Updates with result of senate impeachment vote.
Paraguay's senate on Friday impeached President Santiago Pena, removing him from the presidency after his administration crumbled on Thursday because of a banking crisis.
The 45-member senate voted 44, with one abstention, to accept the recommendation of the lower house and impeach Pena. The lower house voted the previous day 78-0 to reject Pena's attempt to resign and, instead, recommended impeachment over the collapse of a digital bank, Ueno.
Pena was a shareholder in the bank and he had appointed Ueno former chief executive Carlos Carvallo to lead the central bank.
The central bank announced earlier this week that it would intervene in Ueno, which had 2.94mn clients, equivalent to 63pc of Paraguay's adult population. It also held 11pc of funds in the state-run social security institute. Customers, including pensioners, were locked out of their accounts. Carvallo resigned.
Late Friday, the state-run Petropar filed criminal charges against Ueno for breach of contract. The bank held an undisclosed amount of Petropar's cash reserves. Other state agencies did the same.
Pena resigned Thursday in a taped message, but the lower house of congress voted unanimously at the same time to reject the resignation and approved an impeachment hearing.
Pena asked for 72 hours to prepare, but on Friday the senate voted 42-3 to reject the request and announced impeachment proceedings.
Pena's Colorado Party controls both chambers of the Congress, but his lawmakers sided with opposition parties.
Pena sent two lawyers to defend his position, but they did not help his cause, with the senate voting 41-0 to formally consider the charges against Pena after his lawyers concluded their presentation. They also called for steps to ensure that he does not flee Paraguay. They do not want a repeat of neighboring Brazil, where presidential candidate Flavio Bolsonaro fled to the US after losing to re-elected President Luis Inacio Lula da Silva.
Vice-president Pedro Alliana will take over whether Pena is impeached or allowed to resign. The next general elections are in April 2028.
In the meantime, the interior minister resigned, as did Pena's chief of staff and his top legal political and legal advisors.
The scandal is already affecting Paraguay's investment-grade economy. Its currency, the guarani, plummeted by 8.17pc against the US dollar since Ueno's intervention.
Rating agency Fitch downgraded Ueno to D, its lowest rating, stating that the "intervention reflects material regulatory breaches and governance weaknesses".
It could lead to a sovereign downgrade, which would make investors reconsider pumping money into the economy, which Pena's government showcased.
The economy expanded by 6.7pc annualized through August, while annualized inflation through October was 1.7pc, according to the central bank.
Paraguay has focused on attracting investment to the industry, mining and energy sectors. It has championed Paraguay's green grid — 100pc hydroelectric powered — and lower electricity rates to entice investors.
