MercoPress. South Atlantic News Agency

Uruguay fearing the wrath of Cristina Fernandez denies authorization to expand pulp mill capacity

Mujica and Cristina during a recent meeting in Montevideo

The Uruguayan government fearful of Argentine President Cristina Fernandez’s reaction will not authorize the local UPM pulp mill to expand its production capacity from 1 million to 1.3 million tons annually, in the short term, according to company and government sources.

On Friday UPM with its pulp mill next to Fray Bentos on the shared river Uruguay, across from the Argentine town of Gualeguaychú reported that beginning 14 September it will start its annual maintenance stoppage.

“The resumption of operations is scheduled for Wednesday 25 September. This is subject to approval by the government to increased production capacity from 1 million to 1.3 million tons annually. If not the plant won’t resume activities until the month of November”, announced UPM in a public release.

The expansion request has the approval of Uruguay’s Environment Agency but the issue was passed on to Foreign Affairs which re-addressed it to the bi-national (Argentina/Uruguay) Administrative Commission of the River Uruguay, CARU.

According to CARU protocol Argentina has a first 180-day period to present objections, which evolved with just only a few questions from Buenos Aires. This is followed by a second 180-day period which concludes next 15 September, without any statement from Argentina, so far.

Once the second period is over Uruguay can unilaterally authorize the UPM expansion project. However government sources and from the Finnish company revealed that the administration of President Jose Mujica will not authorize the project.

The construction of the UPM plant, originally Botnia, led to five years of diplomatic clashes and threats between Argentina and Uruguay, ending in the International Court of the Hague with a ruling that somehow tried to contemplate both sides of the argument. This opened the way for better neighbourly relations and the lifting of five year pickets on an international bridge linking the neighbouring countries.

On 10 April 2010 The Hague international court said that Uruguay has violated the River Uruguay statute but not its obligations in preventing environment contamination and ordered the joint monitoring.

In recent weeks the government of President Cristina Fernandez has informed Uruguay that there would be no decisions on bilateral issues such as authorizing new ports and jetties in Nueva Palmira or the dredging of the Martin Garcia canal which is essential for those Uruguay river terminals until after the mid term elections of 27 October.

“The Uruguayan government does not want to generate a tension situation which can complicate relations with Argentina, much less following the good reception Cristina Fernandez received when she visited Uruguay on 27 August. Thus the idea is no decision on UPM on the short term”.

On Friday there was a meeting in Fray Bentos of the UPM Monitoring Commission made up of Uruguay’s Housing and Environment minister Francisco Beltrame; the head of the Environment agency Jorge Rucks; the mayor of Fray Bentos Omar Lafluf. During the meeting UPM made public its release on the maintenance of the plant until September 14 and expansion request.

An estimated 600 workers of which 570 Uruguayan and the rest from Argentina, Brazil and other countries, together with fifty different companies will be doing the maintenance job. “At the beginning and when the plant is again put on production there can be ‘episodes’ of smell which in no case will affect human health”.

The UPM expansion request was presented in October 2011.

Diego Canepa Deputy Secretary of Uruguay’s Executive said that the government was working on the expansion issue, “so officially there’s nothing to advance”. Foreign minister Luis Almagro said the “request is in the hands of CARU”, and pointed out the commission has ‘no veto power’ and the timetable for a decision expires in the third week of September.

Rucks head of the Environment agency was quoted by Montevideo media saying the technical report on the expansion project rests at the Foreign ministry, and “the increase in production planned does not generate impact on the environment beyond those of the original parameters for the previous environment authorization”.

Regarding comments from Argentina that the ruling from the International court does not allow ‘innovations’ Rucks said that there is the commitment from both sides not to approve any action without previously complying with the consulting mechanism and “this is in the orbit of Foreign Affairs”.

CARU Vice-president Luis Hierro said it was ‘ridiculous’ that the environmental joint monitoring results should not be released and insisted that reports from Uruguay’s environment office confirm UPM is working correctly.

“If the analyses which are done in Canada indicated the slightest chance of UPM pollution beyond established parameters, do you believe Argentina wouldn’t have an interest in making public the news? said Hierro

Meanwhile the manager of Uruguay’s Forestry Producers Association Atilio Ligrone said he was concerned that the stoppage and possible impasse “means 700.000 cubic metres of wood will not be received by the plant in the coming month” with all its impact on the industry and warned that the plant’s competition costs and forestry sector’s investments are at stake ‘if the expansion is not authorized’.