Wednesday, November 11, 2026

SPACE/COSMOS

Germany's Isar Aerospace eyes overtaking Elon Musk's SpaceX


Frankfurt (Germany) (AFP) – The head of Germany's Isar Aerospace voiced hope Tuesday that the company could one day overtake Elon Musk's SpaceX to become the world's premier space launch company.

Issued on: 10/11/2026 - FRANCE24

Isar launched a rocket into orbit from Andoya in Norway on September 5, 2026 © Handout / Isar Aerospace/AFP/File


Daniel Metzler, who founded the company with two fellow students in 2018, pointed to a huge backlog of launch orders, helped by European military clients.

"SpaceX was founded in 2002. Back then I was playing with Pokemon cards," he said. "Looking at what could happen in the next 18 years, I wouldn't rule out us being further ahead than SpaceX."

Isar became in September the first privately financed European company to get a rocket into orbit.

Europe is betting that competition between Isar and other players such as Rocket Factory Augsburg will bring down the price of satellite launches.


This would help ensure affordable access to space for sectors ranging from telecommunications to defence, independent of entities such as SpaceX, the sector leader valued at $1.9 trillion (1.7 trillion euros).

Speaking at a conference organised by the SZ newspaper, Metzler said Isar had already come a long way, noting that SpaceX needed four attempts to get into orbit compared to Isar's two.

Capacity rather than demand was now the big bottleneck, Metzler added.

He said the company was 15-times oversubscribed for 2028 launches as European governments now preferred European providers to put their defence satellites up as opposed to firms overseas.

"There's 14 customers for every rocket that we have to disappoint," he said.

"About 18 months ago 85 percent of inquiries were commercial and 15 percent were military, and that ratio has since flipped," he added.

Chief executive Daniel Metzler says 'looking at what could happen in the next 18 years, I wouldn't rule out us being further ahead than SpaceX' © RONNY HARTMANN / AFP/File

Isar is working on developing reusable rockets to boost capacity and bring launch costs down, hoping to catch up with SpaceX's reusable Falcon 9 rocket.

"Already with our next launch, for which we are currently finalising the launch vehicle, we will be taking initial measurements to assess the re-entry of the rocket's first stage," he said.

"Over the next three or four flights, we also plan to start flying hardware specifically designed for reusability."

Asked if Isar could one day be valued at 100 billion euros, Metzler said "people massively underestimate the potential of space".

"To be honest, I reckon the figure is much higher, but then people would be even more convinced that I'm completely mad."

pca-vbw/fz/js


Is The Space Economy Driving The Weaponization Of Space? – Analysis

By Chaitanya Giri


Key Takeaways:

The global space economy’s boom in proliferated low-Earth-orbit constellations originated in the 2007–08 Chinese and U.S. anti-satellite tests and is accelerating orbital weaponisation.

Starlink, Chinese mega-constellations and others are creating hyper-redundant architectures that also serve as geopolitical tools, with non-state actors already using commercial satcom for grey-zone operations.

Treating satellite terminals as sensitive dual-use technology and imposing stricter international oversight are required to prevent commercial connectivity from enabling orbital conflict and empowering proxies.

The biggest driver of the global space economy is the bias towards proliferated satellite architectures, which emerged from China’s and the US’s anti-satellite (ASAT) tests in 2007 and 2008, respectively. While the space economy promises services never achieved before, it is also driving the weaponisation of Earth’s orbits, creating the conditions for orbital warfare and, more chronically, turning satellite constellations into geopolitical weapons.

The term ‘space economy’, which now features in a broad range of policy and strategy discussions, is not very old. The Organisation for Economic Co-operation and Development (OECD) codified it in 2012, defining it as, “The space economy is the full range of activities and the use of resources that create and provide value and benefits to human beings in the course of exploring, understanding, managing, and utilising space.”


The OECD coined the term ‘space economy’ to draw private capital and commercial capacities into space activities and to boost the national economies of member states. While commerce appears to be the central driver, the rise of the “space economy” was triggered by two anti-satellite (ASAT) kinetic kill weapons tests: China’s test on 12 January 2007 and the US’s response on 21 February 2008. Both tests pitted the US and China against each other in a comprehensive contest across all of Earth’s orbits. This time, it was not merely a space race but one involving the weaponisation of orbit.
The Military Origins of the Space Economy

China’s ASAT test showed the US a stark picture, which it reciprocated: standalone satellites of that era were not only large and expensive, but also sitting ducks and single points of failure that could cripple the whole military architecture, especially for globally expeditionary military activities. It was well known before the term ‘space economy’ was coined that countries intending to maintain dominance in space, or even to be keepers of exclusive capabilities, would need to carry out military activities under the guise of dual-use commercial activities. Commercial players build the assets, militaries are the end users, and the whole orbital architecture gets laid out, with weaponisation occurring smoothly while hiding in plain sight. The US Defence Intelligence Agency’s (DIA) 2026 public release of an image of China’s secretive spaceplane, Shenlong, operating in Earth’s orbit shows that the weaponisation race has been under way for more than a decade but is coming to the fore only now through in-orbit intelligence gathering.

The Race for Orbital Dominance

In August 2013, the US Air Force Space Command released a paper titled “Resiliency and Disaggregated Space Architectures” which advocated for a disaggregation approach by moving from standalone and exquisite satellites to constellations of small satellites. Constellations have been preferred since then as a deterrent to ASAT tests. They introduced hyper-redundancy, removed single points of failure, established a mathematical deterrent by lowering the cost of making and launching satellites, put the onus of orbital destruction entirely on the ASAT attacker, and created a proliferated warfighting architecture.

SpaceX was the first company to file with the US Federal Communications Commission (FCC) and the International Telecommunication Union (ITU) for an orbital shell of more than 1,000 satellites, specifically 4,425 satellites, in 2016. China filed for an enormous constellation of 12,992 satellites in September 2020. This was also the period when China began nurturing many quasi-private commercial space players under the watchful eye of its state-controlled industries, under the State Council. While China’s Belt and Road Initiative has always had a space component, the first explicit mention of a satellite constellation as a national priority came in the 14th Five-Year Plan, which was approved in March 2021.


At present (as of October 2026), Starlink has more than 10,783 satellites, followed by OneWeb with 654 satellites, Amazon’s Kuiper with 394 satellites, and Qianfan with 238 satellites. In the next few years, the world could see more than 20,000 satellites hovering around in low Earth orbit, but that is not all: unmitigated numbers are envisaged. E-space, founded by OneWeb founder Greg Wyler, has registered with ITU for a satellite constellation of a whopping 116,640 satellites. China’s State-owned Assets Supervision and Administration Commission of the State Council has filed for an enormous constellation of more than 200,000 non-geostationary satellites. This raises questions about the limits to the growth of orbital constellations, whether this expansion is a mad rush, a zero-sum game or a race to nowhere, and where this orbital ‘great power’ rivalry for absolute dominance is ultimately headed.

In the past year, several governments have issued strongly worded statements urging states to step back from an escalation ladder that could lead to a space war. In October 2026, Russia’s former President Dmitry Medvedev warned that if the US blocks Russian satellites, the Ukraine-Russia conflict would escalate into a full-fledged space war, with Russia targeting Starlink.

