Many years ago Argentina and Uruguay signed a treaty establishing a joint administration of the Uruguay River, bordering both countries, and the provisions to be observed regarding its environmental preservation. In 2004 a 1.8 billion dollar investment was announced by Finnish Botnia and Spain’s Ence, two big pulp and paper multinational enterprises, to finance the construction of their mills on the Uruguayan margin of the river, in the municipality of Fray Bentos.

Many years ago Argentina and Uruguay signed a treaty establishing a joint administration of the Uruguay River, bordering both countries, and the provisions to be observed regarding its environmental preservation. In 2004 a 1.8 billion dollar investment was announced by Finnish Botnia and Spain’s Ence, two big pulp and paper multinational enterprises, to finance the construction of their mills on the Uruguayan margin of the river, in the municipality of Fray Bentos.

There seemed to be no controversies, yet when these companies began construction late last year, a protest movement broke out in the city of Gualeguaychú, in the Argentinean province of Entre Rios. The mobilization was led by environmentalists who claim the river will be polluted by the two companies, an argument disputed even by Argentine technicians. (Read more at Diário La Republica March 31, 2006).

After having obtained the support of the province’s governor, activists soon became bold enough to set up a roadblock on the bridge uniting both countries. Such attitude caused considerable damage to Uruguayan exports and the atmosphere between the two countries deteriorated substantially. Yet during President Bachelet’s inauguration in Chile last March, presidents Nestor Kirchner of Argentina and Tabaré Vázquez of Uruguay announced that work on the companies’ sites would be suspended for 90 days and that the traffic on the bridge would be reopened. The intention was to announce a deal a few weeks later at a formal gathering of the two presidents at the end of that month.

That did not occur and the blockade of the bridge was set up again. Argentina wishes to take the matter to be discussed by the International Court of Justice in The Hague, the dispute settlement party agreed upon in the Uruguay River Treaty, while Uruguay is calling for the mediation of the Mercosur Group to unlock the stalemate.

The issue, of an apparently simple solution, was “politicized” and gained the status of national causes, generating quite an impasse not only for both countries but also for the Mercosur as a bloc. The perception of the Uruguayan society is that the two largest countries in the region, Argentina and Brazil, are not concerned with the development of the smaller countries and undermine investment inflows. And what’s more, that both countries reduced imports of Uruguayan goods.

Sectors of the Frente Ampla, the political coalition ruling Uruguay today, with the support of the Economy and Finance Minister, Danilo Astori, even ventured the hypothesis of resuming negotiations on the trade agreement with the US, currently one of the main destinations for Uruguayan exports. At a ministerial meeting President Tabaré Vázquez disallowed any expectation to that end, his words corroborated later on by Foreign Minister Reinaldo Gargano’s statement at a party meeting who also dismissed such possibility. Thus, for now, such risk seems to have been eliminated.

In order for the Mercosur to advance it is necessary that the asymmetries and inequalities between member countries be reduced. Concrete steps to meet this challenge depend, chiefly, on the bigger nations, who will have to make concessions in trade negotiations and invest more heavily in the integration to enable the smaller economies to strengthen more quickly. This should be seen as an investment that the bigger countries would make now to reap results ahead in terms of access to growing markets.

The Argentinean concern over the environmental preservation of the Uruguay River is justifiable, yet the way it was manifested was deplorable, even more so in the case of two progressive administrations. Both in Argentina and in Brazil there are a number of pulp and paper mills and, at the moment, besides the investments to be made in the two plants in Uruguay, other investments are being proposed by VCP and Stora-Enso in the south of Brazil.

True, there are controversies over these plants’ environmental impact given the fact that pulp and paper companies usually acquire vast tracts of land in the surrounding area in order to plant eucalyptus and/or pine trees, a practice that does contribute to land concentration and causes alterations in the local biodiversity. However, impact on the atmosphere and on the river basins, which is dramatic in older mills, has improved considerably with the utilization of new technologies.

The first proposal to suspend the construction offered a reasonable timetable to conduct new analyses designed to appease Argentina’s concerns. But further delaying the construction will oblige the Uruguayan government to pay fines to the companies and, eventually, the blockade of the bridge will be detrimental to all parties involved since Brazilian products circulating into Argentinean territory use that bridge too.

Therefore, this is a political question for the Mercosur, and the Common Market Group should pronounce itself on the matter.