Paraguay’s 1990s Bank Crash Cost Up to 13% of GDP
On Saturday 7 November 2026, Paraguay’s bank failures of 1995 to 1999 are the test for Ueno Bank, the app-based lender taken over on 2 or 3 November by the Banco Central del Paraguay (BCP), the central bank. The International Monetary Fund (IMF), the global lender to governments in crisis, recorded a long bill for those failures: central bank assistance, a weaker currency and a costly clean-up.
Ueno differs in kind, because it is one digital bank with about 2.9 million clients and a deposit guarantee fund that did not exist in the 1990s. Our explainer, The Ueno Bank case explained, sets out today’s facts, and this analysis looks back.
- Past cost The 1995 to 1998 banking crisis cost at most 13% of 1998 gross domestic product (GDP).
- Failures Thirteen domestic banks, about a third of the system, failed between 1995 and early 1999.
- Ueno today Ueno Bank has about 2.9 million reported clients, roughly 45% of Paraguay’s estimated population.
- First payment Depositors can claim a first payment of up to 10 million guaraníes (Gs 10 million, about US$1,673) from the guarantee fund.
- Currency The dollar rose 5.4% against the guaraní, the national currency, in a week, to Gs 5,976 per US$1 on 6 November.
- Power Index Paraguay ranks 10th of 14 in The Rio Times Latin America Power Index, with 35.0 points (November 2026 edition).
Paraguay’s earlier bank failures cost up to 13% of a year’s output, so Ueno Bank starts from a hard record.
In Plain English
- Resolution procedure: the legal process a central bank opens when a bank’s solvency, its ability to absorb losses, falls too low.
- Deposit guarantee fund: a pool of money, paid in by banks and the state, that repays savers up to a set limit.
- Corralito: the public name for Argentina’s 2001 weekly cap on cash withdrawals.
- IMF: the International Monetary Fund, whose notices and working papers record each crisis.
Part of the dossier: Paraguay Ueno Bank crisis hub, Paraguay’s history explained, the Banco Central del Paraguay’s oversight of Ueno Bank, depositors’ guide to Ueno Bank and Paraguay’s bond risk after the Ueno Bank failure.
Paraguay’s Crash of 1995 to 1998
In June 1997 the central bank intervened in three financial institutions, including the largest domestic private bank. That bank held 8% of the system’s deposits, says the IMF’s Article IV notice, its regular country review, of 22 October 1997.
Central bank assistance equalled 1.2% of GDP in June 1997, and total assistance since 1995 reached 5% of GDP. A notice of 29 January 1999 counted 13 failed domestic banks and said some 5 percent of the cost remained to be paid, about half through government bonds.
The IMF put the cumulative cost of the 1995 to 1998 crisis at most at 13 percent of 1998 GDP. The 1997 notice had already described depositors moving funds from domestic to foreign-owned banks.
In December 1997, after reserves fell by close to 40% from their 1996 peak, the central bank temporarily abandoned its support for the guaraní. The currency lost some 20%, and inflation reached 14.6% at the end of 1998, after the guaraní fell again in early 1998.
2002: When Argentina’s Crisis Crossed the River
IMF Working Paper WP/08/139, written in 2008 by IMF economist Luis Jácome, studies central bank involvement in banking crises in Latin America. It describes the 2002 Paraguayan crisis as external contagion from Argentina and Uruguay.
The paper says the large fall of the currency in 2002 followed the shift from pesos to dollars in those two countries. The failing bank, Banco Alemán, a Paraguayan lender, belonged to the main shareholder of Banco de Montevideo, a Uruguayan bank.
Banco de Montevideo had suffered a major run and was later closed. The paper treats Paraguay’s 2002 episode as a case of contagion from its neighbours.
What Changed After 2003
Law 2334 was promulgated and published on 12 December 2003, according to the text held by Paraguay’s National Congress library (bacn.gov.py). It created the Deposit Guarantee Fund (FGD), run and accounted separately by the Banco Central del Paraguay (BCP), the country’s central bank.
Coverage reaches 75 minimum monthly wages per person per institution. Payment is due within 15 calendar days, extendable by another 15.
The law provides for an initial US$50 million from the state, and banks pay a quarterly contribution of 0.12% of average balances. The scheme is described as explicit, limited, compulsory and paid, meant to protect savings partially.
The IMF’s 1999 notice had warned of moral hazard, the risk that insured savers ignore bank risk, from proposed excessive deposit insurance coverage of large depositors. Our guide to how Paraguay’s banking system works covers today’s rules.