In September 2026, UK Defence Secretary Wes Streeting cautioned that space-based threats are growing at an alarming rate and in sophistication, including lasers, electromagnetic pulses and kinetic ASAT weapons. After US Air Force Secretary Troy Meink made the startling revelation that the US has placed “on-orbit space control weapons capable of defending the Joint Force against hostile adversary action,” China’s foreign ministry spokesperson, Guo Jiakun, urged the US to stop preparing for war in space and turning the orbits into a battlefield. The US is certain that its space dominance is being challenged by Russia and China through a strategy of deceiving, disrupting, denying, degrading and destroying. In a 2024 statement, the US Space Force’s Space Systems Command argued that proliferated LEO constellations are the way to avert a single point of failure. Moreover, each of them intends to complicate its adversary’s targeting calculus.


From Orbital Warfare to Geopolitical Leverage

The weaponisation of orbits is a great-power game — and a space war is fast becoming a possibility. The more chronic issue, however, is that great powers use the placement of weapons in space to exploit space assets in pursuit of their geopolitical and geoeconomic goals. India should treat proxies, non-state actors, terror groups and criminal organisations with access to the downstream services of satellite constellations not as peripheral, anomalous actors but as strategic force multipliers of space powers.

With access to LEO satellite communications (satcom), these four groups have already shown several signs of engaging in grey-zone operations, in which their backers can claim plausible deniability or exploit the difficulty of attribution. They use LEO satcom in zones with a governance vacuum, where they trample the telecom sovereignty of legitimate but weak governments. In some situations, they could also create front enterprises with a digital backbone provided by LEO satcom, which then fund the larger terror and criminal enterprises


History has shown that proxies are rarely obedient to their benefactor states. At some point, they go rogue, having acquired weapons, wealth, power and self-interest. Their independent actions, which could be reckless given the absence of accountability, can force their sponsors into conflict with a major rival power while further eroding the international order and the institutions that safeguard the sanctity of space law.

Weaponised LEO constellations are becoming a Sword of Damocles over international security. While the space economy drives global digital connectivity, that connectivity transcends jurisdictions and becomes a geopolitical weapon. Commercially, it grants bad-faith actors the status of data subscribers, giving them secure, high-speed communication backbones that outpace the capabilities of traditional national law enforcement. Closing this security gap requires a paradigm shift: satellite terminals must be treated not merely as commercial consumer electronics but as sensitive weaponised technology, demanding strict international regulatory oversight, cooperative corporate governance and constructive international diplomacy.

None of these seems to be working despite the rise of the space economy, since great powers are becoming autarkic and hegemonic, relinquishing their responsibilities towards shared international well-being and being driven more by domination in space. The question is whether the global space economy, beyond the trillions of dollars it aims to generate, will deny bad-faith actors access to space and commit to accountability, impartial justice and the well-being of those in need, a necessity in today’s world, or whether it will continue to abet space weaponisation unchecked.


About the author: Chaitanya Giri is a Fellow at the Centre for Security, Strategy, and Technology at the Observer Research Foundation.


Source: This article was published by the Observer Research Foundation.

About Observer Research Foundation
ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.
View all posts by Observer Research Foundation →

 

French judge probes author Houellebecq over remarks about Muslims

10.11.2026


Photo: Boris Roessler/dpa

French judicial authorities have opened an investigation into the bestselling novelist and prominent public intellectual Michel Houellebecq concerning allegedly discriminatory remarks made about Muslims in a November 2022 interview, media reports said on Tuesday.

An investigating judge in Nanterre has opened a formal investigation, several French media outlets reported, citing judicial sources. He is suspected of complicity in incitement to discrimination, hatred or violence.

The case centres on an interview with philosopher Michel Onfray published in the magazine Front Populaire. In it, Houellebecq, whose novels include "Submission" and "Atomised," allegedly portrayed Muslims as a threat to the safety of French people with French ancestry.

According to media reports, Houellebecq said in the interview that French people of French origin did not want Muslims to assimilate. Instead, Muslims should stop robbing and attacking French people or leave the country.

He also spoke of possible future "reverse Bataclan attacks" targeting Muslims, referring to the Islamist terrorist attacks in Paris on November 13, 2015.

In January 2023, the France's Council of the Muslim Faith filed a criminal complaint against Houellebecq, Onfray and the magazine's editor, Stéphane Simon.

Houellebecq's lawyers have rejected the allegations. In comments to the newspaper Le Figaro, they argued that the disputed remarks did not contain any call for people to carry out such acts, either directly or indirectly, and were thus protected by freedom of speech.

According to Le Figaro, the author faces a possible prison sentence of up to one year and a fine.

 

Siemens Energy more than doubles annual profit to €4.1 billion

11.11.2026,

Photo: Jürgen Lösel/dpa

German energy technology group Siemens Energy more than doubled its annual net profit to €4.1 billion ($4.6 billion), driven by booming demand for gas turbines and power grid equipment as well as a sharp reduction in losses at its wind power division.

The Munich-based company said on Wednesday profit rose by 145% in the financial year ending in September, marking another record result after the previous year's historic high.

Siemens Energy expects profits to rise further to €5 billion in the current financial year, which began in October.

The company's gas services division increased its operating profit by €1.1 billion, while its grid technologies business recorded an increase of €851 million.

Its previously struggling wind power subsidiary Siemens Gamesa also significantly reduced its losses, cutting them by €1.5 billion. The division returned to positive earnings in the final two quarters of the financial year.

Chief executive Christian Bruch plans to more than triple the company's dividend to €2.30 per share.

Chief financial officer Maria Ferraro described 2026 as another record year for Siemens Energy and said the company was setting more ambitious targets for 2027 and 2030. She said the group aimed to capitalize on strong market conditions and work through its record order backlog profitably.

Siemens Energy has benefited from growing demand for electricity infrastructure as countries modernize their energy systems and the artificial intelligence boom fuels the construction of energy-intensive data centres.

Its order backlog has risen to €164 billion, nearly four times its annual revenue of €44.2 billion.

The company also expanded its workforce by around 5,000 employees to 108,000 worldwide, including 29,000 in Germany, up from 27,000 a year earlier.

Siemens Energy said demand for energy infrastructure remained strong and that it planned to continue expanding capacity.

 

Unemployment among German university graduates hits record high


11.11.2026,

Photo: Martin Schutt/dpa

Unemployment among university graduates in Germany has reached a record high, with younger people particularly affected by the country's struggling economy and the growing use of artificial intelligence (AI), the Federal Employment Agency said.

The number of unemployed university graduates climbed to 372,000 in August, continuing a steady rise over the past five years, according to the agency. Graduates under the age of 30 have been particularly hard hit.

Despite the increase, higher education continues to offer considerable protection against unemployment. The unemployment rate among university graduates stood at 3.3% in 2025, roughly half the rate for the population as a whole.

The rate was slightly higher, at 3.6%, among people with completed vocational qualifications, while more than 21% of those without formal vocational qualifications were unemployed, according to the agency.

Unemployment rates also varied considerably depending on the field of study. Fewer than 2% of teaching graduates were unemployed in 2025, compared with 4.6% of humanities graduates and 3.8% of engineering graduates.

The employment agency attributed the rise in unemployment primarily to Germany's difficult economic situation and the increasing use of AI, with young people in entry-level positions particularly affected. However, it said AI was generally not expected to replace entire professions.

