Paraguay's bank collapse puts Horacio Cartes back on top

How a bank blowup became a political earthquake

Ueno's failure did not come out of nowhere. Bankers in Asuncion had been whispering for months as the lender ballooned during Santiago Peña's ascent and tenure. Peña previously owned a stake in Ueno's parent, and the bank gained from regulatory calls while pulling in hefty deposits from public-sector entities.

That growth drew the attention of senators loyal to Horacio Cartes. They pressed the central bank for data on Ueno, including related-party dealings and public money parked at the lender. The scrutiny mounted, and regulators stepped in early Tuesday. The resolution froze accounts for roughly one in three Paraguayans and sent crowds into the streets.

The aftermath moved fast inside Congress. With Cartes steering the ruling Colorado Party, lawmakers voted unanimously to impeach Peña while sparing Vice President Pedro Alliana, 52. By Friday afternoon, Alliana had been named president.

Cartes' comeback, explained

His political machine is built on a sprawling business portfolio in tobacco, beverages, banking and farming, plus a high profile from running soccer club Club Libertad. He joined the Colorado Party in 2009 and launched the Honor Colorado faction a year later. The party even paused its 10-year membership rule so he could run, clearing his path to the presidency in 2013.

An attempt to extend his hold on power blew back. In 2017, allies sought to amend the constitution to permit presidential reelection. Demonstrations erupted, the Congress building burned, and one protester was killed. Cartes dropped the bid and instead positioned his former finance minister, Peña, who won the presidency in 2023.

Sanctions, US ties and why they reversed

Washington asserted he greased palms with monthly sums as high as $50,000 for lawmakers and that he had ties to individuals in Hezbollah, an entity the US designates as a foreign terrorist organization. Treasury followed with additional measures in 2023. Cartes denies the accusations.

Even so, the local backlash was limited. Soon after that initial announcement, Cartes was elected to helm the Colorado Party, a force that controls both congressional houses and has run Paraguay for decades. The next year, Peña - an economist and former finance minister under Cartes - won the presidency.

By October 2025, the Trump administration lifted financial sanctions without rescinding the claims. Peña has said he did not lobby Washington, though many in Paraguay believed he pushed for that outcome. US engagement with Paraguay broadened, with Senator Marco Rubio visiting in 2024 - the first such visit in more than 40 years - and later becoming secretary of state.

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Ties that once centered on security now reach into trade and investment. Paraguay's diplomatic recognition of Taiwan, unique in South America, remains a friction point with Beijing.

Analysts said party dynamics in Asuncion and US priorities both mattered. Gregory Ross of McLarty Associates put it this way: keeping penalties on the country's most powerful politician was not seen as practical if Washington wanted a tighter partnership. Benjamin Gedan at the Stimson Center noted that sanctions were easier to impose when a rival Colorado faction held power, but things looked different once Peña, aligned with Cartes' camp, rose to lead the country.

Peña's slide and the reopening for Cartes

This year, Peña and Alliana began to carve out their own team inside the Colorado Party and briefly looked ascendant. Governors and legislators lined up, and after Cartes' pick lost Asuncion's municipal race on Oct. 4, he said on Oct. 18 he would skip putting forward a candidate in party primaries.

Then Ueno cracked. As lawmakers close to Cartes pressed for more disclosures, problems surfaced. Just hours before regulators took over the bank on Tuesday, Alliana criticized Peña's crisis response and shifted back toward Cartes.

From there, support for Peña collapsed. Cartes endorsed efforts to oust him, while Alliana avoided removal and stepped in as successor.

For many in Asuncion, Cartes' clout is so entrenched that critics avoid naming him outright, using his initials or calling him "the man on Calle Espana," a nod to the street where his mansion served as a de facto command center during his presidency. As Sebastián Acha of consulting firm Pragma observed, hopes for a post-Cartes era were premature.

Former finance minister Dionisio Borda, who advised Peña when he ran the ministry under Cartes, called Ueno's failure a "fraud against its customers." He blames Peña and points to breakneck growth fueled by public funds, including about $850 million from the government and IPS, the state pension system. For Borda, the broader struggle is straightforward: "This is, in part, a fight for political leadership," and Cartes still wields outsized sway thanks to deep resources and appetite for power.

The bottom line for investors

Political risk just jumped in Paraguay. One of Latin America's most durable ruling parties is reshuffling in the middle of a banking resolution, with a new president named and a former one reemerging as kingmaker. For portfolios exposed to Paraguay's trade corridors or regional risk, watch three swing factors highlighted here: the handling of Ueno's resolution and deposit access, whether Cartes' camp consolidates control inside the Colorado Party, and how US engagement evolves given Paraguay's role on Taiwan and security ties.

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