Cablegate: The Argentine/Uruguay Pulp Mill Imbroglio:

DE RUEHBU #1434/01 1771718
R 261718Z JUN 06





E.O. 12958: N/A
SUBJECT: The Argentine/Uruguay Pulp Mill Imbroglio:
Environmentalists Tell Kirchner to Put His Money Where His Mouth Is

1. Sensitive but Unclassified, Not for Internet Distribution

2. (SBU) Summary: Argentina's strong stand against the construction
of two pulp mills on the Uruguayan side of a river that borders an
Argentine eco-tourism area, has given environmental activists an
opening to press for increased environmental protection. NGO's
rightly point out that some of the 30 pulp mills already operating
in Argentina are serious polluters. Responding to citizen demand,
the Supreme Court has ordered the 44 companies that dump chemical
waste in the large sewer-like Riachuelo River, which runs through
Buenos Aires, to report on the chemical content of their waste. The
Paraguayans have protested a pulp mill on their border. President
Nestor Kirchner is working to upgrade the woefully underfunded
Secretariat of Environment and is reportedly on the brink of

selecting a new more dynamic Secretary. While critics say that
Argentina is protesting the construction of the pulp mills because
of sour grapes -- reportedly, they wanted the plants on their side
of the river -- an unintended and welcome result of the flap is
increased interest in environmental protection in Argentina. End

The Uruguay - Argentine Pulp Mill Flap

3. (U) The imbroglio over the construction of two wood pulp mill
plants in Uruguay's Rio Negro department on the Uruguay River across
from an eco-tourist site on the Argentine side of the border, has
given the environmental NGO community an opening to highlight the
lack of environmental protection across the country. The
construction of two plants, by the Spanish firm Ence and Finnish
company Botnia, a USD 1.9 billion investment, has caused a
diplomatic flap for Argentina and Uruguay. Uruguay has sought USD
150 million loan from the World Bank's International Finance
Corporation (IFC) to support the projects. The Argentines have
filed a case against the construction with the International Court
of Justice in The Hague, arguing that the mills will pollute the
Argentine side of the Uruguay River. This bilateral issue gained
international attention at the recent EU-Latin American Summit in
Vienna, when an Argentine beauty queen in a provocative costume,
appeared before the presidents with a message to stop the proposed
pulp mills plants.

Kirchner Raises the Environmental Flag

4. (U) In mid-May, Kirchner, with his environmental team, various
politicians and the press, traveled to Gualeguaychu, the town across
the river from the pulp mills, to hold a highly publicized rally
where he vehemently opposed the construction, announcing that the
environmental protection is "now a matter of state policy."
Kirchner promised economic growth "that will incorporate an
environmental perspective in all government actions, and raise the
current environmental standards." Local NGO's took the opportunity
to ride on President Kirchner's newly-discovered enthusiasm for the
environment to point out that Argentina has some 30 pulp mills, some
of which are serious polluters. A U.S. expert on the environment,
who is well versed in the water pollution in Argentina, recently
told ESTH Counselor that Argentina has serious water pollution
problems, likening it to the U.S. 50 years ago. The Argentine
Association of Pulp and Paper Producers noted in a recent press
report that Argentine mill owners invested USD 35 million between
2001 and 2005 in improving the environment, although he admitted
there is more to be done in processing the estimated 900,000 tons of
pulp produced annually. Recently, Paraguay filed a suit against
Argentina for pollution by two pulp mills in the northeastern
Misiones Province, on their shared border. According to the
Paraguayan Foreign Ministry, Argentina has failed to respond to the

World Environment Day: NGOs Demand Reform

5. (U) The pulp mill flap has raised consciousness about the
serious pollution problems in Buenos Aires' Riachuelo River among
politicians, the press and the general public. Some claim that the
Riachuelo is Latin America's most polluted river, and no one
disputes the fact that it is the most polluted waterway in
Argentina. Kirchner's recent push for increased environment
protection provided an opening for key environment NGOs to demand
for reform on June 6, World Environment Day. A broad coalition of
13 environmental organizations proposed a series of measures for the
Kirchner Administration to implement. In a document entitled "The
Environment: A State Question," the NGOs urged that the Riachuelo
river be cleaned up; they called for a law for clean technology in
the pulp mills and for upgrading the Secretariat of Environment to
minister status. They cited the need for urgent measures to stop
rampant deforestation and to require a national law making
environmental impact studies mandatory. (Comment: Politicians have

BUENOS AIR 00001434 002 OF 003

outlined plans for cleaning the river for decades. Under the Menem
Administration, the then-Minister of Environment purloined the funds
allocated for the cleanup and has served jail term for doing so.
End Comment.)