 

Turkish banking regulator chief steps down amid widening fund scandal

11.11.2026,

Photo: Anna Ross/dpa

The head of Turkey's banking regulator, Şahap Kavcıoğlu, resigned on Wednesday, days after a multibillion-dollar investment fund scandal reached senior officials of President Recep Tayyip Erdoğan's AKP party.

Kavcıoğlu announced on X that he had asked Erdoğan "for permission to step down so that our agency would not suffer any further damage," citing "recent allegations" concerning the regulator and himself. 

Local media earlier cited an AKP member as implicating Kavcıoğlu in the fund scheme.

Kavcıoğlu's resignation comes hours after he told opposition-leaning Sözcü daily that his agency had nothing to do with the investment funds at the centre of the scandal. 

In mid-September, suspected price manipulation by investment funds triggered a stock market crisis. The financial regulator then ordered 131 funds to be dissolved, affecting about 455,000 investors.

The affair has led to investigations, numerous arrests and dismissals at the Finance Ministry and financial regulators. Kavcıoğlu's deputy is among those arrested.

Last week, Fatma Betül Sayan Kaya, a former Cabinet member and longtime Erdoğan ally, was arrested on charges of violating capital markets law and membership in a criminal organization, state news agency Anadolu reported.

Kavcıoğlu, a former central bank governor, was appointed to lead the Banking Regulation and Supervision Agency in 2023. His successor has not been named yet.

Scientists begin tests on human composting, an eco-friendly alternative to burials and cremation
Cover image: DOWN TO EARTH © FRANCE 24

Issued on: 02/11/2026 - 
06:34 min From the show



Humans have caused irreversible changes to our planet in their time on Earth, pollution that continues even in death. Cremation relies heavily on fossil fuels, while traditional burials take up land. So is there a more eco-friendly way to honour our loved ones? French scientists are exploring the possibility of composting human bodies, a process that returns those who have died to the earth. Our Down to Earth team reports.







New Zealand's knife-edge parliamentary election delivers no clear winner

No clear winner was produced in New Zealand’s legislative elections Saturday, setting up the two main blocs – Prime Minister Christopher Luxon's right-wing coalition and opposition leader Chris Hipkins' left-wing alliance – for weeks of political wrangling to attempt to cobble together a majority. Hipkins said that while New Zealanders had spoken, "it may take us a little bit longer to figure out exactly what it is that you've said".


Issued on: 08/11/2026
By: FRANCE 24

New Zealand Prime Minister Christopher Luxon declared his right-wing coalition has a mandate to form the next government while conceding that the results remained too close to call definitively. © Ben Strang, AFP


New Zealand faced the prospect Sunday of weeks of political wrangling after a knife-edge election that produced no clear winner but saw record gains for minor parties.

Prime Minister Christopher Luxon declared his right-wing coalition had a mandate to form the country's next government – while conceding results remained too close to call definitively.

Preliminary results have his National Party winning the most seats, giving them a very slim majority of just two if combined with their coalition partners, the populist NZ First and the libertarian ACT.

"New Zealanders have given us the biggest seats in parliament, 42 seats as it stands today, and a pathway to form a government," Luxon told journalists on Sunday.
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"There's no doubt about it. We've got a mandate."

He said his National Party had done well given the war in the Middle East and subsequent global fuel shock that has been widely blamed for New Zealand's economic difficulties.

"What we achieved, I think, was pretty good."

Opposition Labour Party leader Chris Hipkins has joked that while the country had spoken, "it may take us a little bit longer to figure out exactly what it is that you've said".

But the results show he has only a very narrow path to power for his left-wing grouping, which also includes the Green Party and Te Pati Maori, representing the interests of New Zealand's Indigenous community.

'Everyone's over politics'

New Zeland's Luxon will run a caretaker government until the final votes are announced on November 27. © Michael Bradley, AFP

Luxon will run a caretaker government until the final votes are announced on November 27.

"I think everyone's over politics, so let's all just have a bit of a break for the next three weeks," he said.

That final tally will include nearly 400,000 so-called "special votes" – among them around 100,000 cast overseas and by people within New Zealand but outside the local electorate in which they live.

Historically, special votes leaned left, potentially giving the Labour or Green parties an additional one or two seats at the expense of the right-bloc.

This week's knife-edge poll drew intense attention to the country's minor parties, in particular the upstart centrist Opportunity Party.

Under the country's mixed-member proportional representation system, voters must tick two options – a general party list as well as an individual member to represent their electorate.

Results put Opportunity winning seven seats, potentially giving the party a kingmaker role in the next government.

With 100 percent of the preliminary count done, Luxon's National are on 42 projected seats and Labour on 36, according to the electoral commission.

The Green Party is in third place with 16 seats, while ACT are on 13 and NZ First have 12. Te Pati Maori have five.


Cost of living concerns


The final tally will include nearly 400,000 "special votes", which historically have leaned left. © Marty Melville, AFP

Luxon said Sunday that while it was "unlikely" he would need the Opportunity Party to form a government, he was willing to work with leader Qiulae Wong on issues on which they agree.

"We can work with our current coalition partners to form the government," he said.

"What I've also said, though, is that there is a need for us to go forward in cross-party collaboration in a lot deeper way."

Many Kiwis are struggling to make ends meet – the price of basic goods remains stubbornly elevated, and unemployment at its highest in more than a decade

On the streets of Wellington, voters told AFP that those rising costs had been top of their minds when they cast their ballots.

Rahul Jain, a 33-year-old support worker, said he hoped the next government could "bring the cost of living down".

"Everything has gone up, so that's the biggest issue right now."

Mary Scott, a lending operations representative, said she hoped politicians in power would keep ordinary New Zealanders in mind.

"I know we're always going to be impacted by overseas events, but what's happening here?" she said.

"They can actually do a lot with the money they have in the bank, and they can make fair policies for everyone.

"They can make the wealthy pay a bit more."

(FRANCE 24 with AFP)

 

German museum returns Māori ancestor's remains to New Zealand

09.11.2026, 

Photo: Hauke-Christian Dittrich/dpa

A German natural history museum has returned the remains of a Māori ancestor, which had been part of its collection for 145 years, to New Zealand in a formal ceremony. 

A delegation from New Zealand received the remains from the State Museum for Nature and Man in Oldenburg, Lower Saxony on Monday.

Director Ursula Warnke said the museum was taking responsibility for its historical legacy with the repatriation. "Human remains from colonial contexts were generally brought to Europe by force and without consent," she said.

New Zealand has been seeking the return of human remains held in European museums for years. Representatives approached the Oldenburg museum with a formal request for repatriation in 2024.

An examination of historical documents established that the Māori ancestor had arrived in Oldenburg in 1881 as part of an exchange, a museum spokeswoman said. The specific Māori community to which the ancestor belonged has not yet been identified.

The decision over how the ancestor will be laid to rest now rests with Māori descendants.

"The return of this ancestor helps to restore the cultural and spiritual connections and relationships Māori have with their ancestors who for us are forever present," Arapata Hakiwai of the Te Papa museum in Wellington said, according to a statement. 

"The unlawful appropriation and storage of the Māori ancestor's remains in a museum should never have happened," Lower Saxony's Culture Minister Falko Mohrs said.

