Pulp Mill Dispute - Origin of The Dispute

Origin of The Dispute

After twenty years of forest industry development, in October 2003, the Spanish company ENCE, received permission from the Uruguayan government to build a pulp mill in Fray Bentos, on the Uruguay River (which forms the natural border in the north between Brazil and Argentina and in the south between Uruguay and Argentina).

Argentinians residing mainly in Gualeguaychú, Entre Ríos, about 35 kilometers from Fray Bentos, had been claiming that ENCE's pulp mill would pollute the river. Also, some demonstrations had been organized against ENCE.

After ENCE received its permit, another company, the Finnish Botnia, made public their intention to consider the same area for another pulp mill. Botnia received the environmental authorization to build a mill in February 2005.

The Uruguay River is shared by the two countries and is protected by a treaty, which requires both parties to inform the other of any project that might affect the river. Besides the issue of pollution, Argentina claimed that the Uruguayan government had not asked for permission to build the mills. Uruguayan authorities counter that the Treaty does not require that permission be obtained, but merely that the other part be appropriately informed, and that conversations had indeed been held and filed, without objections on the Argentinian part. In addition, they claim that the technology used in the mills would avoid polluting the river to the extent claimed by Argentinians. Furthermore, Botnia argues the mill has a positive impact on the river's waters as the factory's state-of-the-art wastewater treatment equipment is used for local sewage treatment as well. Before the construction of the mill, sewage from the city of Fray Bentos was discharged to the river untreated. Botnia's claims are backed by neutral expert statements given to the IFC.