PAPER MILLS DISPUTE: NO END IN SIGHT

UNCLAS MONTEVIDEO 000353 SIPDIS SIPDIS DEPT FOR WHA/BSC BARNES, CROFT AND MURRAY DEPT ALSO FOR EB A/S WAYNE AND WHA/OAS DCENTO DEPT PLEASE PASS USTR TREASURY FOR OASIA FOR DOUGLAS COMMERCE FOR ITA/MAC BASTIAN NSC FOR FISK AND CRONIN E.O. 12958: N/A TAGS: PREL SOCI EINV SENV AORC AR UY SUBJECT: PAPER MILLS DISPUTE: NO END IN SIGHT REF: A. MONTEVIDEO 00327 ¶B. MONTEVIDEO 00305 ¶C. MONTEVIDEO 00291 ¶D. MONTEVIDEO 00268 ¶E. MONTEVIDEO 00250 ¶1. (SBU) The long-running dispute between Argentina and Uruguay over construction of giant pulp mills on a shared river seems to have worsened and entered into a more litigious phase after Presidents Vazquez and Kirchner canceled their plans to meet on the issue last week. Uruguayan public criticism over its Government's handling of the affair and comments made by the GOA's Minister of the Interior that Vazquez "was not in control," because he failed to order a closing of the plants, apparently has stung Vazquez and spurred the GOU to search for a new strategy. As of April 11, a second bridge, out of three bridges linking Argentina with Uruguay was also blocked by Argentine protesters. Construction on the Finnish-owned Botnia plant has been suspended until April 18, but only because of the Easter holidays. Media Reaction -------------- ¶2. (U) Following the partial breakdown in negotiations, the GOU has relegated the matter to Foreign Minister Reinaldo Gargano. Embassy understands that the MFA is attempting to bring the issue before Mercosur and the International Court of Justice (ICJ) in the Hague. Uruguayan sources contend that Argentina (which holds the Pro-tempore Mercosur presidency until July) has rejected the complaint in Mercosur on grounds that the dispute is purely bilateral. News reports also indicate that Uruguay has not yet lodged a formal complaint in The Hague, but has only delivered a letter to the ICJ informing it of the problem. The letter's contents, highlighting that the bridge blockades were a violation of international law were published in the press. ¶3. (U) The Uruguayan media reported that an independent Canadian environmental consulting firm who analyzed the International Finance Corporation's (IFC) Cumulative Impact Study (CIS),downplayed the ecological dangers of the cellulose plants. The press also carried unsubstantiated reports that Argentine protesters were planning to block ferry traffic on the Rio de la Plata and that energy supplies from Argentina to Uruguay could be affected. Also covered were threats by Uruguayan truckers to mount their own bridge blockades. One editorial in the daily "Ultimas Noticias" contrasted President Vazquez' "respect for the rule of law" in honoring private contracts with Argentina's Interior Minister's call to force the plants to halt construction for up to 90 days. Comment: -------------- ¶4. (SBU) It is difficult to predict what might happen next in this ongoing bilateral dispute, but the Uruguayans displeasure at Argentina over the pulp mill issue is already fairly intense. Judging from recent press reports and reactions by our contacts, Uruguay is likely to more aggressively seek international support for its position that the bridge blockades violate international law and treaties. End Comment. Nealon