By returning the remains, the German state was acknowledging its ethical responsibility, he said. He also described the repatriation as part of efforts to confront historical systems of colonial injustice.

Diwali: Over one billion people mark victory of light over darkness



Issued on: 08/11/2026 - FRANCE24


Diwali celebrations began on Sunday, with people across India and the global diaspora gathering to mark one of the most important festivals in the Hindu tradition. In Ayodhya, believed to be the birthplace of Lord Rama, the deity celebrated during the festival, festivities included performances based on the Hindu epic Ramayana, laser and light shows, live music, fireworks and drone displays.



Video by:  Camille Corcoran


Paraguayan protesters are back on the streets despite the removal of President


Issued on: 10/11/2026 - FRANCE24

A banking crisis that saw the president of Paraguay impeached Friday, November 6, continues to rock the country with protesters back on the streets. The Ueno Bank started as a digital first bank, attracting many low income customers, quickly growing to become a major bank in charge of state pensions and holding the accounts of several government institutions before having its accounts frozen by the central bank due to solvency concerns.



LONG READ

Paraguay’s Banking Crisis And The Politics Of Impunity – Analysis

November 11, 2026


By Steven E. Hendrix


Key Takeaways:

Paraguay’s President Santiago Peña was impeached on November 6 after the collapse of Ueno Bank, which held $800–850 million in public funds and left millions unable to access deposits; he faces criminal charges.

The crisis echoes 1990s banking failures involving weak supervision, insider lending and public pension losses, raising questions about political influence over regulators and the Colorado Party’s enduring control of state institutions.

Accountability requires an independent probe into deposits, related-party lending and regulatory delays, not merely a change of president, if Paraguay is to restore confidence and prevent recurrence.


The collapse of Ueno Bank has brought down a president. Paraguay’s history suggests that removing one political leader will not be enough to address the institutions that allowed the crisis to develop.

Paraguay has removed its president, placed senior financial officials under arrest, and watched millions of people struggle to recover their savings from a failed bank. Santiago Peña, elected in 2023 with the backing of former President Horacio Cartes, was impeached on November 6 after losing the support of his own Colorado Party. His vice president, Pedro Alliana, assumed office, while Peña was subsequently charged with offenses arising from the collapse of Ueno Bank and ordered detained at a military facility. The events unfolded with extraordinary speed, even for a region accustomed to political upheaval.

The immediate scandal concerns a financial institution that expanded rapidly, attracted hundreds of millions of dollars in public deposits, and developed close relationships with senior government officials. The larger story concerns the political system that allowed those relationships to develop, the regulators responsible for supervising them, and the governing party that ultimately abandoned the president it had helped elect. Paraguay has experienced banking failures, political corruption scandals, and contested presidential impeachments before. The present crisis brings elements of all three together.

A banking success story unravels

Ueno Bank represented a genuine advance in Paraguayan financial services. Its digital platforms, convenient payment systems, and aggressive expansion attracted customers who had often been underserved by traditional banks. The institution became a familiar presence in everyday commercial life, sponsoring sporting events and making its brand visible throughout the country. By November 2026, Ueno reported approximately three million customers, representing roughly 60 percent of Paraguay’s adult population.

Its growth also brought it into a close relationship with the public sector. According to the Associated Press, Ueno held between $800 million and $850 million in public funds, including substantial deposits from Paraguay’s state pension and health fund. These were public resources entrusted to a rapidly expanding private institution. Their concentration raised questions about how deposit decisions were made, whether financial risks were adequately evaluated, and what influence political relationships may have exercised over those decisions.


The Central Bank had identified problems before the institution collapsed. Supervisors had warned Ueno about excessive lending to companies associated with its owners. By early November, adjustments to the bank’s financial statements revealed that its solvency ratio had fallen below half the legally required minimum. Regulators placed Ueno into resolution proceedings, seeking to protect depositors and transfer viable assets and liabilities to other institutions. The intervention left millions of customers temporarily unable to withdraw or transfer their money.

The consequences reached well beyond Ueno’s shareholders and executives. Ordinary depositors could not access savings needed for household expenses and commercial transactions. Pensioners worried about the security of public retirement funds. Businesses faced disruptions to payments and payroll. The government began arrangements for deposit reimbursements, but the immediate damage to public confidence was substantial. For many Paraguayans, the crisis revived a question that had troubled the country during earlier banking failures: why had regulators allowed a financial institution entrusted with so much public money to reach this condition?

Peña’s financial connections made the crisis politically explosive. He had held shares in Grupo Vázquez, the business group associated with Ueno, until March 2025, after becoming president. His appointment of Carlos Carvallo, who had previously headed Ueno’s predecessor, to lead the Central Bank raised additional questions about the independence of financial supervision. The Central Bank maintained that Carvallo recused himself from decisions involving Ueno, but the overlapping relationships became increasingly difficult to defend as the institution’s financial problems emerged.


Peña’s political position deteriorated rapidly as the banking emergency unfolded. On November 5, he offered his resignation, describing his decision as an effort to preserve national stability and democratic institutions. Congress nevertheless continued impeachment proceedings. Peña’s departure through resignation rather than removal carried potentially important implications for his future political status and the protections available to former presidents. As the Associated Press explained, lawmakers were concerned that accepting his resignation could preserve his eligibility for a lifetime Senate seat and associated legal protections.

The Senate completed the impeachment on November 6. All 44 senators present voted to remove Peña, whose support within the Colorado Party had collapsed. Vice President Pedro Alliana was sworn in to complete the presidential term through August 2028. The unanimity of the vote among those present reflected the extent of Peña’s political isolation, but it did not settle the separate questions of criminal responsibility or the fairness of the proceedings.


Peña was initially placed under house arrest. On November 7, prosecutors filed criminal charges arising from the Ueno investigation, and a judge ordered him detained at a military facility pending further proceedings. Reuters reported on November 8 that Peña had been charged with breach of trust and using his office for personal gain. Former Central Bank chief Carvallo was also charged. Peña denies wrongdoing and has pleaded not guilty. The allegations remain subject to judicial determination.

The speed of the proceedings has raised legitimate procedural questions. Peña requested additional time to prepare his defense during the impeachment, but the Senate proceeded without granting the requested extension. Those concerns deserve examination regardless of the seriousness of the allegations against him. Paraguay’s institutions must be capable of investigating corruption and removing officials when constitutionally justified, while respecting the procedural protections that give such decisions legitimacy.


Paraguay has been here before

During the banking crises of 1995 through 1998, Paraguay experienced repeated failures involving weak supervision, insider lending, inadequate capitalization, and political resistance to closing insolvent institutions. The International Monetary Fund’s examination of Paraguay’s financial sector documented the extensive damage caused by the collapse of locally owned banks and the government’s costly efforts to contain the crisis.

The problems were not confined to a handful of troubled institutions. According to the IMF’s historical analysis, fifteen of Paraguay’s nineteen locally owned banks were closed or absorbed by stronger institutions between 1995 and 1999. The failures followed years of undercapitalization, inadequate supervision, and lending to companies associated with bank owners. Public intervention prevented an even broader collapse but transferred substantial financial losses to the state.


