peña’s administration. It grew to have nearly three million customers—more than 50 percent of the country’s adult population—and received approximately $800 million in deposits from the public sector. Among these funds are those linked to the Social Security Institute (IPS), which administers the retirement and health contributions of thousands of workers.

One of the problems is that the president himself maintained business ties with the group associated with the bank until March 2025. Added to this is the fact that Carlos Carvallo, who had served as president of Financiera Ueno, subsequently went on to head the Central Bank, the agency responsible for supervising and regulating the financial system. During this administration, provisions designed to prevent this type of conflict of interest—known as “revolving door” regulations—were also amended.

The bank’s intervention, the freezing of deposits, and investigations into loans granted to companies linked to its owners ultimately exposed a web of relationships between private interests and public institutions. However, beyond the numbers and financial transactions, there are thousands of people who today cannot access their savings; workers facing uncertainty about their wages; and retirees whose financial resources are at risk. Financial inclusion, which was touted as one of the great achievements of the economic model, ultimately turned into a massive scam against the population.

Santiago Peña’s ties to the business group, the decisions made by the executive branch, and the responsibilities of the oversight agencies are among the issues that gave rise to the impeachment request. The opposition spearheaded the process in Congress, and on 5 November, the Chamber of Deputies approved the charges against the president. Peña submitted his resignation, but both chambers rejected this attempt to step down, and the Senate proceeded with the process. At the time of this writing, the president is set to present his defense in the impeachment trial.

However, to understand this crisis, one must also look to the National Republican Association (ANR), the Colorado Party, – deeply entrenched in the Paraguayan state apparatus and linked to Alfredo Stroessner’s 35-year dictatorship – and particularly to Horacio Cartes (HC). Paraguay has a political peculiarity that is fundamental to understanding what is happening. The Colorado Party has governed virtually uninterrupted since 1947; the only interruption in that long cycle was the administration of Fernando Lugo (2008–2012), who came to power leading an alliance that managed to defeat the Colorado Party at the polls after more than six decades. However, his administration came to an abrupt end in June 2012 through a parliamentary coup that removed him from office in just 48 hours via a controversial impeachment trial. For social movements and sectors of the popular base, this event was not just another episode in history but a political operation orchestrated by sectors of the Paraguayan right, with Horacio Cartes as one of its main actors and with alleged complicity and support from external interests, including those of the U.S. Embassy.

Currently, power within the ANR is fiercely contested by internal factions, but the Cartes faction (HC) has become the ruling party’s main power base. Cartes was not only president of the Republic from 2013 to 2018 but subsequently assumed the presidency of the Colorado Party itself and maintained enormous influence over the decisions of Santiago Peña’s government.

Peña rose to the presidency with Cartes’ political backing. His candidacy and subsequent administration were built under the leadership of the Honor Colorado movement. For this reason, what we are seeing today involves a major political contradiction: the very same faction that built and sustained this administration has now decided to support the impeachment proceedings against the president.

Cartes’ position shifted as the crisis unfolded. Initially, his inner circle rejected the possibility of impeachment and sought to pin the blame on Central Bank officials. However, on 5 November, Cartes publicly announced that the ANR would support Peña’s impeachment. This move cannot be interpreted simply as an institutional decision by the Colorado Party; it also reflects a struggle for political control, for the continuity of the government’s agenda, and for the preservation of a power structure that the movement itself helped build.

Against this backdrop, social movements and the popular sector are not limiting their criticism to demanding individual accountability and rejecting any attempt at impunity; they are also warning that this crisis is yet another example of the failure of the liberal economic model, which for years insisted that the market could regulate itself, that the state should reduce its intervention, and that privatization and deregulation were the path to development. They promised that, if we let capital operate freely, wealth would eventually reach the entire population, that economic growth would translate into well-being, and that everyone would benefit from this supposed trickle-down effect. In Paraguay today, the consequences are felt by every worker, as a result of financial narco-capitalism. This is a model that unscrupulously manages public resources, concentrates wealth, and fosters ties between political power and private interests. It is a system in which profits remain in the hands of certain sectors, while the consequences of their operations ultimately fall on the population.

Therefore, what is happening on this side of the southern part of our America is not isolated from what is happening in other parts of the world; it is part of a dynamic in which big capital dictates political decisions, appropriates the commons, and turns basic rights and needs into business opportunities. The settings change, the actors change, but the logic remains the same.

However, the evident failure of the economic policy of financial capitalism also opens up an opportunity for the organized popular movement: to envision a different future and build a political and economic alternative that breaks with this logic—to pave the way toward a world in which the economy serves life rather than the accumulation of wealth by a few, and in which people can decide on their resources, their present, and their destiny.

Thania Saucedo is a journalist and political leader with the Frente Guasu in Paraguay.

This article was produced by Globetrotter.

*Since this was originally written Santiago Peña has been impeached and arrested.