MONTEVIDEO, Uruguay, Aug. 25 (UPI) -- Argentina is dropping its objections to Uruguay pulping its eucalyptus for export revenues, raising hopes in Uruguay the Latin American country can go ahead with more pulp-making plants for European and Asian paper industries.
The fast-growing eucalyptus offers Uruguayans and Finnish paper manufacturers a win-win prospect and more pulp mills would likely attract international investors to Uruguay, analysts said.
Finnish newspaper Helsingin Sanomat cited expert reports that expanding pulp production in Uruguay rather than in northern Europe was a feasible option for both sides and more projects should be explored.
Argentina objected to the first pulp mills built on the Uruguay River frontier between the two countries in 2005 but a Buenos Aires initiative to drag Montevideo to the International Court in The Hague, Netherlands, ended with an embarrassing defeat.
Environmentalist groups also failed to convince the court and independent environmental experts the pulp mills could be harmful.
Several years of Argentine government campaigns, combined with numerous pressure groups' picketing of a bridge over the river linking the two countries, triggered a breakdown of overland trade and tourism.
As a final irony, Argentina had to threaten its protesting groups with court action to halt the protest campaign and allow trade and tourism to resume.
Argentine Foreign Minister Hector Timerman told the Uruguayan La Republica newspaper the political row over the pulp mill was dead and buried and both sides now wanted harmony to prevail in their bilateral relations.
Argentine President Cristina Fernandez de Kirchner's government squandered millions of dollars of state funds on the abortive campaign and risked damaging bilateral relations despite conciliatory moves by Uruguayan President Jose Mujica.
"Problems of the past have been solved and have been overcome for the benefit of both peoples, with no resentment, and which is the only way to solve them," Timerman said. "We have a relationship that can grow and which is going through a very good moment with no open conflicts," he added.
"Yes, we have many issues pending," he said, adding the two sides would concentrate on issues that brought them together.
Paper manufacturer Stora Enso says it plans to build a new giant pulp factory in Punta Pereira, Uruguay, in partnership with Chilean forestry company Arauco. The companies plan to invest $1.9 billion in the project and have the complex up and running by 2013.
Helsingin Sanomat said the new factory will be the largest foreign investment ever made in Uruguay. It will produce 1.3 million tons of eucalyptus pulp annually for shipment to paper mills in Europe and Asia.
Finnish economist Matleena Kniivila told the newspaper that Stora Enso's investment in Uruguay will likely not be the latest.
"Tree farming is clearly more efficient because trees grow much faster in South America than they do in Finland, for example. Labor is also much cheaper than it is in Europe. With growing demand for pulp in Asia, speed and low labor costs are a necessity," Kniivila said.
China is likely to be a key market. It doesn't have the right conditions for producing its own pulp in large quantities.
