MercoPress. South Atlantic News Agency

World Bank grants loan for Uruguayan pulp mill

The World Bank agreed Tuesday to finance a controversial pulp mill project in Uruguay that has caused tensions with Argentina over concerns it will cause environmental damage to a shared river.

The financing by the bank's private-sector lender International Finance Corp (IFC), and its guarantee agency Multilateral Investment Guarantee Agency (MIGA), will provide up to 520 million US dollars in loans and insurance for Finnish company Botnia-Orion mill on the Uruguay River.

"The decision paves the way for us to move forward and engage with stakeholders to maximize economic, environmental and social benefits to local communities on both sides of the river" IFC Executive Vice President chief Lars Thunell said in a official statement after the decision.

Argentina has vehemently argued that the mill, which is due to begin operations late next year, will damage the environment and also hurt tourism and fishing along the river, which divides the neighbors.

Argentine and Uruguay government ministers lobbied World Bank member countries ahead of Tuesday's board meeting. The tension was heightened within the World Bank where Argentina represents Uruguay and four other South American countries in a constituency.

World Bank officials, who spoke on condition of anonymity, said Uruguay had considered moving to another constituency to ensure it gets a fair representation over the pulp mills issue, but had decided against it because of time constraints.

Uruguay's Economy Minister Danilo Astori said he had met with the Argentine representative on the board who agreed to include an annex in his statement to be read to the board on Tuesday, which would elaborate on Uruguay's position.

For months environmentalists and residents from the city of Gualeguaychu in Argentina, near the Uruguay border, have intermittently blockaded major highways connecting the two countries in protest to the project causing great harm to the regional and Uruguayan economic.

Brazil, current president of the Mercosur trading bloc agreed on Tuesday to call an extraordinary meeting December 15, on Uruguay's request for a discussion of Argentine protests over the paper mill, which it insists harm trade and tourism.

Increasingly aggressive protestors say the paper mill will harm the environment and tourism in the area. Originally supported by the Argentine and provincial governments, picketers have since cut loose and seem to have become more and more autonomous.

A second pulp mill project by Spain's Ence is currently under relocation consideration to another site because of persistent complaints from Argentina. The two pulp mills investment could reach 1.8 billion US dollars the highest private undertaking in Uruguay in recent times. The World Bank has financed two autonomous environment impact accumulative assessment reports which deny any lasting pollution consequences because of the pulp mills.