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### Viewing cable 08MONTEVIDEO34, BOTNIA OPERATING SUCCESSFULLY; ENCE PREPARES TO

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08MONTEVIDEO34 | 2008-01-25 14:02 | 2011-03-08 00:12 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Montevideo

`

    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

    ..

`