August 9, 2005

Tiny Uruguay pressed by neighbor to halt pulp mills

By Louise Egan

GUALEGUAYCHU, Argentina (Reuters) - Gualeguaychu used to be
a sleepy Argentine town. That was before two European companies
decided to build some of the world's largest pulp mills on its
doorstep in neighboring Uruguay.

Now it's a hotbed of protest as farmers, ecologists and
politicians fearing the mills will lead to acid rain and a
stench reminiscent of rotten eggs have taken to the streets to
block the projects. Their opposition to the mills, which
Uruguay hopes will help bolster its economy, has also caused a
diplomatic feud between the two countries.

"There's no stopping this town. We won't back down now,"
vowed Edgardo Moreyra, an Argentine activist at a noisy rally
outside Gualeguaychu's city hall where students chanted "Clean
air, clean water! No to the paper companies!"

But this is not your typical David against Goliath battle
of average citizens against big corporations.

The protesters are backed by Argentina's government, which
wants the projects halted, and their slingshot is aimed at tiny
neighbor Uruguay, a laid-back nation of 3.4 million people
better known for its picturesque cattle ranches than for

With the pulp mills, Uruguay's leftist President Tabare
Vazquez is embarking on one of the biggest private industrial
investments in his country's history, hoping to give a boost to
the economy after a deep economic crisis.

His predecessor approved the two companies' combined
investment of $1.7 billion to produce 1.5 million tonnes of
wood pulp on the banks of the Uruguay River, a natural border
between Uruguay and Argentina's Entre Rios province which is
home to Gualeguaychu's 80,000 residents.

The plants will be built about 3 miles apart by Finland's
Metsa-Botnia, Europe's second-largest pulp producer, and
Spain's Ence . Construction began in April at one site and is
due to start in October at the other.

Uruguayan officials expect the plants to boost forestry
exports five-fold and overall exports by 8 percent.

Ence's $600 million plant is scheduled to begin exporting
cellulose in 2008 at a rate of 500,000 tonnes a year while
Botnia's $1.1 billion installation will go online in late 2007,
producing 1 million tonnes annually, making it one of the
largest in the world.


While many Uruguayans are also enraged their government is
promoting what is considered one of the world's dirtiest
industries, some in nearby Fray Bentos village look forward to
thousands of new jobs.

Urguayan engineer Bruno Vuan sees great potential as he
stands in the muddy Botnia construction site watching dozens of
dump trucks move dirt. "Forestry is going to be almost as
important for Uruguay as beef," he muses.

Across the river on the Argentine delta, opposition is
unanimous. People fear dioxin and furan emissions will endanger
the river's fish and birds and wreak havoc on their citrus
orchards and commercial honeybees.

They accuse Ence of bringing in "dirty technology" that
will be banned in the European Union in 2007. Both Ence and
Botnia denied those accusations, insisting their plants will
comply with the strictest EU environmental standards.

But Gualeguaychu residents like Daniel Perez, a dental
technician who fled Buenos Aires two years ago to raise his
children in what he calls "the cleanest air possible," is

"We feel we've been chosen as the garbage dump of the
world," he said. Agriculture and tourism represent two-thirds
of Gualeguaychu's economy.


Legally, Argentina has a say in any development affecting
the Uruguay River, which is shared by the two countries and
jointly administered via a bilateral treaty.

Provincial and municipal authorities in Argentina have
aligned with protesters, threatening international legal action
against Uruguay if necessary.

Following diplomatic friction, the two governments in late
July agreed that a bilateral commission would take six months
to study any possible pollution from the projects.

But the final report will not be legally binding and in the
meantime the two companies intend to start building.

Ence and Botnia are drawn to Uruguay because of its supply
of eucalyptus globulus trees, prized as the raw material for
fine quality paper, and for its proximity to Asian and North
American markets.

"Ence cannot grow with a similar project in Europe because
the biggest restriction to growth in Europe is the availability
of raw material," said Ence spokeswoman Rosario Pou.

Uruguayan Environment Minister Mariano Arana has defended
the companies so far but vowed to confront them if a study
reveals any environmental risk.

"If the study says these plants are dangerous and are not
compatible with the region's biodiversity, then we will not
hesitate to shut them down," he said.