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Trouble at mill

Oliver Balch Latin America Editor here.

January to Argentines is what August is to most mainland Europeans. Restaurants close their shutters, shops bolt their doors and everyone heads off to the beach for a month. The place to be seen for trendy Argentines (“VIP”, “Top”, ”fashionistas” as the jet set is variously known here) is Punta del Este. The sun-bathing salons of Buenos Aires are already beginning to fill up as people prepare their base tans for the annual pilgrimage to the über-cool Uruguayan beach resort.

There’s a problem, though. The Uruguayan government has given permission to two European pulp companies to build some gigantic mills on the border with Argentina. The move has sparked a furious dispute that has been running now for well over a year (ever on the pulse, Ethical Corporation reported on this first in May 2005). On the Argentine side, local residents near the mills say they are an eye-sore and a potential source of toxic contamination. For their part, the Uruguayans argue that the mills represent much needed investment. Where the diplomats failed, the protestors have moved in. Last year, Argentines took to blocking the main road networks into Uruguay. Tourist numbers in Punta del Este dropped as much as 50% in the high season. Uruguay’s tourist industry fear the same tactics will be used this summer as the dispute continues unabated.

The International Finance Corporation (IFC) came out in favour of Botnia’s mill last week after months of impact studies and further impact studies. Ence, the Spanish firm responsible for the second of the two mills, pre-empted the announcement by saying it was looking into new locations for its proposed mill. This eases the IFC’s job as much of the criticism from environmentalists had been focused on the cumulative impact of the two mills – i.e. both in their own right might tick all the boxes, but combined they represent a $1.8 billion project that presents all sorts of water and energy use issues. Ence has yet to announce where it plans to move to. Botnia is continuing full-steam ahead. The IFC’s decision also makes it easier for BBVA and Caylon, the private banks helping arrange financing for the projects. Both are members of the Equator Principles. “If it’s good enough for the IFC, it’s good enough for us” is their basic defense.

A law suit filed by Argentina is still pending in the International Court in the Hague, but it seems that the government here in Buenos Aires is now trying to back-peddle. President Kirchner has wrung out as much political mileage as he could from the issue (earlier in the year he travelled to Gualeguaychú, the epicenter of the opposition here, and pronounced that the environment was a “policy of state”). Very cleverly, the President made the head of the main NGO opposing the mills his new Environment Secretary. She is now calling on the protestors not to continue with the blockades. A canny policy of divide and conquer.

One good thing coming out of the whole affair is the commitment by the Argentine government to prioritise environmental issues in the future. Cleaning up the Riachuelo, the capital’s stinking river, is now top of the agenda. It is not the first time the government has tried. Under Carlos Menem, the Environment Secretary famously pledged to decontaminate the river in “1000 days”. She ended up going to prison for embezzling state funds. The river still reeks.