World Bank Group grants loan for Botnia pulp mill in Uruguay

The World Bank decided on Tuesday to grant a loan of 170 million US dollars to the controversial Finnish pulp mill project in Uruguay. The mill is being built by the Finnish company Metsä Botnia. The bank has also agreed to an insurance policy worth 350 million dollars for possible risks.
      In its decision, the World Bank stated that the pulp mill project brings significant economic benefit, and does not cause environmental damage.
      The construction of the plant has sparked intense opposition in neighbouring Argentina, where there are fears of negative environmental impact. The plant is located in Fray Bentos on the Uruguayan bank of the Uruguay River, which forms the border between the two countries. The mill is expected to begin operations about a year from now.
      Botnia CEO Erkki Varis said that the bank’s decision came as a relief.
      The total cost of the mill is estimated at over a billion dollars, making it the largest foreign investment by a Finnish company.
     
The dispute between Argentina and Uruguay is set to continue in the International Court in The Hague, and a decision is expected in a couple of years. The International Finance Corporation (IFC), which decided on the loan on behalf of the World Bank, said that it is not taking any stand on the process in The Hague.
      Varis said that he is confident that the court will find in favour of Uruguay in Argentina’s complaint concerning the use of the border river.
     
In Buenos Aires, Jorge Daniel Taillant, the head of the Center for Human Rights and Environment (CEDHA), said that he is "confident" of victory in the Hague. He says that a ruling against Botnia could lead to the demolition of the plant. "The investors need to take this into consideration", he said by telephone on Tuesday.
      He added that the "arrogant" attitude exhibited by Botnia toward local people has hurt the reputations of other Finnish companies, such as Nokia. Taillant also warned that Botnia might face legal action later as well.
     Varis said that he does not want to comment on CEDHA's accusations. Another Botnia representative said that the organisation is spreading information that is "utter rubbish".
     
On a more conciliatory note, Varis said that he believes that many opponents of the Botnia project are genuinely concerned about the environment. He attributes this to the poor reputation of the Argentine pulp industry, and to negative media attention on the Botnia project. In approving the loan, IFC noted that the pulp mill will treat the sewage of the city of Fray Bentos, as well as the waste water of another pulp mill in the nearby town of Mercedes, which is not run by Botnia, and which currently has no treatment facilities.
      IFC calculates that the "largest foreign investment in Uruguay’s history" will eventually produce two percent of the country’s GDP and eight percent of its exports.
      Varis says that Botnia expects the pulp mill, which is 80 percent built, to start operations on schedule in about a year. It is expected to increase Botnia’s turnover by about one third, and create 2,500 new jobs.
     
The wife of CEDHA leader Jorge Daniel Taillant, Romina Picolotti, was previously the chair of the organisation, until she was named Argentina’s Minister of the Environment in July this year. Taillant says that the organisation is not linked with the Argentine government.
      He also insisted that demonstrations against the pulp mill are spontaneous actions taken by local people, and that they can continue at least until February.


Previously in HS International Edition:
  King of Spain to mediate in Metsä-Botnia pulp mill dispute (6.11.2006)
  Argentine opponents of Botnia pulp mill bring case to Finland (30.8.2006)
  Metsä-Botnia gives Argentine journalists tour of Finnish pulp industry (22.5.2006)
  Argentine environmentalists stage protest at Finnish Embassy in Buenos Aires (18.5.2006)
  European Union backs Metsä-Botnia in pulp mill dispute with Argentina (21.4.2006)

Links:
  CEDHA website: