VZCZCXYZ0001
PP RUEHWEB

DE RUEHBU #0626/01 0762208
ZNY CCCCC ZZH
P 172208Z MAR 06
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC PRIORITY 3863
INFO RUEHMN/AMEMBASSY MONTEVIDEO PRIORITY 5418
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

PP RUEHWEB

DE RUEHBU #0626/01 0762208
ZNY CCCCC ZZH
P 172208Z MAR 06
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC PRIORITY 3863
INFO RUEHMN/AMEMBASSY MONTEVIDEO PRIORITY 5418
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
,C O N F I D E N T I A L BUENOS AIRES 000626 	
 	
SIPDIS 	
 	
SIPDIS 	
 	
TREASURY FOR OIA NANCY LEE, DORA DOUGLASS, CHRIS KUSHLIS 	
DEPT FOR WHA/BSC IAN SHERIDAN	 WHA/EPSC FOR KRIS URS 
EB/IFD/OMA FOR KENDALL MOSS	 EB/IFD/ODF FOR KERI DIZOGLIO 
 	
E.O. 12958: DECL: 03/17/2016 	
TAGS: PREL EINV EFIN SENV AR UY
SUBJECT: ARGENTINE MFA RAISES CONCERNS ON POSSIBLE IFC 	
FUNDING OF PAPER MILLS 	
 	
Classified By: DCM Hugo Llorens for Reasons 1.4 (b) and (d). 	
 
¶1.  (C) Argentine Foreign Minister Jorge Taiana requested a 
meeting with the Ambassador on March 15 to discuss GoA 
concerns regarding a proposal before the International 
Finance Corporation to provide funding for the controversial 
paper cellulose plants in Uruguay.  In the absence of the 
Ambassador, who was on official travel in Argentina, the DCM, 
accompanied by the PolCouns, met with Taiana on March 16. 
 
¶2.  (C) During the meeting, Taiana expressed his concern that 
the IFC Board should not take any action on pending loan 
applications for the plants until a final Cumulative Impact 
Study (CIS) could be completed.  He suggested that the 
concern might be consistent with U.S. regulations (Pelosi 
Amendment) that require that all relevant studies, including 
environmental impact studies, be completed and made public 
120 days before the IFC Board votes on the loans.  He noted a 
December 2005 environmental impact study on the plants was an 
interim report that did not meet the conditions of the Pelosi 
Amendment.  Taiana gave the DCM a non paper on the GoA 
concerns, an informal translation of which is in paragraph 
four. 
 
¶3.  (C) Comment:  It is our understanding that no date has 
been set for an IFC Board review of the loan proposals and, 
indeed, that the final CIS report is probably still sometime 
off.  The GoA is cognizant of our neutral position on the 
paper mill dispute and that any decisions we make on the 
proposed loans will be made on a technical basis.  It was our 
impression that Taiana was more interested in sounding out 
possible ways of delaying Board consideration of the loans 
rather than obtaining a U.S. abstention or negative vote on 
the loans.  Taiana's demarche reflects the GoA's desire to 
buy additional time to seek a mutually acceptable solution to 
what has become a serious impediment to Argentine-Uruguayan 
relations.  End Comment. 
 
¶4.  (C) Begin Text:  Aide Memoire.  The International Finance 
Corporation has been considering two loans for some months in 
order to contribute to the financing of two paper mills 
located on the left margin of the Uruguay River.  These 
projects have given rise to a controversy between the 
Government of the Argentine Republic and the Government of 
the Oriental Republic of Uruguay based on the non-compliance 
of legal statutes in force and the lack of a reliable 
environmental impact study. 
 
The Government of the Argentine Republic has cautioned the 
IFC and those international banks contributing to the 
financing about the potential environmental and social 
liability they might be subject to in the case these projects 
are realized without complying with all the necessary 
requirements and, thus, cause any clear damages.  This 
liability would be most burdensome to the main member of the 
World Bank and the IFC. 
 
The Pelosi Amendment (22 U.S. Code Chapter 7, Section 262m-7) 
states that the U.S. Secretary of the Treasury shall instruct 
the Executive Director in each multilateral development bank 
to vote not to approve any actions taken by the respective 
bank that may have a significant impact on the environment 
unless an environmental assessment of the proposed action and 
alternatives for such an action is made available to the 
board of the bank. 
 
In compliance with said instructions, the U.S. Executive 
Director at the World Bank and the IFC frequently abstains 
from voting when such a situation appears, although it does 
not prevent the action from being approved.  Abstention would 
mean, in this case, putting forward the taking of actions 
that could bring social and environmental liability, as was 
mentioned before, with its corresponding impact. 
 
Thus, it is requested that you consider, in the form in which 
you consider best, that the U.S. Executive Director at the 
World Bank and the IFC avoid taking a decision while the 
controversy is ongoing. 
 
It is worth remembering that Argentine delegations have 
supported the U.S. position in international meetings with 
respect to restrictions on the use of methyl bromide, which 
affects agricultural producers and sectors of the U.S. 
population in a manner similar to the damages that the 
projected paper mills may cause to agricultural producers and 
sectors of the Argentine population.  End Text.