MercoPress. South Atlantic News Agency

Good and bad news for Uruguay's pulp industry

A Canadian forestry company has shown interest in establishing a pulp mill in Uruguay, which would be the fourth undertaking of this nature, reports the Montevideo press.

So far two pulp mills are under construction, one belonging to Finland's Botnia and a second from Spain, Ence, which this week announced it was suspending work until next November, pending World Bank financing.

A third company, Sweden's Stora Enso (the world's largest in the industry) is also planning a pulp mill in Uruguay.

"The pulp industry in Uruguay will not only have investors from Finland, Spain and Sweden but also from Canada", announced last week Industry, Energy and Mining Deputy Minister Ponce de León during a forestry forum in Montevideo, although he did not reveal details of the operation. "Canadian investors have met several times with government officials and have expressed a strong interest in investing in Uruguay", however the final decision will take months.

Meantime Uruguay and Argentina are waiting for the ruling from the International Court of The Hague which has to decide whether the joint management agreement for the shared river next to where the pulp mills are being built has been ignored and therefore there are high risks of extensive water and air pollution in the region.

The shared waterway is the river Uruguay which acts as a natural boundary between Uruguay and Argentina, and President Nestor Kirchner administration following on complaints from residents across the river claims Uruguay did not follow information procedures explicitly contemplated in the joint agreement and besides the chemical method to be used in the mills could be highly contaminating.

Argentina requested a 90 days mills construction freeze to elaborate on an independent accumulative environmental impact assessment which Spain's Ence has accepted, but Finland's Botnia has refused point blank arguing it's a private investment which abides by Uruguayan law and has a timetable of commitments to honour.

Argentina then decided to take the case to The Hague which is the arbitration contemplated in the 25 year old shared river agreement.

Uruguay is also complaining that for several months, pickets on the Argentine side protesting against the pulp mills, effectively blocked the two binational bridges across the river Uruguay causing extensive losses to trade and tourism. Uruguay claims Mercosur's charter which guarantees free movement of goods and people was violated because of Argentina's passivity towards pickets.

However Ence which first announced it was suspending construction until the second week of July when The Hague ruling is expected now has extended the period to November given credit access difficulties.

Originally the pulp mills would be receiving soft loans from the World Bank's International Finance Corporation but Argentina has successfully delayed all loans until a final decision from The Hague and a full independent, accumulative environmental impact assessment has been completed.

A first assessment by the World Bank was rejected by Argentina arguing the bank was an "interested party" in the undertaking.

To make things even more complicated an Ence top official, Javier Villa Orellana, who recently visited the pulp mill said that although the company remains "interested" in the Uruguayan project, "it considers madness building the two pulp mills so close (Botnia is only five miles away) to each other and a potential environmental hazard". "I've instructed the Ence officers in Uruguay to look for some other place to move the future pulp mill", admitted Mr. Villa Orellana.

If this finally happens Ence would also be contemplating one of the proposals from Argentina to mitigate the potential impact of pollution on the Argentine fluvial coast which was to move the pulp mills somewhere else.

The two pulp mills investment totals 1.8 billion US dollars, the highest single private undertaking in Uruguay in decades. An estimated 2.500 labour are currently working at the Botnia plant under construction.