MercoPress. South Atlantic News Agency

Mercosur becoming a world leading cellulose producer

Mercosur is forecasted to become a world cellulose production pole with investments in three plants and forests, from one company only equivalent to 3,75 billion US dollars.

Swedish-Finnish Stora Enso is planning to increase the cellulose production capacity of Brazil and Uruguay to 9,5 million tons per annum to which must be added the potential of sixty plants in Argentina which make up almost another million tons, according to a report from the company.

Nils Grafstrom, Stora Enso Latinamerica CEO who recently visited Montevideo said the company was planning to invest 250 million US dollars in Uruguay to forest 100.000 hectares in seven years, "as the basic forestry platform for a cellulose plant" with a one million tons annual capacity.

The decision about the new plant which would demand an investment in the range of a billion US dollars will be taken in the coming three to four years and in the meantime Stora Enso will be investing 100 million US dollars in planting 50.000 hectares of eucalyptus and pines beginning in 2005.

The project in the south of Brazil, in Rio Grande do Sul, is similar to that of Uruguay: 100 million US dollars to forest 50.000 hectares starting this year, and another 150 million US dollars in the coming seven years to complete 100.000 hectares and a new cellulose plant with an annual production of a million tons.

This week Stora Enso will be inaugurating a cellulose plant Veracel in the northeast state of Bahia with an annual production of 900.000 tons, taking Brazil's total production to over five million tons, said Mr. Grafstrom. Brazil is the country in the region with most paper and pulp plants, 220, followed by Argentina with 60, Chile 11 which have GDP impact in the economies equivalent to 1,4% in the case of Brazil and 4% in Chile's.

Stora Enso investments already involve 1,75 billion US dollars (1,25 billion in Vercael, 250 million in the south of Brazil and 250 million in Uruguay) with the possibility of reaching 3,75 billion US dollars if the two plants planned, one in Uruguay and another in Rio Grande do Sul finally go ahead.

Uruguay is already involved in the construction of two cellulose plants in the mid west of the country, just across Argentina, one of them Finnish, Botnia and a second Spanish Ence, totalling 1,8 billion US dollars in investment and a production capacity of 1,5 million tons annually.

However these two plants are involved in a diplomatic controversy with Argentina since Buenos Aires is conditioning the setting up of the cellulose processing to a previous environmental impact assessment which ensures no chlorine pollution in the shared Uruguay river which also acts as a natural frontier between neighbouring countries.

Stora Enso's announcement was praised by Uruguayan vice president Rodolfo Nin Novoa, but the head of the Forestry Department from the Agriculture, Livestock and Fisheries ministry wasn't so enthusiastic.

"This is not the kind of investment we're targeting", said Andres Berterreche. "We are looking for a wood industry with added value", such as manufacturing furniture and other wood products he added. "The pulp model is an input for other industries".