MercoPress. South Atlantic News Agency

Uruguay Argentina preparing for another confrontation round

Fernandez: To dredge or not to dredge, that is the question

Uruguay and Argentina seem head on for another confrontation. Uruguay ratified it is considering the unilateral dredging of one of the two main River Plate channels it shares with Argentina to ensure the viability of huge projects which need navigational capacity for their production.

However Foreign Affairs minister Gonzalo Fernandez said that Uruguay prefers a joint effort and is holding negotiations with Argentina in the framework of the Administrative Commission of the River Plate, CARP, which rules and manages such undertakings. "Yes, we are considering it but have not defined it yet", said Fernandez referring to the unilateral option. And if no understanding is reached then "Uruguay will consider the unilateral dredging" but in that context must, nevertheless consult for Argentina's approval, according to the River Plate Treaty. However it evolves, the situation is most delicate: relations between Uruguay and the Kirchner couple administration are strained particularly since the alleged "in consulted" Uruguayan decision to allow the construction of a pulp mill along the coast of another border-shared water way, the Uruguay River, also jointly managed. The five-year long Botnia pulp mill dispute has soured bilateral relations. Argentina filed a complaint in the International Court of The Hague and Uruguay before Mercosur, since it claims the Argentine government has tolerated pickets that block bi-national bridges' traffic. Furthermore Uruguay in Mercosur meetings has blocked Argentine protectionist attempts to increase tariffs to imports from outside the block, and most recently vetoed former President Nestor Kirchner as chairman for the newly created Union of South American Nations, Unasur, which have obviously infuriated the ruling couple in Buenos Aires. But shipping Botnia's annual potential production of a million tons of pulp needs deep channels along the river Uruguay and the Uruguayan River Plate coast, as well as will two other huge projects: Spain's Ence which is building a second pulp mill (with similar capacity) and Rio Tinto which is planning to ship millions of tons of iron ore mined in the South American heartland from a Uruguayan port. The River Plate has a main access channel, Canal Mitre which leads directly to Buenos Aires deep in the estuary. A branch of it runs closer almost parallel to the Uruguayan coast through where all the pulp and iron ore shipments travel or will be fed into from Uruguayan ports. The catch is that Canal Martin Garcia is at least five feet shallower than Canal Mitre and both channels according to the 1973 River Plate treaty must be jointly and in consultation managed and dredged. Dredging Martin Garcia to at least 36 feet would cost in the range of 80 million US dollars but needs if not the Argentine matching funds share, Buenos Aires consent. Botnia which in October celebrated its first year of operations is just managing to get production out, but for the two other projects there was a pre-October horizon of 18 to 36 months, which could have extended because of the global crisis. During that time Uruguay is expected to make the Martin Garcia channel more navigable but must first convince Argentina, or again be accused of acting "unilaterally". As positions stand it's hard to see a change of attitude from the Argentine administration but other circumstances could emerge. For one, Argentina is financially strapped and orphan of international credit. On the other in October 2009, Uruguay is holding presidential elections and Argentina mid term elections when the growing discontent with the Kirchner couple could again emerge as happened last July in Congress, in spite of an overwhelming numbers majority, with the farmers' conflict.