The treatment of social security funds was especially disturbing. Rather than allowing troubled banks to fail promptly, authorities encouraged the Instituto de Previsión Social, Paraguay’s public social security institution, to increase its deposits in financially weak banks. In January 1997, IPS was persuaded to convert 26 billion guaraníes in deposits at Banco de Desarrollo into equity in an effort to prevent the institution’s failure. The strategy did not resolve the underlying problems.

The IMF estimated that IPS lost more than 620 billion guaraníes, equivalent at the time to approximately $265 million, in banks liquidated during 1997 and 1998. The government subsequently agreed to absorb 525 billion guaraníes through a long-term bond. Public retirement resources had been exposed to institutions whose financial condition should have prompted more decisive regulatory action. Political reluctance to close troubled banks allowed losses to accumulate, while the eventual costs were transferred to the public sector.

The resemblance to the present Ueno scandal warrants careful examination. In both periods, substantial public resources were exposed to private financial institutions, questions arose about the adequacy of banking supervision, and political relationships complicated the effort to establish responsibility. Paraguay’s financial system has changed considerably since the 1990s, however, and the failure of one institution does not establish that the entire system is unsound. The current investigation must determine whether the problems arose from inadequate regulation, improper political influence, failures of management, or some combination of these factors.

The earlier banking crisis also produced a prolonged struggle over accountability. Former President Juan Carlos Wasmosy, who governed from 1993 to 1998, faced criminal proceedings concerning government assistance to Banco de Desarrollo, one of the troubled institutions of the period. He was initially convicted, but that conviction was overturned on appeal. On June 21, 2007, Paraguay’s Supreme Court confirmed his acquittal. The proceedings continued for years after the immediate financial emergency had passed. They also demonstrate why allegations, initial judgments, and final judicial outcomes must be treated separately.

Paraguay adopted important reforms after the earlier banking crises, including measures to strengthen banking supervision and financial regulation. Those changes should not be dismissed. The country’s financial system has demonstrated greater stability in subsequent decades, and its monetary authorities have often been credited with maintaining a degree of macroeconomic discipline that distinguishes Paraguay from several of its neighbors. Nevertheless, the Ueno scandal raises the possibility that improvements in regulation were not accompanied by sufficient protection against political interference.


The World Bank’s earlier warning

The international financial institutions were already confronting Paraguay’s governance problems during the banking crisis of the 1990s. The timing was significant because the World Bank itself was undergoing a major change in how it approached corruption.

When James D. Wolfensohn became president of the World Bank in 1995, corruption remained a subject that many officials approached cautiously. The institution’s charter prohibited political interference in member countries, and corruption had long been treated as the “C word,” a subject considered politically sensitive and therefore difficult to address directly. Wolfensohn challenged that reluctance. In October 1996, he publicly described corruption as a cancer undermining development, arguing that international assistance could not achieve its objectives without greater transparency and accountability. The World Bank adopted a formal anticorruption strategy the following year, expanding its willingness to examine the governance conditions affecting the effectiveness of its lending.

Paraguay soon experienced a serious deterioration in its relationship with the Bank. In December 1998, the institution informed the government that it would stop preparing new loans until implementation of existing projects improved and outstanding obligations involving the Yacyretá hydroelectric project were addressed. The Bank’s September 2001 Country Assistance Evaluation found that Paraguay had one of its ten worst-performing project portfolios in August 1999. No new World Bank loans had been approved since 1997, despite a country assistance strategy that had contemplated continued lending.

The difficulties extended across several sectors. A $29 million Land Use Rationalization Project, approved in 1992 to help modernize Paraguay’s rural property cadastre, had suffered extensive implementation delays and achieved only a fraction of its original objectives. The project initially contemplated cadastral work covering more than 24 million hectares. Its scope was eventually reduced to a pilot covering approximately 2.3 million hectares, which remained incomplete despite extensions. The Bank’s evaluation identified procurement problems, inadequate management, weak technical supervision, and poor-quality deliverables. Other projects experienced similar difficulties, reflecting broader weaknesses in public administration and the capacity to implement development programs.

Land administration was particularly important in Paraguay, where the concentration of rural property, uncertain land titles, and longstanding disputes over ownership complicated economic development and social equity. A functioning cadastre was essential for protecting property rights, improving taxation, reducing disputes, and establishing a reliable basis for agricultural investment. Failure to complete the project therefore had consequences extending beyond the Bank’s financial portfolio. It represented a missed opportunity to strengthen an institution central to Paraguay’s economic and political development.

The Bank’s decision to curtail new lending was not formally described as the first application of Wolfensohn’s anticorruption policy, nor do the available records establish that Paraguay was the first country to have a loan cancelled under that initiative. The documented episode is nevertheless significant. At the same time that Paraguay was struggling with banking failures and the political management of public financial resources, one of its principal development partners was concluding that serious governance and implementation problems had undermined the effectiveness of its assistance.


The Bank’s 2001 evaluation was particularly critical of the country’s limited commitment to reform. It found that projects approved during the 1990s had encountered serious difficulties, many attributable to governance conditions, and that political and institutional obstacles had prevented reforms needed to sustain economic development. The problems were not confined to the financial sector. They extended into land administration, infrastructure, public-sector management, and programs intended to improve the lives of ordinary Paraguayans.

The IMF’s 2001 assessment also documented the lingering consequences of the banking crisis and weaknesses in financial supervision. The World Bank, meanwhile, maintained a policy dialogue with Paraguay despite the deterioration in its lending portfolio. Its approach included technical assistance and efforts to support public-sector reform. The Bank had not abandoned Paraguay. It was attempting to maintain an institutional relationship while insisting that the country address weaknesses that undermined the effectiveness of development assistance.

International institutions can provide financing, technical assistance, and advice, but they cannot substitute for domestic political commitment to effective administration and independent oversight. The difficulties confronting Paraguay in the 1990s were not simply a shortage of resources or technical expertise. They also involved the political arrangements through which public institutions made decisions and allocated economic opportunities. Those arrangements deserve renewed scrutiny as Paraguay examines how substantial public deposits came to be concentrated in Ueno Bank.
The Colorado Party and the distribution of power

The Colorado Party’s relationship with the Paraguayan state provides essential context for understanding these recurring problems. Under Alfredo Stroessner, who ruled from 1954 until 1989, the party became deeply integrated into the government, military, civil service, and judiciary. Political loyalty influenced public employment, government contracts, and access to economic opportunity. The dictatorship ended, but the networks connecting party organization to state resources proved more durable.

A study of Paraguay’s political institutions by José Molinas, Aníbal Pérez-Liñán, Sebastián Saiegh, and Marcela Montero, published through the Inter-American Development Bank, examined how these relationships shaped policymaking across the dictatorship and the subsequent democratic transition. The authors found that competitive elections changed the mechanisms through which political authority was exercised but did not immediately dismantle the patronage networks developed over decades. Their analysis describes a political system comparatively effective at distributing benefits to particular constituencies while struggling to adopt broader regulatory and redistributive reforms.


The Colorado Party has governed Paraguay for most of the period since 1947, interrupted most notably by Fernando Lugo’s election in 2008. Its electoral success reflects genuine popular support as well as organizational strength and longstanding access to state resources. Internal competition can be intense, sometimes more consequential than competition with opposition parties. Factions disagree over leadership, appointments, economic opportunities, and political strategy, even while sharing an interest in preserving the party’s position.

