April 4, 2006

Hopes for truce on Uruguay pulp mills fade further

MONTEVIDEO, Uruguay (Reuters) - Talks between Uruguay and
Argentina over the environmental impact of two giant pulp mills
on their border crumbled again on Tuesday as a planned
presidential "summit" on the dispute was canceled for a second

Just as a truce in the months-long diplomatic spat appeared
near, Argentina rejected a decision by one of the two pulp
companies to halt construction in Uruguay for just 10 days,
considered too short a time to allow the governments to conduct
a new environmental impact study as planned.

Finland's Metsa-Botnia announced it would halt work on its
mill as of April 7, saying it sought to facilitate dialogue
between the two governments. Previously, it had pledged to stop
construction for up to 90 days, but it later resumed activity
with no explanation.

Argentina's President Nestor Kirchner and Uruguay's Tabare
Vazquez had planned to meet this week to discuss the issue.

"The meeting has been postponed because of the terms of
Botnia's decision, which only accepts a suspension of 10 days,"
Uruguay's Presidential Chief of Staff Gonzalo Fernandez told
reporters at a news conference.

Botnia and Spain's Ence are building two mills worth a
combined $1.7 billion along the Uruguay River, which divides
the two countries and is managed bilaterally.

On the Argentine side, citizens have taken to the streets
in massive protests and road blocks to protest the mills, which
they say will destroy river wildlife and tourism.

Uruguay says blockades at border crossings have caused $300
million in losses to its economy.

The swelling protest movement has pressured Buenos Aires to
demand a new environmental impact study measuring the combined
effect of the two projects.

Uruguay has grudgingly agreed to the study but defends the
projects, the largest-ever industrial investment in Uruguay,
saying the companies will use the latest technology to keep
contamination to a minimum.

Uruguay blamed Botnia for breaking the fragile truce with

"We're a little disappointed by the company's lack of
sensitivity in not allowing for a longer period to help clear
up Argentina's doubts and sort out this problem definitively,"
Fernandez said. "We hope they reconsider."