Argentina, Uruguay At Loggerheads Over Pulp Mills on Shared River

BUENOS AIRES, Argentina, May 9, 2006 (ENS) - A heated dispute between Argentina and Uruguay over two pulp mill projects, currently under construction on the eastern shore of the Uruguay River, a natural resource shared by both countries, has both governments steaming.

Argentina filed a case against Uruguay over the mills in the International Court of Justice in the Hague on May 4. The next day, Argentine President Nestor Kirchner led provincial government officials and others in a protest against the mills in the town of Gualeguaychú.

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Argentine President Nestor Kirchner addresses the demonstration May 4 against two pulp mills in Uruguay. (Photo courtesy Office of the President)
The filing is the first time that a Latin American country has taken a neighboring state to international court over an environmental dispute. It is also the first time that a World Bank project will be the focus of a case at the International Court of Justice.

For its part, Uruguay has filed a claim with the Secretary General of the Organization of American States and invoked the Olivos Protocol within the framework of the MERCOSUR trade agreement to seek a political solution. The mills have been approved by the Uruguyuan government, and construction has started.

The mills are being built by Finnish company Metsa Botnia and Spanish company Ence in the vicinity of Fray Bentos, Uruguay near the border between the two countries. Their total combined cost is estimated at US$1.8 billion.

Plans call for the mills to use elemental chlorine free technology to manufacture bleached eucalyptus pulp for export.

Ence’s project is a plant with an output of 500,000 tons of pulp per year, while that of Metsa Botnia would have an output of 1,000,000 tons per year. These factories are expected to produce 1.5 million tons of cellulose, one of the largest outputs in the world and "a very significant environmental challenge," the Argentine government said.

Argentina complains that Uruguay authorized the construction of the pulp mills and of a port for the exclusive use of one of them without following the mechanism of consultation and prior information agreed by both countries in the treaty of 1975 on the Statute of the Uruguay River.

"This mechanism is in conformity with international environmental law and the principle that no country should allow activities within its jurisdiction or under its authority which can have a negative environmental impact on a neighboring country, a principle that both countries have fostered in a number of international treaties and agreements," the Argentine government said Monday in an official memo sent to ENS.

The government of Uruguay is eager to see the pulp mills go ahead. Tabaré Vasquez, Uruguay’s president met May 3 with World Bank President Paul Wolfovitz in an effort to get explicit Bank approval for the projects. The mills, which have not yet received World Bank funding, are under consideration by the International Finance Corporation and the Multilateral Investment Guarantee Agency to receive over US$400 million.

Local people are worried about environmental pollution, deforestation and increased truck traffic.

In April, Argentinian protesters blocked a highway into Uruguay protesting the mills on environmental grounds. The roadblock was lifted on May 2, but concerns that mills will ruin the sensitive river ecosystem and the area's tourist industry drew about 100,000 people to a rally against the mills in Gualeguaychu on April 30.

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Botnia Pulp mill project area in Fray Bentos, on the Uruguay River. (Photo courtesy Greenaccord)
Large public demonstrations against the two pulp mills are not new. On April 30, 2005, some 20,000 people from Argentina and Uruguay met in the middle of the international bridge joining the two countries near Fray Bentos to express their opposition to the mills.

In an open letter to the International Finance Corporation (IFC) on June 3, 2005, dozens of environmental groups from both countries as well as concerned individuals object that the Uruguayan government's environmental analyses were done for each plant separately and did not take into account the accumulated environmental impacts of the two pulp mills together.

In their letter to the IFC the critics say that neither Metsa Botnia nor Ence have carried out any serious studies on the possible negative social impacts of their projects, either in the matter of foreseeable loss of jobs related to the liquid effluents, and to gaseous emissions with a strong and disagreeable smell, of the pulp mills, or of the possible impacts on the health of the local population.

"At no time has it been considered that some 1,300 people in Fray Bentos, out of an economically active population of 8,500, obtain employment from local tourist activities, linked to the Las Cañas resort, which would be threatened by the presence of two enormous pulp mills a few kilometers upriver from the tourist zone," the letter states.

To them are added a "non-quantifiable" number of fisher-people and honey producers who might also lose their means of livelihood if these plants are installed, the groups wrote to the IFC.

The possible negative social impacts on the Argentine side have not been considered either, where they also depend on tourist activities as a generator of employment, the critics said.

The groups point out that timber requirements to supply both mills are much higher than local supply, even if it were also to come from both countries.

It is also important to point out, they said, "the impacts that one or both plants would have on the use of the country’s highway facilities due to the traffic of hundreds of trucks with 40 ton loads or more."

Metsa Botnia will require 3.5 million cubic metres of eucalyptus timber, while Ence requires 1.7 million cubic metres. With these requirements, the groups estimate that there will have to be an annual cutting of 140,000 hectares (540 square miles) for Metsa Botnia alone and 210,000 hectares (810 square miles) per year for both plants.

The installation of one or of both plants would imply tripling the present area under plantation, the groups told the International Finance Corporation, hoping head off the loan.

The Center for Human Rights and Environment (CEDHA), an environmental lobby group with an office in Argentina, says Botnia, the Finnish pulp mill was to blame for the recent collapse of negotiations between Argentina and Uruguay to resolve the dispute.

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Argentine Vice President Daniel Scioli (left) and President Nestor Kirchner hold a sign at the rally May 2. It reads, "Yes to life, no to the pulp mills." (Photo courtesy Office of the President)
Fearing a drop in stock values in New York, the company decided to ignore the presidents’ request to halt construction, allowing the two nations to sort out their differences. This decision left the negotiators without information regarding eventual impacts to the environment, to the impacted region’s tourist industry and to the health and livelihoods of local communities threatened by the pulp mills’ expected pollution.

CEDHA argues that Botnia and ENCE are using second-rate technology that is being phased out in Europe. The companies have to turn to countries with less stringent environmental laws to build their mills, CEDHA says.

While the pulp bleaching process would be chlorine-free, CEDHA says the waste produced by the pulping and bleaching stages of the process would contaminate the environment.

CEDHA claims that dioxins, carbon monoxide and sulfur dioxide would be discharged into the air and into the River Uruguay, which is used for drinking water by nearby towns. Large volumes of fresh water would be extracted from the river for the mills, and plantation expansion would see native vegetation cleared.

The government of Argentina expressed disappointment that a High Level Technical Group entrusted with direct negotiations failed to make a breakthrough despite meeting 12 times between August 3, 1995 and January 30, 1996.

The Argentine delegation to those meetings concluded that due to the polluting nature of the process to be used by the two plants, their magnitude, their geographical location, their proximity to populated and agricultural and cattle grazing areas, the fragility of the aquatic ecosystem, the environment could not be preserved at the highest international levels as both parties had agreed during the Group's first meeting.