(Nov 6): Paraguayan President Santiago Peña stepped down on Thursday after the collapse of a major commercial bank with ties to his government plunged the South American nation into financial and social turmoil.

Regulators seized Ueno Bank SA early on Tuesday, freezing the savings of millions of Paraguayans, including pensioners, and sparked widespread protests in a country where roughly one in three people held deposits at the lender. Peña, a key ally of US President Donald Trump, was facing impeachment proceedings.

“I do it thinking of the stability of our country, social peace and preservation of our democracy,” Peña said in a video announcing his resignation.

The turmoil marks a tectonic shift within the Colorado Party, which propelled Peña to power in 2023. Divided into rival factions, the party has dominated Paraguayan politics for most of the past seven decades.

Lawmakers kicked off discussions to impeach the president on Thursday morning, when Horacio Cartes — the powerful former president and leader of the ruling Colorado Party, which holds a majority in Congress — publicly backed his ouster.

The escalating crisis is weighing on Paraguayan assets. Paraguay bonds dropped across the curve, posting some of the worst performances in emerging markets. Notes due in 2055 were down about 1.8 cent to a session low as of 12.03pm in New York. The country’s currency, the guaraní, fell 5.2% to trade at 6,525 per dollar. 

The Trump administration has forged close ties with Peña business-friendly government. 

Last month, Deputy Secretary of State Christopher Landau met with Peña in Asuncion and said Paraguay “plays a very key role in the region” for US diplomacy as Trump seeks to bring Latin America closer. After the visit, Peña flew to Washington and met with Treasury Secretary Scott Bessent to discuss critical minerals and economic cooperation.

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