VZCZCXYZ0000
PP RUEHWEB

DE RUEHMN #0034 0251455
ZNR UUUUU ZZH
P 251455Z JAN 08
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC PRIORITY 7896
INFO RUCNMER/MERCOSUR COLLECTIVE PRIORITY
RUEHHE/AMEMBASSY HELSINKI PRIORITY 0083
RUEHLI/AMEMBASSY LISBON PRIORITY 0014
RUEHMD/AMEMBASSY MADRID PRIORITY 0876
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY

UNCLAS MONTEVIDEO 000034 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV ETRD PREL SOCI SENV AR UY
SUBJECT: BOTNIA OPERATING SUCCESSFULLY; ENCE PREPARES TO 
BUILD 
 
Botnia is operating smoothly, no environmental impact 
-------."
138710,1/25/2008 14:55,08MONTEVIDEO34,Embassy Montevideo"",UNCLASSIFIED//FOR OFFICIAL USE ONLY,,""VZCZCXYZ0000"
PP RUEHWEB

DE RUEHMN #0034 0251455
ZNR UUUUU ZZH
P 251455Z JAN 08
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC PRIORITY 7896
INFO RUCNMER/MERCOSUR COLLECTIVE PRIORITY
RUEHHE/AMEMBASSY HELSINKI PRIORITY 0083
RUEHLI/AMEMBASSY LISBON PRIORITY 0014
RUEHMD/AMEMBASSY MADRID PRIORITY 0876
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
,UNCLAS MONTEVIDEO 000034 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV ETRD PREL SOCI SENV AR UY
SUBJECT: BOTNIA OPERATING SUCCESSFULLY
BUILD 
 
Botnia is operating smoothly, no environmental impact 
--------------------------------------------- -------- 
¶1. (SBU) After a turbulent start, Finnish Botnia - the 
largest foreign investor in Uruguay - celebrated its second 
month of smooth operations on January 9.  The firm is 
operating at 70% of its capacity and has already exported 
148,000 ton of cellulose, worth $112 million, to China and 
Europe.  The President of Botnia Uruguay Ron Beare told 
Ambassador that his company ""couldn't be more pleased with 
the results so far and that production had exceeded 
expectations."" 
 
¶2. (SBU) Botnia's plant has also contributed significantly to 
local industrial growth and, contrary to the fears of 
Argentine and some local environmentalists, so far has not 
caused any negative environmental impact.  A January 20 
report by Green Cross, an environmental consulting firm 
founded by former Soviet President Gorbachev, found that 
sulfur dioxide levels have remained stable and concur with 
GOU reports that the plant is not polluting the Uruguay 
River.  On January 3, an Argentine specialist told local 
press that his working group ""had not found anything unusual"" 
attributable to the plant.  However, the next day, he 
backtracked saying that he was actually referring to the 
pre-Botnia situation. 
 
Is the conflict with Argentina losing pressure? 
--------------------------------------------- -- 
¶3. (U) Botnia's installation by the Uruguay River triggered 
an unusually bleak conflict with Argentina that prompted a 
complete blockage of one of the three shared bridges/borders 
by Argentine protestors in Gualeguaychu, and intermittent 
blockages of the other two.  The longstanding conflict has 
had a negative impact on Uruguay's economy, including a sharp 
decline in the number of Argentine visitors to Uruguay in 
¶2007.  While tensions remain, and flare ups may still occur, 
the conflict seems to be gradually losing pressure.  Early 
2008 figures show Argentine tourists are returning to Uruguay 
(January and February are the high season for the tourism 
industry) at numbers near or above pre-Botnia levels. 
Uruguayan President Vazquez has sent friendly overtures to 
Argentine President Fernandez who in turn seems willing to 
leave the conflict at The Hague for the time being.  NOTE: 
The GOU expects the International Court of Justice at The 
Hague to render its decision in the case in mid-2009.  END 
NOTE.  The slight 
thaw in the political situation and the indications that the 
plant is not contaminating may be gradually undermining the 
fervor of the Gualeguaychu protestors. 
 
Spanish ENCE started a second pulp mill 
--------------------------------------- 
¶4. (U) On January 14, the GOU authorized Spanish firm ENCE to 
begin construction of a huge pulp mill (similar in scope to 
Botnia's) in Conchillas, near Colonia, on the Rio de la Plata 
estuary.  Company representatives confirmed to Ambassador 
that ENCE had begun to prepare the site for construction and 
planed to expedite construction.  ENCE originally planned to 
build its plant closer to the Botnia plant, but suspended 
construction for nearly two years, reportedly due to 
Argentine pressure.  Instead it opted for a location further 
away from Argentina's coastline.  ENCE plans to invest $1.3 
billion in this pulp mill, reportedly the largest overseas 
Spanish investment ever, and more than double the amount 
originally planned.  ENCE officials downplayed reports that a 
third pump mill project, by Portucel, would also take off 
soon.  They explained that Protucel did not own forestry 
acreage in Uruguay and had not begun to buy any.  Without a 
ready supply of raw materials, talk of building a plant did 
not amount to much, they said. 
 
COMMENT 
------- 
¶5.  (SBU) COMMENT: Our impression is that the long-running 
pulp mill dispute, that has soured Uruguay-Argentina 
relations, may have crested.  To some extent President 
Vazquez has benefited politically for having stood up to 
Argentine pressure.  ENCE's initiation of construction is 
also a feather in the cap of the GOU, which considers that 
investment a direct result of Botnia's success. 
 
Baxter 


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