The party’s longevity has also shaped the institutions responsible for holding government officials accountable. Political appointments, access to public employment, and the distribution of government benefits have remained important instruments of party organization. These practices are not exclusive to the Colorado Party, nor does party membership establish involvement in corruption. But the party’s extraordinary endurance has given it particular influence over institutions responsible for distributing public resources and enforcing the rules governing their use.

Financial regulation does not operate in isolation from these political institutions. Decisions about public deposits, regulatory appointments, supervisory priorities, and the enforcement of banking rules are made within a broader political environment. Even technically sound regulations can be undermined if the officials responsible for enforcing them lack independence or face pressure from powerful political and economic interests.

Paraguay must now examine whether its institutions have developed sufficient independence to resist such pressures. The failure of one bank cannot answer that question by itself. Investigators need to examine the specific decisions that allowed Ueno to expand, attract public resources, and continue operating despite emerging concerns about its financial condition. Their work must include the conduct of officials who remain politically influential, not merely those who have already lost office.
Horacio Cartes and the American sanctions reversal

Horacio Cartes’s rise demonstrates how political and economic influence can reinforce one another within this system. A successful businessman before becoming president in 2013, Cartes subsequently consolidated substantial influence over the Colorado Party. His support was instrumental in Peña’s election, and his position as party leader gave him considerable influence over legislators and the political fortunes of the administration.

Cartes also has a significant history with American anticorruption sanctions. In January 2023, the U.S. Treasury Department sanctioned him under the Global Magnitsky framework, alleging extensive corruption before, during, and after his presidency. Treasury accused Cartes of making payments to legislators to secure their loyalty and influence political decisions, describing monthly payments ranging from $5,000 to $50,000. The allegations portrayed political support as something that could be maintained through financial incentives and withdrawn when legislators failed to comply.


Treasury’s allegations went beyond isolated payments. The department described efforts to influence decisions within the Colorado Party, obstruct investigations, and protect business interests through political relationships. The sanctions represented an unusually direct American intervention against a former president who continued to exercise considerable influence in Paraguay’s governing party.

Cartes denied wrongdoing. On October 6, 2025, the Trump administration lifted the financial sanctions, removing Cartes and associated companies from the Treasury sanctions list. The decision was politically significant, particularly given the detailed allegations accompanying the original designation. American officials explained the reversal in terms of foreign policy interests and the continued utility of the sanctions, rather than announcing that the earlier corruption allegations had been disproved.

The State Department explained that the restrictions were no longer required to encourage changes in behavior and therefore no longer served American foreign policy and national security interests. That explanation left unanswered whether the underlying concerns about corruption had changed. Paraguay’s continued recognition of Taiwan and its cooperation with Washington on international issues provided the Trump administration with reasons to value the bilateral relationship. Whether those considerations determined the sanctions decision has not been established.

The reversal also prompted criticism in Washington. Democratic senators Jeanne Shaheen, Elizabeth Warren, and Tim Kaine publicly questioned the decision, arguing that the administration was undermining the credibility of the Global Magnitsky sanctions system by allowing political considerations to influence anticorruption enforcement. The criticism deserves consideration, but it does not establish that an improper bargain occurred.

Sanctions are instruments of foreign policy, not criminal verdicts. Their imposition does not establish guilt beyond a reasonable doubt, and their removal does not establish innocence. Administrations have authority to reassess whether particular sanctions continue to advance American interests. That discretion also creates the possibility that foreign policy considerations will influence decisions originally justified on anticorruption grounds.

Cartes regarded the reversal as a vindication. Others saw a political decision that said little about the substance of the original allegations. The available evidence does not establish that an improper transaction occurred between Washington and Cartes. Nor does the reversal erase the history that led to his designation.

That history makes Cartes’s role in Peña’s downfall particularly revealing. As the banking scandal intensified, Cartes withdrew his support from the president he had helped elect. Colorado Party legislators joined the impeachment effort, and Peña’s political position collapsed. Cartes may have concluded that protecting Peña would inflict lasting damage on the party. He may also have recognized an opportunity to preserve his own influence while distancing himself from the scandal. The evidence does not establish that Cartes engineered the bank’s collapse or organized the demonstrations that followed, but his influence over the president’s political survival demonstrates the importance of party leadership in determining how Paraguay’s institutions respond to a crisis.


The Colorado Party’s ability to remove a president while retaining control of the executive branch is a significant feature of the present crisis. Alliana’s succession preserves the governing party’s position through the remainder of the presidential term, scheduled to end in August 2028. The party has changed its leadership in government without necessarily changing the political relationships that shaped the previous administration.
A familiar constitutional dilemma

I have seen Paraguay confront a contested presidential removal before. I was serving simultaneously as acting USAID Mission Director and acting Deputy Chief of Mission at the U.S. Embassy in Asunción when Congress impeached President Fernando Lugo in June 2012. The international community was struggling with a question that was anything but academic: had Paraguay experienced a legitimate constitutional transfer of power or a parliamentary coup? Governments across the region were debating how to respond, and we had to be careful that our actions at the Embassy did not prejudge decisions properly belonging to Washington.

The timing created an unusual diplomatic dilemma. Our annual Fourth of July reception was approaching, and we had to decide whom to invite. Extending an invitation to one side while excluding the other could easily have been interpreted as an American decision about the legitimacy of the new government. That was not a decision we intended to make through a guest list. We invited everyone. After all, the occasion was America’s Independence Day, not an opportunity for the U.S. Embassy to determine who should govern Paraguay.

The uncertainty was not confined to our Embassy. The Organization of American States was still examining the political and legal consequences of Lugo’s removal in early July. Its secretary general, José Miguel Insulza, subsequently acknowledged that the speed of the proceedings had created serious questions about the legitimacy of the process. Neighboring governments reacted more sharply, and Paraguay was suspended from Mercosur. The circumstances of Peña’s removal are different, particularly the financial scandal and criminal allegations involved, but the earlier experience shows how constitutional procedures can produce outcomes whose legitimacy remains contested.

Lugo’s impeachment was completed in less than two days following a deadly confrontation over a land dispute at Curuguaty. The proceedings were formally grounded in Paraguay’s constitution, which gives Congress authority to remove a president for poor performance of official duties and certain other grounds. But the extraordinary speed of the process and the limited opportunity for Lugo to prepare a defense prompted criticism from governments across Latin America. The dispute concerned not only whether Congress possessed the constitutional authority to act, but whether its exercise of that authority satisfied broader expectations of democratic legitimacy.


The present controversy raises related questions. Peña’s lawyers have complained that he was not given adequate time to prepare his defense. His removal followed the rapid collapse of political support within the governing party, and the impeachment proceeded amid intense public anger over the banking emergency. Those circumstances do not establish that the process was illegitimate. They do, however, warrant examination of whether the procedures used were sufficiently fair and independent of the political interests involved.

Washington’s response this time has been notably more direct. On November 8, Secretary of State Marco Rubio telephoned President Alliana to congratulate him on assuming office. In a readout issued the following day, the State Department reaffirmed America’s commitment to a strong and enduring partnership with the Paraguayan people. Alliana subsequently described discussions about security, technology, trade, investment, and development, and said Rubio had invited him to a future meeting.

