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URUGUAY-ARGENTINA: Bridges Close as Credit Lines for Pulp Mill Open

Darío Montero

MONTEVIDEO, Nov 22 2006 (IPS) - The Uruguayan Tourism Ministry is exploring ways of mitigating the effects of traffic blockades across an international bridge linking the country with neighbouring Argentina, which were renewed this week as a result of a World Bank decision to help finance a controversial pulp mill.

The multilateral lender’s decision Tuesday to grant a loan to the Finnish company Metsa-Botnia, which is building a paper pulp factory in Uruguay on a border river, prompted Argentine environmentalists opposed to the plant to once again block traffic between the two countries over the Uruguay River.

The demonstrators, who live in the Argentine town of Gualeguaychú, located 20 km from the Metsa-Botnia pulp mill, argue that the plant will pollute the environment and hurt tourism and fishing along the river. The town of 80,000 is located on the Gualeguaychú River, which runs into the Uruguay River.

Gustavo Rivollier, the coordinator of the Citizens’ Environmental Assembly of Gualeguaychú, said “People are worried, and unless a better idea is found, I think we’re going to spend our (southern hemisphere) summer on the highway,” alluding to the roadblocks, a protest measure they have used intermittently for the past year.

Besides the 170 million dollars that will come from the bank’s private-sector lender International Finance Corporation (IFC), the bank’s Multilateral Investment Guarantee Agency (MIGA) agreed to a 350 million dollar insurance policy for possible risks, all of which opens up the door to other private sector credit lines for the Metsa-Botnia plant.

Uruguay received the news with a sense of relief, but also with “great restraint,” Tourism Minister Héctor Lescano told IPS. He said it was not a time for celebrating, but for avoiding putting new hurdles in the way of the difficult negotiations that mediators recently sent by the King of Spain are attempting to kickstart.

Montevideo’s hopes of finding a solution to the dispute with Buenos Aires are also focused on a possible meeting between President Tabaré Vázquez and Brazilian President Luiz Inácio Lula da Silva on Dec. 8 during the South American Community of Nations summit in Bolivia, said Lescano.

The Argentine government admitted that the special lobbying effort by Environment Minister Romina Picolotti to block the World Bank loan had been fruitless.

But there is also opposition to the factory on the Uruguayan side of the border river. “For the environmental movement, this credit goes beyond the construction of a specific cellulose factory, because unfortunately it throws great weight behind the imposed plantation forestry model, which is seriously damaging the much-touted ‘natural’ Uruguay,” activist María Selva Ortiz told IPS.

“Besides, the approval of the loan reveals that participation by the local residents near the plant, which the World Bank has put so much emphasis on, did not actually occur, because none of the well-founded observations we presented against the plant and the forestry plantations were taken into account,” said Ortiz, a member of REDES-Friends of the Earth (FoE) Uruguay.

REDES-FoE Uruguay filed a complaint against Metsa-Botnia with the Permanent Peoples’ Tribunal, which held hearings in May in Vienna “to denounce human rights violations and cases of economic and environmental injustice committed by the 30 biggest European corporations in the region of Latin America and the Caribbean.”

The Tribunal ruled that “there is clear evidence that moving forward with this project will violate the right of access to basic utilities, the right to land, food sovereignty and safety, labour rights, environmental rights and political and civil rights.”

Rivollier agreed with that view. But he went even further, saying the World Bank had approved a “death loan,” which he described as an “affront” to Argentina.

Construction of the plant near the Uruguayan town of Fray Bentos is over 70 percent complete.

Both the Uruguayan and Argentine governments lobbied the World Bank hard. Argentina sent Picolotti, who has a direct line to the Gualeguaychú activists, while the Uruguayan government sent Economy Minister Danilo Astori as well as President Tabaré Vázquez’s spokesman Gonzalo Fernández.

The World Bank explained in a communiqué that the loan was granted after the two studies it had commissioned concluded that the plant would generate significant economic benefits for Uruguay without causing environmental damages, because it would operate in accordance with the highest environmental standards.

It also said that independent studies offered conclusive proof that the surrounding area, including the Argentine town of Gualeguaychú, would not suffer adverse environmental consequences.

Metsa-Botnia’s 1.2 billion dollar factory is the single biggest foreign investment in the history of Uruguay. The plant will produce at least one million tons of paper pulp a year, while creating 2,500 direct and indirect jobs and accounting for the equivalent of two percent of this small South American country’s gross domestic product, according to the World Bank.

Like the Argentine government of Néstor Kirchner and the Gualeguaychú activists, REDES-FoE and the Uruguayan non-governmental National Commission in Defence of Water and Life sent a letter urging the World Bank not to approve the loan.

In their letter, they argued that plantation forestry and the production of cellulose had a negative impact on water resources and thus violated the Uruguayan constitution, which since a 2004 amendment stipulates that water is a public good, and that the top priority must be human consumption.

But while Uruguayan environmentalists agree on the need to safeguard the environment and human health, they are opposed to the roadblocks staged by the Gualeguaychú activists.

The traffic blockades on the international bridge “remove the debate from its orbit,” because it is not only a question of the installation of pulp mills, but of the development model that is being imposed, which merely uses raw materials with little added value, replacing pastureland with fast-growing plantation trees that use enormous quantities of water, and thus threatening the beef industry, said Ortiz.

The activist also said the recent decision by Spain’s ENCE company to relocate its own projected plant away from Fray Bentos was an achievement.

The Gualeguaychú protesters blocked traffic for almost the entire summer of 2006, when the tension between Montevideo and Buenos Aires peaked.

The Uruguayan government complained at the time that the blockades caused the country around 500 million dollars in losses due to the drop in the number of Argentine visitors to Uruguay’s beaches.

Tourists from Argentina represent around 80 percent of foreign visitors to Uruguay during the summer high season (January and February), and most Argentine visitors arrive by land. Hundreds of Uruguayans who live in Argentina and drive back in the summer to visit their families are also affected by the roadblocks.

Tourism and beef are the top sources of foreign exchange in this country of 3.3 million.

Tourism Minister Lescano is thus considering alternatives, such as offering incentives to Argentine visitors and launching a campaign to draw tourists from southern Brazil, since it appears inevitable that the Gualeguaychú protesters will continue their demonstrations throughout the summer of 2007.

Uruguayan Foreign Minister Reinaldo Gargano reiterated, in a message sent to the Argentine government Monday, that the traffic blockades violate agreements of the Mercosur (Southern Common Market) trade bloc, which the two countries form part of along with Brazil, Paraguay and Venezuela; a ruling by the Mercosur dispute settlement body; and a verdict handed down by the International Court of Justice in The Hague.

Gargano will attempt to put the question of “the obstacles to the free cross-border circulation of goods, services and people” on the agenda of the Dec. 15 meeting of Mercosur foreign ministers in Brazil.

But Alfredo Chiaradía, the Argentine Foreign Ministry’s secretary of international trade and economic relations, has already warned that his country will keep the issue off the agenda.

Argentine Ambassador to Uruguay Hernán Patiño Meyer acknowledged that the roadblocks “do not help establish dialogue,” which his country is seeking through the mediation of King Juan Carlos, whose envoy, Juan Antonio Yáñez, was received by Kirchner himself last weekend.

In Montevideo, he met with Gargano, who made it clear to him that “Uruguay will not negotiate under pressure.”

The dispute has marred the fraternal relations between Argentina and Uruguay, which share a common history and are culturally very close. The tension has even given rise to expressions of intolerance and hostility between Argentines and Uruguayans – something that would have been unthinkable in the past.