Uruguay Allows UPM’s Pulp Increase Output, El Pais Says

Uruguay’s President Jose Mujica allowed UPM-Kymmene Oyj (UPM1V) to boost production by 100,000 tons, half of what the company had required, Montevideo-based newspaper El Pais reported.

The company, whose plant is based on the Uruguay River that borders Argentina, will have to build a cooling tower and reduce the the amount of phosphorus in the water the goes back into the river, the newspaper said, citing Mujica.

Negotiations with Argentina’s government, which opposed the increase in output, are over, Mujica said, according to the newspaper. Argentina said it may file a complaint at the International Court of Justice in The Hague, Netherlands, El Pais reported.

UPM’s $1.1 billion pulp plant was the South American country’s biggest investment ever when it began operations in 2007. The project fueled protests by Argentine environmental groups, who blocked bridges connecting the countries for about four years because they said the plant would pollute the river.

“I’m going to make a decision in the middle,” Mujica said in a Sept. 26 interview with Bloomberg in New York. “The decision is not simple. It’s a give and take.”

The International Court of Justice ruled in 2010 that Uruguay breached procedural obligations to cooperate with Argentina and the Administrative Commission of the Uruguay River during the development of the pulp mill.

Uruguay didn’t breach “substantive” environmental obligations by authorizing the construction and commissioning of the Orion pulp mill, the United Nations court in The Hague said.

Uruguay needs to follow the procedures set in an accord about the use of the river to approve an increase in the company’s output, Argentina’s Foreign Ministry said Sept. 29 in an e-mail statement.

“UPM´s interests, no matter how powerful it is, can’t promote the violation of international rulings or accords between sister nations,” the ministry said in the statement.

To contact the reporter on this story: Eliana Raszewski in Buenos Aires at eraszewski@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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