New Paraguayan president promises full compensation after bank collapse following predecessor’s impeachment

Alliana, who previously served as vice president, assumed office during an extraordinary congressional session shortly after lawmakers impeached and removed former President Santiago Pena for his ties to the banking crisis.

"What I come to promise is concrete: those compatriots who today are going through a difficult moment as a result of this financial disaster will be fully compensated. We will not leave them alone," Alliana said in his presidential address shortly after Senate President Basilio Nunez presented him with the presidential sash.

Minutes after his conviction in the Senate, Pena was arrested at his private residence in a residential neighborhood of the capital, Asuncion, 20 minutes from the Legislative Palace.

The Prosecutor's Office requested Pena’s immediate detention on charges of conflict of interest, illegal negotiations and alleged embezzlement linked to the collapse of Ueno Bank.

Before a 44-0 vote removed him, Pena submitted a letter of resignation to Congress to defuse the political crisis.

"I resign to avoid further damage to the country and to help restore tranquility to Paraguay," Pena wrote in his resignation statement. "No individual should be a cause for greater division or instability. I step down with gratitude, while carrying the anguish of those who are currently awaiting answers."

The political tailspin was triggered earlier this week when the Central Bank of Paraguay (BCP) intervened in Ueno Bank after discovering critical solvency deficiencies.

The bank's closure has frozen the assets of 2.94 million clients, representing nearly half of Paraguay's population, as well as major public institutions and pension funds, including the state-run Social Security Institute.

Lawmakers accused Pena of allowing state agencies and public pension funds to deposit hundreds of millions of dollars into Ueno Bank beyond legal limits, despite warnings about insider lending and lack of collateral.

In his first executive directive, Alliana instructed financial regulators to expedite payout schemes prioritized toward low-income accounts and small depositors hit hardest by the freeze.

Alliana is set to complete the remainder of the 2023-2028 presidential term as Paraguay struggles to stabilize its financial sector amid widespread public unrest.