Bank pulls out of divisive paper mill project

Controversial plans to build a major paper mill complex on the river separating Uruguay and Argentina have been dealt a further blow by the withdrawal of an important financial backer.

Dutch banking giant ING pulled out following pressure from campaigners who say the development on the River Uruguay would cause massive air, water and land pollution, destroying an unspoilt area that lives off tourism and is home to half a million people.

The $1.7bn project has caused a row between Uruguay, which backs the development and the jobs it promises to bring, and Argentina, which fears its consequences for human health, the environment and tourism.

Last month the two governments agreed a 90-day halt to the project following months of protests and roadblocks in Argentina (see related story).

Spanish wood products group ENCE and Finland’s Botnia want to build two mills in an area already equipped with ports for transporting the eucalyptus wood used to make paper. Campaigners say they have chosen Uruguay, one of South America’s poorest countries, for its “flexible” environmental regulations.

Jorge Daniel Taillant of Argentinean NGO Centre for Human Rights and Environment (CEDHA) told edie: “We acknowledge that we need to produce paper, but you need to set up paper industry in a responsible way and in the right place. This is a pristine area that lives off tourism. This is not the right place.

“But it is easier here than in Europe to contaminate in inhabited areas,” he said.

The loss of almost $500m in funding that ING was expected to secure is more than just a financial setback for the project, Paul de Clerck of Friends of the Earth International told edie:

“The fact that ING pulls out will have the consequence that other private banks will also think twice and be very cautious,” he said.

The World Bank – another major investor – already suspended its decision on a $400m funding package last week, waiting for more investigation into environmental impacts to emerge.

The two European paper companies behind the project insist the mills, which would be the biggest investment in Uruguay’s history, will bring thousands of jobs to the impoverished country.

According to Botnia, its planned paper mill in Fray Bentos “will boost Uruguay’s gross domestic product by 1.6 percent and create directly and indirectly about 8,000 jobs in the country.”

But Jorge Daniel Taillant said that the number of jobs created are more likely to stay in the range of 200, and that profits will share the fate of the paper and be exported to Europe:

“ENCE exports everything. Certainly this will bring some profit to Uruguay, but at what price?”

The development will see a 50km stretch along the Rio Uruguay turned into an “industrial area” polluted with dioxins, chlorine, solid residue and plagued by an overwhelming rotten egg smell that come as part of the paper industry package, he said.

Further protests against the Spanish government giving a $350m loan to ENCE are expected in Madrid on Tuesday.

More information can be found at the CEDHA and World Bank websites.

Goska Romanowicz

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