Paraguayan President Santiago Peña resigned on November 5 after the failure of a digital bank used by nearly half the country's population turned into a full political crisis, forcing Taiwan to navigate a sudden change of leadership in its only diplomatic ally in South America.
Vice President Pedro Alliana, Peña's running mate in the 2023 election, is expected to take over. Taiwan's Ministry of Foreign Affairs said it is following events closely and that the upheaval will not affect relations between the two countries.
Ueno Bank's Failure Sparked Protests And Impeachment
The crisis began on November 3, local time, when Paraguay's central bank found that Ueno Bank, a homegrown digital lender, was severely undercapitalized and fell short of minimum solvency standards. After the central bank stepped in, about 3 million depositors were unable to access their accounts, setting off waves of protest across the country.
Scrutiny quickly turned to Peña. A former finance minister and former member of the central bank's board, he had business ties to Ueno Bank and had held shares in its parent group. Opposition lawmakers filed an impeachment motion against him on November 4.
Peña tried to contain the damage. He asked central bank President Carlos Carvallo to resign and enacted a law requiring banks to return most of their customers' money within five business days. Neither step calmed public anger.
Colorado Party Defections Sealed Peña's Exit
The decisive pressure came from inside his own camp. Several lawmakers from the Colorado Party, Paraguay's ruling party, publicly called for Peña to leave office. He announced his resignation on November 5, and the Chamber of Deputies then approved the impeachment motion unanimously, with no votes against.
Taipei Says It Still Has The Situation Under Control
Deputy Foreign Minister Chen Ming-chi, who oversees Taiwan's relations with the Americas and visited Paraguay in June, told reporters at the Legislative Yuan, Taiwan's parliament, on November 6 that the ministry was monitoring developments and was aware that Alliana would assume the presidency.
"Our embassy has a pretty good handle on things," Chen said. "At the same time, I want to stress that in Paraguay we will continue to maintain good contact with the ruling party and with friends from all sectors. We still have the whole situation under control."
In a written response to Storm Media later that day, the ministry said it respects Paraguay's constitutional system and democratic process. It said the political developments would not affect diplomatic ties or ongoing cooperation, including the Taiwan-Paraguay sovereign AI computing center and a smart technology park, projects it said benefit people's livelihoods. Taiwan will keep working with Paraguay in a spirit of mutual benefit to deepen what the ministry called a long-standing and solid partnership between democratic allies.
Peña Was Among Taiwan's Most Vocal Defenders
Peña's fall removes one of Taipei's most outspoken champions on the world stage. Speaking during the United Nations General Assembly in September, he said Paraguay would not "remain neutral" and would stand with Taiwan on the basis of the values the two countries share: democracy, the rule of law, human rights, and peace. He also visited Taiwan in May.
The personal ties date to the start of his term. When Peña and Alliana were sworn in in August 2023, Lai Ching-te, then Taiwan's vice president and now its president, led a delegation to the inauguration as a special presidential envoy.
Taiwan's Shrinking Circle Of Allies Raises The Stakes
Paraguay is one of only 12 countries that formally recognize Taiwan, and any instability there is watched closely in Taipei as Beijing works to pull away the island's remaining partners. In October, China sanctioned Paraguay's technology minister, one of the first times it has targeted a sitting cabinet member of a Taiwan ally.
Alliana's expected succession keeps the presidency in the hands of the ticket that won in 2023, which Taiwanese officials are likely to see as a source of continuity as they work to keep the relationship steady.
