Central bank director resigns as pension fund's $345 million exposure threatens financial stability

The Banco Central del Paraguay's decision to activate a "resolution procedure" over ueno bank has, within hours, concentrated the attention of the country's entire financial system, triggering an institutional crisis that already extends beyond the bank itself and threatens to become the most delicate episode for Paraguay's financial confidence in recent years.

The immediate trigger is devastating in its scale: the Instituto de Previsión Social (IPS), the country's main pension fund, raised its deposits in ueno from barely USD 20 million to USD 345 million — an exposure that unions and social organizations have labeled irresponsible and that has prompted public demands for immediate withdrawal. At the same time, data from ABC Color reveal that ueno's holdings in "other companies" surged by 8,000%, a figure that raises serious questions about the risk management and the supervision exercised by the BCP during the entity's expansion phase. Economists consulted by local media warn that the resolution, if not managed with clear communication and credible corrective measures, could erode confidence in the financial system as a whole, with knock-on effects on employment and economic activity that the Unión Industrial Paraguaya has already begun to anticipate. The resignation of BCP director Carmen Marín has sharpened the perception of institutional instability, while the president of the Chamber of Deputies, Pedro Alliana, publicly urged President Santiago Peña to intervene and took direct aim at the central bank's leadership.

This episode overlaps with a structural tension that has dominated the economic agenda for weeks: the appreciation of the guaraní against the dollar. J.P. Morgan highlighted the local currency's advance, but what international markets may read as a sign of macroeconomic strength is experienced in the real economy as a hemorrhage. The Unión de Gremios de la Producción (UGP) is complaining that the dollar is falling "without a parachute" and that revenues from the agricultural sector and commodity exports are deteriorating at a worrying pace. According to Última Hora, the drop has already cost some 3,000 jobs in the maquila sector and is weighing on real-estate profitability. The government and industry groups have set up a technical working table to assess the impact, though they flatly ruled out intervening in the price, which limits the scope for action to indirect measures. The paradox is uncomfortable: the strong guaraní is partly the consequence of solid macroeconomic fundamentals — the BCP reports a cumulative expansion of 5.7% through August, unemployment fell in the third quarter, and optimism about this year's growth hovers around 5% — but those same fundamentals produce very different winners and losers depending on which side of the economy each player operates in.

On the fiscal front, the bicameral commission resumed its review of the 2027 General Budget after requesting reports from the Ministry of Economy and Finance. The budget faces pressures on several flanks: the central government's wage bill grew 9.9% year-on-year, interest payments on public debt rose 12.9%, and institutions such as the Universidad Nacional are requesting an additional USD 61 million. The new Economy Minister, Óscar Lovera, has indicated that the goal is to put the budget back on track in 2028, once the debt-payment cycle has been absorbed. In parallel, the MEF opened the window for creditor bids under a debt-management operation via bonds, with USD 1.2 billion in Treasury securities already placed on the local market. The Caja Fiscal, meanwhile, faces an actuarial deficit that, according to ABC Color, the ongoing reform would fall short of covering, adding a long-term burden to the public accounts.

In the energy sector, two developments reveal underlying tensions between Paraguay's investment ambitions and its infrastructure limitations. State-owned ANDE set a tariff for artificial intelligence centers of between USD 34 and USD 46 per MWh, with a minimum annual adjustment of 2.5% starting in 2028 — a signal that the country wants to capitalize on the global data center boom by leveraging its abundant and cheap hydroelectric power. However, a study cited by ABC Color warns that the 22 hydroelectric projects planned on interior rivers would generate barely 398 MW, less than the growth in demand in a single year, exposing the fragility of installed capacity against the commitments being contemplated. In that context, the installation of the first electromechanical piece of Unit N°1 at Aña Cuá, in the Yacyretá dam, represents concrete progress in expanding binational generation, though its scale likewise does not solve the structural short-term problem.

On the trade front, the Ministry of Industry and Commerce warned that Paraguay will not accept, within the Mercosur-European Union agreement, a quota distribution that constrains its development — a stance that reflects Asunción's growing awareness of its negotiating leverage at a moment when agricultural exports (led by soy and rice, the latter with external sales of USD 251 million) are the main anchor of foreign-currency inflows. The DNIT also launched a pilot plan for electronic export invoicing, as part of the digital transformation being driven by the new Dirección Nacional de Ingresos Tributarios, which emerged from the merger of the Tax Subsecretariat and the Customs Directorate promoted since the start of the Peña administration.

What lies ahead warrants sustained attention on several simultaneous fronts. The management of the ueno bank crisis will determine in the coming weeks whether the BCP manages to contain the reputational damage or whether the lack of communication and the IPS exposure become political fuel. The evolution of the exchange rate will continue to pressure the export sector and maquila employment while the government lacks direct instruments to intervene. And the handling of the 2027 General Budget in the bicameral commission — with the MEF still not having delivered all the required reports — will test whether fiscal discipline can hold up against wage and spending demands pushing in the opposite direction. The IMF and the World Bank, with whom the BCP president and Minister Lovera held meetings in Washington, see a country with outstanding macroeconomic fundamentals but with institutional vulnerabilities that, if not managed rigorously, could prematurely cut short one of South America's most sustained expansionary cycles.