TO THE EDITOR:
In June I wrote in these pages highlighting Paraguay: sustained growth, moderate public debt, low inflation, and a simple tax system. A few months later, its President, Santiago Peña, submits his resignation, motivated by the Ueno Bank crisis.
The bank that was the fastest-growing in the country ended up collapsing for granting loans to companies from its own economic group. President Peña maintained business dealings with them until 2025, and the president of the Paraguayan Central Bank headed Ueno's predecessor institution.
When the ruler and the supervisor come directly from the supervised, we have an incentives problem. When loans are concentrated in the bank's own owners, we do too. The 1982 crisis taught Chile some lessons in this same regard, and our banking institutions have become steadily more solid.
Fiscal discipline and low taxes are necessary conditions for growth (and I maintain that we should take note of that over here). But it is not enough. What remains to be seen in Paraguay now has more to do with its institutions and its ability to rebuild trust.
Óscar Monett Recabal
Research Professor, Faro UDD
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Santiago Peña, president of Paraguay
Xavi Hurtado / Europa Press
07/10/2025 Xavi Hurtado / Europa Press CommentsDEAR EDITOR:In June I wrote in these pages highlighting Paraguay: sustained growth, moderate public debt, low inflation, and a simple tax system. A few months later, its President, Santiago Peña, has submitted his resignation from office, prompted by the Ueno Bank crisis. The bank that was once the fastest-growing in the country ended up collapsing for granting loans to companies of its own economic group. President Peña maintained business dealings with them until 2025, and the president of the Paraguayan Central Bank headed the predecessor institution of Ueno. When the ruler and the supervisor come directly from the supervised, we have an incentives problem. When loans are concentrated in the very owners of the bank, we have one as well. The 1982 crisis gave Chile some lessons in this very regard, and our banking institutional framework has become steadily more solid. Fiscal discipline and low taxes are necessary conditions for growth (and I maintain that we should take note of that over here). But it is not enough. What remains to be seen in Paraguay now has more to do with its institutions and their capacity to rebuild trust.Óscar Monett RecabalResearch Professor, Faro UDDMore about:InstitutionsTrustEconomy