How Three Neighbours Chose Differently
Ecuador approved a blanket deposit guarantee in early December 1998 through a new Deposit Guarantee Agency (AGD). It took over Filanbanco, an Ecuadorian bank, and closed six other impaired banks in December 1998 and January 1999, says IMF Working Paper WP/04/12.
In March 1999 the government declared a one-week bank holiday and then froze deposits. Time deposits were locked for at least one year, while savings above US$500 and half of checking balances were frozen for six months.
The paper links the freeze to a drop of more than 7% of GDP in 1999. Ecuador adopted the US dollar as legal tender in January 2000.
Argentina’s Decree 1570/2001, dated 1 December 2001 on Infoleg, Argentina’s official legal database, restricted cash withdrawals above 250 pesos or US$250 per week per holder. An IMF working paper says this corralito limited the need for continued central bank assistance.
In Peru, late 1990s capital outflows exposed solvency problems at two Peruvian banks, Banco Wiese and Banco Latino. The response used minimum central bank involvement and restructured failing banks.
Why Ueno Is Not 1995
Ueno is one digital bank with about 2.9 million clients, not 13 domestic banks over four years. Paraguay’s statistics institute INE estimates 6.46 million inhabitants in 2026, so clients equal about 45% of that population.
Clients are accounts, not necessarily separate residents. The deposit guarantee fund also did not exist in the 1990s.
The BCP says its board opened a resolution procedure for Ueno unanimously, because its solvency index fell below 50% of the required minimum after adjustments to its financial statements. The BCP notice is dated 2 November 2026, and one other document says 3 November, so the date is 2 or 3 November.
The BCP announced a first payment of up to Gs 10 million per depositor (about US$1,673 at Gs 5,976 per US$, the market close of Friday 6 November 2026). The payment comes from the guarantee fund created in 2003.
The 1990s figures are therefore no forecast for Ueno. They show what kind of bill a bank failure leaves, and our Ueno Bank scandal timeline tracks the facts as they arrive.
What It Means for You
A saver can read the law directly, because it sets payment within 15 calendar days, extendable by 15, up to 75 minimum monthly wages. The first payment is capped at Gs 10 million (about US$1,673).
The dollar cost Gs 5,670 on Friday 30 October and Gs 5,976 on Friday 6 November, a rise of 5.4%. A traveller who swaps US$100 now receives about Gs 30,600 (about US$5) more than a week earlier.
An investor can note that the guaraní lost some 20% after the December 1997 move, while this week the guaraní fell 5.1% and the dollar rose 5.4%. Politics adds a second layer, since on 6 November the Senate removed President Santiago Peña, and Vice President Pedro Alliana was sworn in as his successor.
Dollar deposits matter too, according to IMF Working Paper WP/11/10. The share of savings held in dollars, called deposit dollarisation, fell in Paraguay from 69.7% in the first quarter of 2001 to 43.5% in the third quarter of 2010, against 78.5% to 49.7% in Peru, in IMF staff calculations.
What Is Not Known
The final size of the hole in Ueno is not known. How much state money is frozen is not confirmed.
The exact date of the resolution, 2 or 3 November, is not settled in the documents. A full payout timetable has not been confirmed.
Whether the central bank needs to lend to the system is open. So is how the guaraní and bond markets settle.
We found no primary figure for the fiscal cost of the 2002 crisis or for Peru’s 1999 cost. Paraguay now has a guarantee fund it lacked then, and how it is used is still open.
Frequently Asked Questions
How much did Paraguay’s 1990s bank crisis cost?
The IMF estimates the 1995 to 1998 cost at most at 13% of 1998 GDP. Some 5% of that cost remained to be paid in early 1999.
Does Paraguay guarantee bank deposits today?
Yes, Law 2334 of 2003 created the Deposit Guarantee Fund, covering up to 75 minimum monthly wages per person per institution. Payment is due within 15 calendar days, extendable by another 15.
Is Ueno Bank a repeat of 1995?
No, Ueno is one digital bank with about 2.9 million clients, while 13 domestic banks failed from 1995. A guarantee fund now exists that the 1990s lacked.
Sources: read 7 November 2026: IMF Article IV notices of 22 October 1997 and 29 January 1999; IMF Working Papers WP/08/139, WP/04/12 and WP/11/10; Decree 1570/2001 on Infoleg; Law 2334 of 2003 from Paraguay’s National Congress library; the BCP notice on Ueno Bank; the INE population estimate. Guaraní converted at Gs 5,976 per US$, the market close of 6 November 2026.
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief