Central Bank president resigns as Ueno Bank collapse triggers Paraguay's worst fiscal crisis.

The Ueno Bank crisis has today reached a dimension that transcends the mere failure of a minor financial institution: with embargoes totaling $70 million against its directors and the Vázquez Group, executive arrests, the resignation of the president of the Banco Central del Paraguay, and the appointment of an interim president, Paraguay is undergoing its most severe institutional financial shock in years — precisely at the moment when President Santiago Peña's administration faces a parallel fiscal crisis that has prompted the Chief of Staff to demand that his ministers "tighten their belts."

The BCP initiated a "resolution procedure" against Ueno Bank, immediately suspending all its operations and digital applications. The Superintendencia de Inversiones (SIV) suspended the public offering and trading of securities issued by the entity. According to ABC Color, BCP president Carlos Carvallo tendered his resignation once the crisis broke, being replaced on an interim basis by Liana Caballero, while director Carmen Marín also stepped down. The simultaneity of these departures — in the context of a crisis that, according to critics cited by ABC Color, exposes belated reactions by the supervisory body — has triggered a first-order political storm.

The trapped funds go well beyond individual savers. State-owned electricity company ANDE saw both infrastructure resources and its pension fund assets frozen. The Instituto de Previsión Social (IPS) moved quickly to guarantee the payment of pensions and year-end bonuses through other banks, announcing that it would define today the alternative entities for disbursements. The Cámara de la Pequeña y Mediana Empresa (Cipama) urged the BCP to release deposits, warning of the damage to thousands of families, while the MSME association, although calling for calm, flagged a potential drag on activity. Economists consulted by ABC Color warned of the potential impact on the country's investment grade rating and questioned BCP's controls, although the Asociación de Bancos (Asoban) reaffirmed the systemic soundness of the sector and maintained that this specific case should not affect the sovereign rating. Police detained Ueno Bank executives and managed to capture Miguel Almada, described by Última Hora as the last fugitive director.

The banking crisis inconveniently overlaps with pre-existing fiscal turbulence. The government has resorted to the phrase "war economy" to describe the deterioration of public finances, the result of a sharp drop in tax collection. The new Economy Minister, Óscar Lovera — who replaced Carlos Fernández Valdovinos in what the government labeled "the second half" — attempted to tone down the rhetoric, publicly rejecting the term and pointing to signs of improved revenue, though at the same time confirming that the budget would only be back on track by 2028 after the payment of accumulated debts. The contradiction between Lovera's official discourse and the Chief of Staff's austerity rhetoric illustrates the lack of message coordination that several analysts have flagged as a governance problem.

A former deputy Economy Minister described the situation as "the worst fiscal management since 2003" and cast doubt on the 2028 deficit target, according to ABC Color. Former minister Ferreira, for his part, warned of financial "window dressing" in the 2027 General Budget bill. In parallel, data published by ABC Color revealed that Central Government salaries rose 9% despite the declared austerity drive — a figure the business sector itself received with irritation. One businessman cited by the same outlet described the MEF's management as causing "havoc" and "irreparable damage." The industrial association, meanwhile, criticized the "war economy" concept and called for stimulus measures rather than a purely contractionary approach.

The DNIT, the new tax authority created through the merger of the Subsecretaría de Tributación and the Dirección de Aduanas — a Peña-era reform that promised to raise the tax burden from 10% to 12% — announced it plans to curtail tax incentives for investment as part of the adjustment measures. This generates direct tension with the goal of keeping Paraguay an attractive destination for foreign capital, at a time when the country ranks 84th in the Index of Economic Freedom, according to Última Hora.

In the energy sector, the contract between state utility ANDE and Araico/Crusoe for supply to artificial intelligence data centers continues to draw technical criticism. ABC Color reported complaints about a 15-year fixed tariff below technical cost, with the contract still unpublished. The terms that have leaked — between $34 and $46 per MWh, with minimum annual adjustments of 2.5% from 2028 — fuel questions over transparency in a long-term contract tied to a globally expanding sector.

The guaraní has appreciated against the dollar in recent weeks, according to ABC Color, a development that benefits importers but complicates life for agro-industrial exporters and maquila firms, a sector where job losses are already estimated at 3,000 according to Última Hora. Despite this, the BCP reaffirmed the neutrality of its monetary policy, arguing that the economy shows cumulative expansion of 5.7% through August, underpinned by the soybean sector boom.

The immediate agenda is dense. The BCP will need to communicate precisely the timeline and amount of repayment to Ueno Bank depositors — with the maximum covered by the deposit insurance fund at the center of the discussion — while the Prosecutor's Office moves toward criminal charges against the bank's directors and, according to some sectors, against BCP authorities themselves. The Senate will summon new minister Lovera to account for state arrears to suppliers. And the government will need to demonstrate — to the IMF and the World Bank, with whom both the MEF and the BCP held recent meetings according to La Nación — that its handling of this crisis does not compromise the fundamentals that have sustained the country's investment grade rating.