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Finally! Botnia Starts Production

Botnia formally starts up Uruguay's largest construction and foreign investment project, but Kirchner continues his protests.


Finland-based pulp producer Botnia, the largest foreign investor in Uruguay, this week finally started production at its new $1.2 billion facility in the South American country. 

"This is a very important moment for the company", Botnia President and CEO Erkki Varis said in a statement last week. "We are starting up one of the most modern pulp mills in the world and an example in environmental care."

Yesterday, the first pulp bales were produced on a trial basis. The production start comes several months after schedule thanks in large part to final permit delays from Uruguayan authorities.


Although the investment by Botnia is seen as a major coup for Uruguay, the Finnish company has had to deal with a series of unexpected hurdles, including constant protests from Argentine NGO's, an international smear campaign by the Argentine government and most recently a farcical final process before getting the necessary approval 10 PM Uruguayan time on Thursday (see Uruguayan Farce).

In late August - nearly 11 weeks ago - Botnia opened a new $23.7 million terminal at the Port of Nueva Palmira. (See Botnia Terminal Opens). At the time, the company expected production to start at the end of September. 

The new mill, located in the city of Fray Bentos, has a capacity of one million tons of elemental chlorine free eucalyptus pulp/year. Botnia chose Uruguay because it offers ideal growing conditions for rapid growth eucalyptus trees. At the same time, the business environment - including land ownership - is investor-friendly, company officials say. Spain-based Ence and Swedish-Finnish Stora Enso are also building pulp mills in Uruguay.

The location of the Botnia mill was chosen to minimize transportation distances between the supply of raw material and the port, which will ship the finished pulp to markets in Europe and Asia.

More than 7,000 workers have been involved in the construction of the new mill, which started in September 2005. It represents the largest construction project ever in Uruguay. The mill will now generate some 3,000 direct jobs and another 5,000 indirect jobs and will boost Uruguay's GDP by 1.6 percent, Botnia says.


The new mill will also be one of the most environmentally-friendly pulp mills in Latin America. "The mill will have one of the most modern and efficient effluent treatment plants which will not only treat the effluents of the mill but is also committed to treating the municipal sewage from the city of Fray Bentos," Botnia said in a statement. "The mill will reutilize, recycle and optimize the use of raw materials during the entire production process. It will generate its own energy from renewable sources and an excess that could eventually be sold to the national grid."

It will have no biological impact on the Uruguay River which borders to Argentina, company officials say. That's a statement that contradicts claims by Argentine president Nestor Kirchner and Argentine NGO's protesting the new mill.

However, Botnia's claim is supported by both Uruguayan and independent studies and tests. The most prominent one - from the World Bank's International Financing Corp - shows no environmental damage from the mill. The IFC has invested $170 million in the mill, while the bank's Multilateral Investment Guarantee Agency (MIGA) has provided a guarantee of up to $350 million for the mill.  "The two organizations, after completing a thorough review of the facts, are convinced that the mill will generate significant economic benefits for Uruguay and cause no environmental harm," the IFC said in a statement last year announcing its investment.


Kirchner, however, has dismissed the IFC report and has sued Uruguay at the International Court of Justice in Hague. So far, that has cost Uruguayan taxpayers $3.5 million in legal expenses, according to Uruguayan newspaper El Pais.

When Kirchner learned that Uruguay's President Tabare Vazquez gave the OK for Botnia to receive its final permit, he told his Uruguayan counterpart that he had "stabbed" Argentina. “Truly speaking, you are out of line," Kirchner told Vazquez, according to a report in the Buenos Aires Herald Saturday. "You didn’t just stab me, but the whole Argentine people."

Kirchner's opposition to the Botnia mill comes despite independent charges that Argentine contaminates more than Uruguay. "If the government of Argentina is so concerned and sensitive regarding environmental issues that affect their country, President Kirchner should address the pollution problems of the Matanza-Riachuelo Basin in Buenos Aires," Wayne Dwernychuk, a Canadian scientist and author of the IFC report, wrote in the Latin Business Chronicle a few months ago (See Argentina's Environmental Hypocrisy). "Millions of people are directly affected by toxic chemicals and unsanitary conditions therein, and have been doing so for countless years."


While daily organic water pollutant emissions reached less than 20,000 kilos in Uruguay in 2004, it reached more than 140,000 kilos in Argentina, according to London-based researcher Euromonitor.

Meanwhile, Argentine NGO's have repeatedly threatened to stop the mill from opening and have blocked several key roads linking Argentina and Uruguay, causing significant losses in trade and tourism.  The latest round came on Saturday, when some 20,000 demonstrators marched to Argentina's river border with Uruguay, according to AP. 

An overwhelming majority - 80 percent - of Uruguayans support the new Botnia mill, according to polls. An informal Latin Business Chronicle online poll showed 88 percent support for the mill among our readers.

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