CEDHA PRESS RELEASE 6 APRIL

Fray Bentos-Uruguay. April 6, 2006 - Negotiations between the Argentine and Uruguayan Presidents over the controversial construction of a US$1.2 investment in the cellulose industry by Botnia of Finland, collapsed yesterday when Botnia announced it would not halt construction of its mega pulp papermill, as had been requested by both country presidents.

Conflict over Botnia’s mill first arose nearly a year ago, when 50,000 concerned citizens of Gualeguaychú, the Argentine community across the Uruguay river from the plant site, who had not been consulted about the mill installation, blocked the international bridge that unites Uruguay and Argentina bringing international attention to massive public opposition to the mill.

A citizen’s environmental assembly was created representing the Gualeguaychú community opposing the Botnia’s mill. The Assembly, along with their Governor, and CEDHA (an Argentine non governmental environmental organization), filed a complaint to the World Bank about the project. The World Bank Ombudsman (CAO) discovered concerning irregularities over Botnia’s and the World Bank’s own compliance with Environmental and Social Safeguard Policies, opening grounds for numerous legal complaints against Botnia and the Uruguayan government over the design and implementation of the cellulose industry. Complaints include a criminal complaint against Botnia executives for environmental contamination and human rights violations in Argentina. The case has also gone to the Inter-American Human Rights Commission, the first time ever that a World Bank financed private investment faces an international human rights tribunal.

The conflict between Argentina and Uruguay over the two mills (including a mill to be constructed by the Spanish ENCE), escalated when the Citizens’ Assembly of Gualeguaychú decided to create a permanent road block of the international bridge, and set up a human blockade which lasted for more than 40 consecutive days in the middle of Uruguay’s highest tourist season, leading to mounting diplomatic tensions and calling of ambassadors to the capital cities. The situation has also destabilized the MERCOSUR, as Uruguay is beginning to look north to commercial relations with the United States, with which it is likely to sign a free trade agreement, despite the discomfort this produced with its colossal neighbors, Brazil and Argentina.

The presidents of Argentina and Uruguay met recently in Chile, and agreed to a 90-day truce, conditioned on the lifting of road blocks and the halting of construction by Botnia, which is the only one of the two plants presently in construction. The local Botnia representative publicly announced that Botnia would heed the request, while the Citizens’ Assembly also showed good faith in the presidential accord, and lifted the road blocks. Everything was set to advance negotiations, and the foreign ministries of each country drafted what seemed to be a consensus accord to proceed with new environmental impact studies to measure impacts that had not yet been considered, particularly on the tourist sector, which is central to the region.

Just hours from the signing of a closing agreement to set the stage for a presidential summit between Argentina and Uruguay Botnia announced that contrary to what it had said earlier, it would not suspend construction, presumably because of adverse stock price impacts halting construction would have in European markets. Botnia has also threatened Uruguay that it would abandon its investments if problems continue. Uruguay, meanwhile is trapped by a draconian contract signed between Uruguay and Finland, and with Botnia, that would penalize Uruguay with multimillion dollar sums should Botnia be negatively impacted by changes in the terms of the investment. Botnia’s decision to ignore the Presidents’ request, effectively collapsed the ongoing dialogue between Uruguay and Argentina and with it any hopes for moving towards a resolution in the conflict.

The Uruguayan Presidential Secretary, Gonzalo Fernandez, in one of the first signs of strain between the Government of Uruguay and the Finnish company, Botnia, confronted Botnia’s decision, in the midst of the worst ever diplomatic disputes between the countries, suggesting that the decision was “abrupt”, and lamented that this obstructs hopes for an eventual resolution to the conflict, especially considering the good will of both nations to resolve the dispute. On the Argentina side, Chief of Cabinet, Alberto Fernandez, lamented that Botnia “does not understand the real dimensions and reach of the binational conflict which has ensued.”

Botnia’s decision is unfortunate, since for the first time, negotiations between Argentina and Uruguay seemed to get underway. Botnia and ENCE, the Spanish company constructing just upstream had both indicated that they would support the decision to halt construction in favor of the negotiating process. ENCE has not begun construction due to freezing of international finance following complaints filed to the CAO by CEDHA, stakeholders, and the government of Entre Ríos (Argentina). Botnia, which has its own funds (but whose international financing is also blocked), decided to ignore the presidents’ request. If Botnia does not concede to stop construction to carry out missing impact assessments, it is likely that Argentina will make good on its threat to take Uruguay to the International Court of Justice at the Hague.

Botnia’s investment in Uruguay ato ver US$1.2 billion is Uruguay’s largest foreign direct investment ever, and represents the largest foreign investment by any Finnish company abroad.

For more information:

Jorge Daniel Taillant
Center for Human Rights and Environment (CEDHA)jdtaillant@cedha.org.ar
cel. 54 9 351 625 3290
office: 54 3541 494 162