MercoPress. South Atlantic News Agency

Argentina-Uruguay dispute over cellulose project

Uruguay will go ahead with the establishment of two cellulose plants along the river Uruguay which it shares with Argentina in spite of Buenos Aires alleged environmental objections that have reached the World Bank, one of co financers of the billion plus US dollars project.

Uruguayan president Tabare Vazquez said that the "World Bank has a favourable position regarding the project" and all the "necessary environmental reports are there to be seen", adding that "all the guarantees to control contamination are in place".

This week Argentina, arguing environmental reasons, opposed the granting of a 100 million US dollars credit to Uruguay which is part of the financial package together with European banks that will help finance the one billion plus US dollars project involving Botnia from Finland and Spanish Ence.

The Argentine province of Entre Rios on the other side of the river Uruguay where the cellulose plants have began to be built argues that "there are no environmental impact assessments" and experience from other countries shows that "cellulose plants cause irreparable damage to the environment and human life".

Entre Rios Deputy Governor Guillermo Guastavino emphasized that the "Uruguayan government refuses to supply us all the necessary information", and besides "we don't have an idea of the design and outlay criteria for the establishment of the plants".

"They seem to forget that the river Uruguay has a common administrative committee which addresses all the fluvial and environmental issues", highlighted Mr, Gustavino.

Argentine Ambassador in Montevideo Hernan Patiño Mayer downplayed the dispute rejecting allegations that Argentina really wants the investment on its side of the river, but pointed out "a certain Argentine disappointment" because of a bilateral committee to address the environmental impact, agreed between presidents Kirchner and Vazquez, has yet to be named and begin operating.

Uruguayan Foreign Affairs minister Reynaldo Gargano refuses to discuss the promised bilateral committee, until Argentina drops its objection to the World Bank credit for Botnia in Uruguay.

Reiterating president Vazquez statement, Mr. Gargano said that "Finland is the country in the world which most looks after the environment and they are going to use that same technology in Uruguay".

But Uruguayan authorities have admitted they are considering demanding a guarantee deposit from Botnia linked to compliance with local environmental regulations.

The dispute which Uruguayan sources link to the coming mid term October elections in Argentina because allegedly President Kirchner wants to ensure full support from the province of Entre Rios for his "country project", has reached the World Bank.

The World Bank International Financial Confederation, ICF, which is to grant the "soft" loan, said in an official release late Thursday that the Botnia and Ence cellulose plants projects were still in the "process of evaluation", but also recognized the significant benefits they would represent for the Uruguayan economy and praised the government and the people of Uruguay for their support to the enterprise.

"ICF is planning with the support from the Uruguayan government a study on the accumulated impact of both plants", and will inform Argentina of the results.

The release recalls that "ICF is considered world leader in environmental and social standards for the private sector in emerging markets and is committed to work with its clients complying with the highest standards".

A World Bank regional delegate has been travelling between Buenos Aires and Montevideo, but Argentine sources admit that it's hard to see how Argentina can effectively block the loan because it has no individual chair and shares the regional share with Bolivia, Paraguay, Chile, Peru and Uruguay.

The overall project involves 1,8 billion US dollars (Botnia 1,2 and ENCE 600 million) plus a port creating 900 direct jobs and 4,500 indirect jobs, with cellulose production beginning in 2007. (Botnia a million tons pa and ENCE 400,000 tons).

"The ICF loan is less than 10% of the operation, so we can live without it", said Carlos Faroppa from Botnia.

However Entre Rios governor Jorge Busti has warned that if no agreement is reached he will appeal to the International Court of Justice in The Hague fro violation of the river Uruguay treaty and contamination of the city of Gualeguaychú, just across from the plants. He also plans to begin legal actions against Spain because of the ENCE plant.

More information: www.metsabotnia.com/en