The contrast with 2012 is striking to someone who experienced that earlier uncertainty firsthand. Fourteen years ago, even the guest list for an Independence Day reception required diplomatic care. This time, the American secretary of state has publicly congratulated the successor president within days of the impeachment. The call signals Washington’s willingness to work with the new government. It does not establish that the United States has endorsed the impeachment procedures or reached conclusions about Peña’s criminal responsibility. Those are separate matters, and the brief official readout did not address them.

Presidents should not be protected from accountability. But the institutions responsible for enforcing accountability must act independently, provide fair procedures, and resist pressure from the political factions that control them. Paraguay’s history offers reasons to examine those obligations carefully.
Esperanza Martínez and the lessons of 2012

Esperanza Martínez remembers the Lugo impeachment from a different vantage point. She was Lugo’s minister of health, and I worked closely with her during that period, when USAID supported Paraguay’s public health sector. Fourteen years later, she is again confronting a presidential impeachment, this time as a senator. Her participation in the present controversy provides a connection to the political upheaval of 2012, although the circumstances surrounding the two impeachments are substantially different.

Martínez was raising concerns about Ueno before the bank collapsed. In October 2026, she publicly questioned the placement of IPS pension funds at Ueno, criticized the role of central bank officials in facilitating the institution’s rapid expansion, and urged Colorado Party legislators to protect retirement savings. Her accusations were political allegations, not established findings of misconduct, but they were made before the November intervention. The chronology raises questions about what regulators and legislators knew, how they responded, and whether earlier scrutiny might have reduced the damage.


Following Peña’s removal, Martínez published a Facebook statement recalling that fourteen years earlier, after Lugo’s impeachment, she had stood in the same public square sharing a painful sense of powerlessness with other Paraguayans. The mood this time, she wrote, was one of celebration and renewed determination to build a better country. Yet she also warned that the political struggle was far from over, describing a mafia-like network that quickly reorganizes itself within the structures of power.

Her language reflects her political position and should be understood as such. But the concern she raises extends beyond the opposition. Paraguay has changed presidents while leaving the Colorado Party in control of the executive branch. Alliana, a longtime party leader and ally of Cartes, represents continuity within the governing establishment. Whether the new administration will pursue a genuinely independent investigation of the financial and political relationships surrounding Ueno remains to be seen.

Martínez’s experience also illustrates the changing political circumstances surrounding Paraguay’s impeachment processes. In 2012, she was a member of an administration removed by a Congress dominated by political opponents. In 2026, she has participated in the political response to the removal of a Colorado Party president whose own allies withdrew their support. The two episodes differ in their causes, political alignments, and legal allegations, but both demonstrate how congressional authority can become decisive when a president loses the political support necessary to remain in office.
The demonstrations and the struggle over the narrative

The collapse of Ueno produced genuine public anger. Depositors, pensioners, workers, and students took to the streets demanding access to their money and accountability from the government. Some protesters called for the removal of both Peña and Alliana, reflecting dissatisfaction with the political establishment more broadly. The disruption of ordinary financial transactions gave the demonstrations a direct connection to the daily lives of thousands of Paraguayans.

The political interests involved need not have been identical. Depositors wanted their savings restored. Workers feared losing their jobs. Opposition politicians saw evidence of government misconduct, while factions within the Colorado Party faced decisions about their own political futures. These interests could converge in demanding Peña’s removal without sharing a common explanation for the crisis or a common vision of what should follow.

The protests have continued after the change of government. On November 9, public schoolteachers went on strike, demanding protection and repayment of approximately $60 million in pension funds deposited at Ueno. Their action underscores the distance between a political transition and the resolution of the underlying financial emergency. The resignation or removal of senior officials does not restore pension assets, settle outstanding obligations, or answer questions about why those resources were exposed to a troubled institution.


The press has played an important role in exposing Ueno’s financial problems and the relationships among its owners, government officials, and regulators. Individual reports deserve scrutiny for accuracy, sourcing, and fairness. But allegations that journalists collectively manufactured the crisis or coordinated a campaign to remove Peña require evidence that has not been established. The bank’s financial condition, regulatory intervention, and criminal investigation cannot be dismissed merely because their reporting also served the interests of particular political actors.

Journalists must distinguish the financial facts from the political struggle surrounding them. Evidence of improper lending or regulatory failures should be reported regardless of whether it benefits the opposition or a faction of the governing party. Allegations about the motives of politicians, journalists, and demonstrators deserve the same scrutiny. Paraguay’s citizens need accurate information about the management of their savings and public resources, not another contest in which competing political interests determine which facts receive attention.
The regional experience

Paraguay is not the first Latin American country to discover that a banking scandal can become a crisis of political legitimacy. Ecuador’s financial collapse in the late 1990s exposed serious weaknesses in banking supervision and contributed to the political upheaval that removed President Jamil Mahuad in January 2000. The circumstances were more severe than Paraguay’s present difficulties, involving a systemic banking crisis, currency collapse, and military intervention. The IMF’s September 2000 assessment of Ecuador attributed the crisis partly to failures to address emerging weaknesses in the banking system, alongside external shocks and broader economic policy problems.

Ecuador’s experience demonstrated how quickly public confidence in a government can deteriorate when citizens lose access to savings and believe powerful financial interests have received preferential treatment. The country’s banking emergency was followed by a dramatic deterioration in economic conditions, the adoption of the U.S. dollar, and a political transition that took place amid widespread public anger. The relationship between financial collapse and political instability was not simply a matter of economic indicators. It reflected a broader loss of confidence in the institutions responsible for protecting citizens and managing public resources.

The Dominican Republic experienced another instructive crisis in 2003, when the collapse of Banco Intercontinental, or Baninter, revealed extensive accounting irregularities and concealed liabilities. The resulting government intervention imposed enormous costs on public finances and contributed to currency depreciation and inflation. The IMF’s October 2003 assessment documented accounting malpractice, fraud, and unregistered liabilities amounting to several times the bank’s recorded deposits. The Central Bank intervened in April 2003 and provided substantial liquidity assistance to contain the damage.


The consequences extended beyond Baninter itself. Problems emerged at other financial institutions, while the costs of intervention contributed to rising public debt and pressure on the currency. The IMF called for stronger bank supervision, improved governance, and more effective mechanisms for resolving troubled financial institutions. The episode demonstrated how failures of oversight at a politically influential bank could impose costs far beyond its shareholders and depositors.

Argentina’s financial collapse in 2001 provides a further example of how restrictions on access to bank deposits can transform an economic emergency into a political crisis. The government’s corralito, which restricted withdrawals and transfers, became a powerful symbol of the failure of public institutions to protect ordinary citizens. Mass demonstrations followed, and President Fernando de la Rúa resigned in December 2001. The IMF’s Independent Evaluation Office examined the deposit runs, withdrawal restrictions, and collapse of confidence that preceded the political upheaval.

Argentina’s crisis was much broader than Paraguay’s present banking emergency. It involved the collapse of a currency arrangement, a sovereign debt default, and a prolonged economic contraction. But the experience shows why access to savings can become an immediate question of political legitimacy. When citizens cannot withdraw money needed for ordinary transactions, confidence in financial institutions and confidence in political leadership can deteriorate together.

