From: Lucas Bergman, Reuters
Published October 31, 2006 12:00 AM

Argentina Wants World Bank to Halt Pulp Mill Loans

BUENOS AIRES, Argentina -- Argentina wants the World Bank to halt loans for a pulp mill in neighboring Uruguay until an international court has ruled in a case Argentina brought against the project, the country's top environmental official said Monday.

Finland's Metsa-Botnia is building a pulp mill alongside a river dividing Uruguay and Argentina, which has sparked protests by Argentine environmentalists and a diplomatic feud that reached the International Court of Justice in The Hague.

The World Bank's private-sector lender and guarantee agency said this month they would recommend that their boards approve financing for the project, after determining it met with their environmental and social standards.

But Argentine Environment Secretary Romina Picolotti said this would be irresponsible given the stiff resistance to the mill, which has fueled road blockades along Argentine highways leading to Uruguay.

"I hope if the executive directors of the bank approve this loan and there are deaths along the border ... they take responsibility for their actions," said Picolotti, who will travel this weekend to Washington to meet with bank directors.

Argentina says its neighbor violated a bilateral treaty on the Uruguay River by not providing sufficient information on the project. The court in The Hague refused to order a halt to the construction, but a broader decision is not expected until late next year, sources at Argentina's foreign ministry said.

Argentina fears the mill, which is due to begin operating in the third quarter of 2007, will damage the environment and also hurt tourism and fishing.

The bank's International Finance Corp. has proposed providing $170 million in loans for Botnia's mill, while the Multilateral Investment Guarantee Agency is considering political risk insurance of around $300 million.

"We want (the World Bank) to say, 'let's work for social harmony and see how we can resolve this conflict and respect the legal framework. Let's wait until an international court makes a ruling to see if the law has been violated,"' Picolotti told Reuters in an interview.


Spain's Ence had planned to build a pulp plant next to Botnia's mill, but the company announced it would relocate it. The two mills were estimated to cost about $1.7 billion, representing the largest private investment in Uruguay's history.

Argentine protesters have said they plan to block roads leading to Uruguay again this weekend, as high-level officials from Latin America, Spain and Portugal meet in the Uruguayan capital of Montevideo at an Ibero-American Summit.

The Argentine government rejects these protests because they could harm its legal strategy but it does not put a stop to them, despite Uruguay's complaints that such demonstrations cost their economy millions of dollars.

Picolotti suggested that one way to resolve the dispute would be for Botnia to relocate its mill.

"Why insist on installing the mill in that place where there is such a deep social conflict? I am not asking Botnia to lose money. The company should be compensated for the money it invested in that place so it can relocate," she said.

Source: Reuters

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