6. (U) Responding to a court case brought by activists, the Supreme
Court recently ruled that the GOA must present a plan within 30 days
for reducing the Riachuelo's pollution. The court's decision
requires that the 44 companies that discharge waste into the river
detail the amount and chemical content of the waste. The firms
include oil companies such as Shell and YPF and other large
companies. Press reports credit the pulp mill flap with garnering
attention to this long standing environmental problem in Buenos
Aires City and Province where 3 million people are affected by the
pungent river, which looks like a large sewer.

Top NGO Reports on the Environmental Situation
--------------------------------------------- -

7. (U) ESTH Staff heard a litany of environmental problems at the
recent event marking the publication of a 600-page report, "The
Environmental Situation in Argentina 2005," prepared by the
Foundation Vida Silvestre Argentina, associated with the World
Wildlife Fund International (WWF). The report highlighted
large-scale deforestation, pollution, overfishing and
desertification. It warned that the burning of forests in the Grand
Chaco region, shared with Paraguay and Bolivia, produces more carbon
dioxide emission than generated by all the motor vehicles in the
country. Pollution generated by mines in remote region like the
Patagonian steppes in southern Argentina was also highlighted. Old
mines, including uranium mines, have impacted water supplies in the
Puna Altiplano plateau in northwestern Argentina, the Andes
Mountains along the western border, and the Yungas rainforest in the
northwest, where mining has had a severe impact on local water
supplies. (Note: The World Bank is developing a project to clean
up Argentina's defunct uranium mines, two of which are in the center
of urban areas.)

Call for Increase Federal Support for the Environment
--------------------------------------------- --------

8. (SBU) During this event, the keynote speaker, a leading
environmentalist and constitutional lawyer, observed that while the
necessary environmental laws are in place, they are not enforced.
He called upon the GOA to increase its meager support for the small
Secretariat of Environment, currently under the Ministry of Health.

The speaker, Daniel Sabsay, observed that jurisdictional problems
inherent in a federal system, complicated by the weak Secretariat of
Environment, make enforcing environment law an impossible task. The
speaker emphasized that the Federal Environmental Council (COFEMA),
responsible for coordinating environmental policies with provinces
through consensus, has not protected the environment because it is
stacked with political representatives political parties, oil and
mining companies, rather than environmentalists. In sum, COFEM is a
sham. (Comment: The speaker is right on the mark. Not only has
COFEMA not worked effectively to protect the environment, but the
Argentine Secretariat of Environment, itself, is understaffed and
under funded. Job security is an issue there because about one half
of the 300 employees do not enjoy civil service protection.
Employees routinely hold two or three jobs to support themselves and
are often absent from the office. End Comment.)

Top NGO Calls for Increased Environmental Protection
--------------------------------------------- -------

9. (U) In discussions with ESTH Counselor, staff from the Vida
Silvestre Argentina Foundation, the country's largest and most
important NGO, said that, while they are strong proponents of the
environment, at the same time they realize that Argentina needs to
continue its economic growth to support its recovery from the 2001
financial disaster. Foundation representatives pointed out that all
industry has some degree of contamination. While sympathizing with
the inhabitants of Gualeguaychu, the Foundation pointed out they do
not have the right to protest by blocking traffic, causing
considerable loss to commerce. The Foundation recommended an
independent study to determine the environmental impact of the pulp
mills. It also pointed out that there is a chlorine free technology
currently in use, and recommended that countries in the region work
with industry to install this state-of-the-art technology. The
Foundation emphasized that Argentina must apply the same high
environmental standard that it wants the Uruguayan pulp mills to
have to its own pulp mills.

The Pulp Mill Debate: Good for Argentina's Environment
--------------------------------------------- ----------

10. (SBU) Comment: Since the beginning of the Kirchner
Administration, the environment has been placed on the back burner.

BUENOS AIR 00001434 003 OF 003

The general public appears to be willing to give the Administration
some space, accepting damage to the environment as the cost of the
economic recovery. However, Kirchner's sudden morphing into a
defender of the environment has put the spotlight on Argentina's
environmental problems. It could result in more resources and
interest in cleaning up contaminated sites and rivers, and requiring
environmental impact studies. From the Argentine side of the
Uruguay River, the "greening of the Kirchner Administration" is a
good thing. End Comment.

11. (U) To see more Buenos Aires reporting, visit our classified
website at:< /a>

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