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Cablegate: Botnia Operating Successfully; Ence Prepares To

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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