These comparisons have limits. Paraguay has not experienced Ecuador’s systemic economic collapse or Argentina’s sovereign debt and currency crisis, and allegations concerning Ueno remain subject to investigation. The Dominican Republic’s Baninter failure offers a closer institutional comparison because of the allegations of accounting irregularities and the consequences of inadequate banking supervision. In each case, however, the eventual political and economic costs were shaped by the credibility of the institutions responsible for managing the emergency.

Paraguay’s own banking history provides the more immediate warning. The country has already experienced the consequences of using public resources to sustain weak financial institutions, allowing regulatory problems to accumulate, and delaying intervention when politically influential interests are involved. Those failures were documented extensively, and reforms followed. The current investigation must establish whether the safeguards developed over subsequent decades were insufficient, poorly enforced, or compromised by political relationships.
What accountability would require

Pedro Alliana inherits a government facing an immediate financial emergency and a serious credibility problem. As a longtime Colorado Party leader and political ally of Cartes, he represents continuity within the governing establishment. His administration cannot plausibly claim to have resolved the underlying institutional questions simply because Peña has been removed.


The recovery of depositors’ money must remain the first priority. By November 8, the Central Bank reported that approximately $160 million had been paid to nearly 1.2 million customers through the deposit guarantee system. That progress matters, particularly for families and small businesses unable to withstand prolonged disruption. But restoring access to deposits will not establish why the bank failed or whether public institutions acted properly in placing substantial resources there.

Alliana has begun changing the leadership of the institutions responsible for financial oversight. On November 9, he nominated economist Jorge Schreiner to head the Central Bank, and Congress approved the appointment. Schreiner previously served on the Bank’s board and headed the securities commission. The government also appointed Fernando Rivarola, a former banking regulator, to the Central Bank’s board. According to Reuters, Rivarola had warned about Ueno’s condition in a July report that became public in October.

These appointments may help restore confidence, but their significance will depend on what follows. The reported July warning raises an obvious question: if serious concerns about Ueno’s condition were already documented, why did the institution continue operating until November? The answer requires examination of the powers available to supervisors, the information presented to the Central Bank’s leadership, and the decisions made after those warnings. Replacing officials will have limited value unless the reasons for earlier regulatory failures are established.

A credible investigation should examine the bank’s lending practices, its relationships with related companies, the decisions governing public-sector deposits, and the conduct of financial regulators. It should establish when concerns about Ueno’s condition first emerged, how those concerns were communicated, and why corrective action was not taken sooner. Public institutions, including IPS, should explain the criteria used to select financial institutions for their deposits and the safeguards intended to protect public resources.

The investigation must also extend beyond individuals who have already lost political power. If evidence implicates officials who remain influential, prosecutors and regulators should be able to pursue it without interference. Conversely, allegations against Peña and other defendants must be tested through fair legal procedures. Accountability loses much of its meaning when criminal investigations become instruments of political rivalry.

The earlier banking crises offer a practical agenda for reform. Paraguay should examine whether the rules governing public deposits provide adequate protection against concentration risk, whether financial regulators have sufficient independence from political appointments, and whether existing mechanisms for identifying related-party lending are being enforced. The country should also consider how information about the placement of public pension funds can be made more transparent without compromising legitimate financial confidentiality.


These questions extend beyond Ueno. A financial institution can satisfy formal reporting requirements while still presenting risks that require closer supervision. Public agencies may comply with procurement or deposit rules while making decisions that expose taxpayers and pensioners to unnecessary losses. Regulators may possess the legal authority to intervene but hesitate when an institution has powerful political connections. Determining whether any of these failures occurred at Ueno requires a detailed examination of the documentary record.

The investigation should also establish the responsibilities of the various public institutions involved. The presidency, the Central Bank, the banking superintendency, public pension authorities, and state-owned enterprises do not exercise identical powers. Their decisions must be examined separately, with attention to the legal duties of each official and the evidence of any improper intervention. Political responsibility may extend beyond conduct that satisfies the elements of a criminal offense, but that broader responsibility should not be used to bypass the protections afforded to defendants.

Paraguay’s experience with the World Bank in the 1990s also suggests that international partners can contribute to institutional reform without substituting for domestic accountability. Technical assistance can strengthen financial supervision, improve public financial management, and support transparent systems for administering public resources. Yet those improvements will have limited effect unless Paraguayan institutions are willing and able to apply the rules consistently, including when politically influential individuals or organizations are involved.
Paraguay’s capacity for reform

Paraguay has considerable strengths. Its entrepreneurs have demonstrated remarkable ingenuity, its civil society organizations have produced innovations recognized internationally, and successive governments have maintained a degree of macroeconomic stability that distinguishes the country from several of its neighbors. I have seen those strengths firsthand through my work in Paraguay, including with organizations pursuing practical solutions to poverty, health care, and economic opportunity. The country’s achievements deserve recognition, and the present crisis should not obscure them.

Organizations such as Fundación Paraguaya and CEPEP have demonstrated that Paraguayan institutions can produce meaningful results, often with limited resources and in difficult political circumstances. Their experiences illustrate the country’s capacity for innovation and sustained institutional development. Paraguay’s private sector has shown similar ingenuity, while its economic management has often avoided some of the more severe instability experienced elsewhere in the region.


These achievements make the present crisis particularly damaging. Paraguay has spent years building confidence among international investors and development partners. Its fiscal discipline, relatively stable currency, and expanding financial sector have helped attract capital and strengthen its economic reputation. But a country can maintain sound macroeconomic indicators while allowing political relationships to distort decisions about public resources. Financial supervision depends on regulators who can act without interference, public institutions that can explain where they place their money, and a judiciary capable of examining misconduct without regard to political affiliation.

Economic modernization requires more than new technology, expanding financial services, or favorable investment indicators. It also depends on institutions capable of applying rules consistently, protecting public resources, and resisting improper political influence. Ueno’s expansion showed what financial innovation could accomplish. Its collapse has raised questions about the institutions responsible for ensuring that innovation remained financially sound.

The Colorado Party has survived dictatorships, democratic transitions, banking crises, corruption scandals, and contested changes of government. Its ability to adapt has been an important part of Paraguay’s political history. Whether the present crisis produces institutional reform or simply another rearrangement of power within the governing establishment remains uncertain.

Peña’s removal may prove to be an important act of political accountability. The criminal proceedings may establish responsibility for serious financial misconduct. But neither outcome, standing alone, will explain why Paraguay once again found itself confronting questions about public pension funds, politically connected banks, and the independence of financial regulators.


Nearly thirty years after its earlier banking crises, Paraguay has another opportunity to examine the relationship between political power and public money. Its citizens have already paid a substantial price for failures of financial supervision. They deserve an investigation that follows the evidence wherever it leads, including into the political arrangements that may have allowed those failures to develop. The real measure of Paraguay’s response will be whether the institutions responsible for protecting public resources emerge more independent, transparent, and capable of enforcing the law, including against those who remain in power.


About Steven E. Hendrix
Steven E. Hendrix is a former senior U.S. foreign assistance official who served in leadership roles with the U.S. Agency for International Development and the U.S. Department of State. He worked extensively in Latin America, Africa, and Asia, including collaboration with European development partners.
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