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DE RUEHMN #0529 1601802
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O 091802Z JUN 06
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5891
INFO RUCNMER/MERCOSUR COLLECTIVE
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UNCLAS MONTEVIDEO 000529 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR WHA/BSC AND EB 
DEPT ALSO FOR EUR/ERA, EUR/WE (MHILL), EUR/NB (MEVANS) 
 
E.O. 12958: N/A 
TAGS: PREL SOCI KLIG EINV EWWT AORC SENV AR UY
SUBJECT: PULP MILL DISPUTE GOES TO COURT 
 
REF: MONTEVIDEO 0435 AND PREVIOUS 
 
¶1. (SBU) Summary: Uruguay's dispute with Argentina over the 
construction of two pulp mills on a shared river (reftels) 
has reached the International Court of Justice (ICJ). On June 
8, both sides, backed by expensive international law firms, 
presented their opening arguments to the ICJ's 15 magistrates 
in The Hague.  An ICJ ruling on Argentina's petition for an 
injunction to halt the plants' construction reportedly will 
be made within the next six to eight weeks.  The June 8-9 
court hearings were broadcast live on Uruguayan television 
amid much local interest. Thus far, the Uruguayans appear 
optimistic that the Court will not issue an injunction to 
halt the plants' construction in Fray Bentos.  However, GOU 
officials have privately told us that they remain concerned 
that the issue will not be resolved even if Uruguay prevails 
in the ICJ.  They fear that Argentine environmental activists 
might once again resume blockades of international bridges 
and/or that Argentina might somehow interfere with the needed 
dredging of the Uruguay river, with negative consequences for 
ships servicing the plants. End Summary. 
 
¶2. (U) On June 8, the daily "El Pais" reported from sources 
close to the President that bilateral discussions with 
Argentina over the pulp mills would be on hold until the 
court case in The Hague was decided.  Vazquez expressed 
optimism about Uruguay's prospects at the ICJ, but also 
indicated that the final resolution to the thorny issue lay 
in future bilateral negotiations with Argentina, once they 
resumed.  The same sources indicated that Vazquez favors a 
"joint commission" to monitor pollution on the Uruguay river. 
Other press articles speculated that a better Mercosur 
protocol for governing environmental issues will be required 
to resolve the dispute and avoid such conflicts in the 
future. (Note: Uruguay is also lodging a complaint against 
Argentina in Mercosur's arbitration tribunal in an attempt to 
prevent future bridge blockades and perhaps pave the way for 
a suit against the GOA. End Note.) 
 
¶3. (U) The Spanish company ENCE ended speculation that it 
might abandon its plans to build its pulp mill in Fray 
Bentos. Rumors of this circulated in recent weeks because of 
ENCE's bid to acquire large paper plant in Portugal. ENCE 
executives reportedly told the GOU on June 7 that the company 
is firm in its plans to build its plant in Fray Bentos. 
However, it appears ENCE is keeping its construction 
activities at the plant site to a minimum pending the outcome 
of the ICJ case, and in respect of a 90-day suspension of 
construction requested by Argentina. In April, the GOA had 
requested the suspension to facilitate bilateral talks. 
Meanwhile, the Finnish-owned Botnia plant's construction in 
Fray Bentos continued unabated, except for a one-day strike 
by unionized workers last week. 
 
¶4. (SBU) Last week, MFA officials involved in the court case 
privately told us that, while Uruguay's chances of avoiding a 
court injunction are good, they are concerned that Argentine 
nationalist passions will become inflamed if it loses the 
court case in The Hague. They worried that Argentine 
activists might resume blocking international bridges and/or 
that the GOA might somehow interfere with plans to further 
dredge the Uruguay river. The dredging is needed to make way 
for large ocean going vessels to reach the pulp plants in 
Fray Bentos. The GOU has also tightened its security measures 
around the Botnia plant and at some public events. It fears 
disruptive incidents such as the one that took place at the 
EU/LA Summit in Vienna, when a bikini clad woman carrying a 
placard protesting against the plants appeared in front of 
world leaders. 
 
5.(SBU) Comment: Despite coinciding with the start of the 
World Cup, the ICJ proceedings have received widespread 
public attention in Uruguay. This is because Uruguay 
considers the pulp mills to be of vital national interest. 
Thus far, Uruguay is not pursuing a counter case against 
Argentina for economic damages caused by the bridge 
blockades. We understand,however, that it is looking at all 
its options (in Mercosur and elsewhere) to ready its 
arguments in case they are needed. End Comment. 
Nealon