Plantations, poverty and power - Critical Information Collective

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Botnia, Uruguay: Monocultures, pollution fears and an international dispute
The US$1.2 billion Botnia pulp mill is the largest single foreign investment in Uruguay’s history. 316 Built
on the Uruguay River at Fray Bentos, the plans for the pulp mill led to massive protests in Argentina and
Uruguay. Spanish company ENCE also planned to build a pulp mill near Fray Bentos, but relocated its
pulp mill to Colonia in the south-west of Uruguay, as a result of the protests. 317
The Argentinian government was so concerned about pollution from the mill that it took Uruguay to the
International Court of Justice (ICJ) in the Hague. In July 2006, the ICJ ruled against Argentina. But this
first ruling only stated that the court could not order a halt to construction of the pulp mills because there
was no immediate danger. In other words, any pollution would happen once the pulp mill starts
operations and the court cannot rule on something that has not yet happened. 318 It will take the ICJ several
years to reach a decision about whether the construction of the pulp mill violates the 1975 Uruguay River
Treaty. Under the treaty, either country has to inform the other about any developments which might have
an impact on the river, before the project starts. In the case of the Botnia pulp mill, Uruguay did not do
so, claims Argentina.
The pollution from the pulp mill has received much attention internationally. Less discussed is the fact
that the pulp mill sources its raw material from thousands of hectares of eucalyptus plantations, which are
drying up streams and leaving communities without water supplies.
Botnia is a Finnish company, owned by the Metsäliitto Group (a cooperative of Finnish forest owners, 53
per cent) and UPM Kymmene (47 per cent). 319 Despite the controversy, the pulp mill received a series of
subsidies from European bilateral institutions as well as from the World Bank. In November 2006, the
International Finance Corporation agreed to finance the project, giving a green light to other financiers to
get involved.
Lavish international subsidies
Financing for Botnia’s pulp mill comes from the following sources of public money:
•US$170 million from the International Finance Corporation;
•US$350 million guarantee from the Multilateral Investment Guarantee Agency;
•US$100 million reinsurance from Finnvera of MIGA’s guarantee;
•USS$70 million from the Nordic Investment Bank;
•US$230 million buyer credit guarantee from Finnvera;
•US$7 million from Finnfund to Botnia’s plantation subsidiary Forestal Oriental.
When IFC announced its support for the pulp mill, Erkki Varis, Botnia’s CEO and President, wrote that
316 “URUGUAY: World Bank gives go ahead to Botnia mill”, Brazil Report, 24 October 2006.
317 “Ence’s Relocation of New Uruguay Mill Settles Dispute with Argentina“, TAPPI, 13 December 2006.
http://www.tappi.org/s_tappi/doc.aspCID=183&DID=553739
318 “Uruguay welcomes World Bank report on paper mills bordering Argentina”, Xinhua General News Service, 14
October 2006.
319 “Oy Metsä-Botnia Ab”, Botnia website: http://www.botnia.com/en/default.asppath=204,208,225