Guaraní crashes as Ueno Bank collapse triggers Paraguay's worst financial crisis in decades.

The guaraní became this week the world's worst-performing currency against the dollar, according to Bloomberg, with the exchange rate pressing the 6,500-per-dollar barrier at moments of peak political tension — a threshold that until recently seemed unthinkable for an economy the IMF projects will grow at twice the regional average. That brutal contrast between macroeconomic fundamentals and the institutional crisis unleashed by the collapse of Ueno Bank defines Paraguay's economic moment with uncommon clarity.

The failure of Ueno Bank, the digital lender tied to Grupo Vázquez, has triggered the most serious financial and institutional crisis the country has faced in decades, with ramifications stretching from the banking system to the top of the Banco Central del Paraguay. The BCP announced a "resolution procedure" for the entity, suspended its public securities offering through the Superintendencia de Inversiones, and rolled out a digital platform allowing depositors to register and check the status of their accounts — a platform that briefly crashed under heavy demand, according to ABC Color. The central bank also appointed Liana Caballero as interim president following the resignation of Carlos Carvallo, while another board member, Carmen Marín, also stepped down amid the storm. President Santiago Peña nominated Raúl Vera Bogado as the candidate to lead the institution on a permanent basis.

The sheer scale of public-sector exposure to the bank is what turns this case into a first-order fiscal threat. The Instituto de Previsión Social has up to USD 355 million deposited at Ueno — a figure that climbed from barely USD 20 million over a relatively short period, according to Última Hora — while the Ministerio de Economía y Finanzas filed a criminal complaint over 373.838 billion guaraníes from the Caja Fiscal invested in the entity, equivalent to roughly USD 60 million. Funds from ANDE, its pensioners' fund and from Senave, which is claiming 40 billion guaraníes, were also trapped. The Contraloría formally summoned the BCP for answers, the Ministerio de Economía joined the criminal complaints, and senators announced legal actions against President Peña himself and the former BCP board, pointing to possible supervisory failures that allowed public funds to become massively concentrated in an entity that later proved insolvent.

The market reaction was immediate and severe. Pressure on the guaraní intensified as the scale of the problem emerged, with the dollar posting simultaneous gains against the euro and the real, according to Última Hora. Moody's warned of fiscal and sovereign risks stemming from the bank resolution, though JP Morgan maintained its constructive stance on Paraguay. The Asociación de Bancos del Paraguay (Asoban) came out in support of the early return of deposits to private savers, while urging prudence in the use of the Deposit Guarantee Fund and reaffirming that this isolated case should not affect the country's credit rating. That containment message was reinforced by statements from Banco Atlas and Sudameris, which sought to distance their balance sheets from the episode.

The consequences for the productive sector are already visible. The Paraguayan-American Chamber of Commerce (AmCham) warned of the impact on the business climate and legal certainty, while the soy industry — the backbone of exports — flagged potential effects on investment. Feprinco demanded that deposit returns be accelerated to restore the payments chain, and MSME associations asked the BCP for the urgent release of deposits. Accountants, for their part, petitioned the Dirección Nacional de Ingresos Tributarios for a grace period on fines and interest for taxpayers affected by the freezing of funds.

In parallel, the Peña administration is also managing a transition at the Ministerio de Economía y Finanzas: Óscar Lovera took over as the new head, with a presidential mandate to preserve social programs while navigating a complex fiscal picture. The ministry plans to steer the budget toward 2028 after clearing accumulated arrears. Underlying data remain solid — the BCP reported cumulative expansion of 5.7% through August, and the IMF projects Paraguay will grow at nearly twice the global average — but currency pressure, the repricing of sovereign bonds and political uncertainty are complicating the near-term outlook, according to ABC Color.

In the energy sector, the contract between ANDE and the firm Araico/Crusoe for electricity supply to AI data centers continues to draw technical criticism without having been published, with allegations that the fixed tariff agreed for 15 years would fall below technical cost. Itaipú transfers to the Paraguayan state have reached USD 381 million through October, though in year-on-year terms they are USD 18 million below the same period of 2024, adding a further element of strain to public accounts.

What bears watching in the coming weeks is the pace of the deposit-return process for private savers — the BCP has pledged to prioritize smaller account holders — and the fate of public funds, particularly those of the IPS, whose partial or full recovery will largely determine the final fiscal cost of the episode. The selection process for the new BCP president will be equally decisive in restoring institutional confidence, at a moment when both Moody's and currency markets are closely watching whether Paraguay can contain the damage without compromising its record of macroeconomic stability, which until very recently was the most prized asset in its narrative to international investors.