In Uruguay, protests are rising against the installation of UPM’s planned new pulp mill project in Paso de los Toros. There has been strong social criticism on the conditions of the contract that the government signed with UPM, on the expected impacts of the pulp mill as well as on the impacts of the associate infrastructure projects. EPN and its partners have published a Dodgy Deal* for this project, to warn investors against financing it, as it will expose them to huge reputational and financial risks.

In 2017, the Finnish pulp company UPM signed a controversial agreement with the government of Uruguay, for the construction of a pulp mill with the capacity of 2 million tonnes a year in Paso de los Toros. The contract has a long list of prerequisites, worth billions in investments, which the state of Uruguay must fulfil before UPM decides if it will, or not, proceed with the construction of the mill. This includes heavy investments in infrastructure, including the construction of a railway, roads and building a new port, setting up a free trade zone (which means UPM will pay almost no taxes in Uruguay), make legislative changes to facilitate the licensing process, reforming labour laws and letting UPM influence the curriculum of University courses. Opponents claim the contract is not beneficial for the Uruguayan people and that it is unconstitutional, as such commitments should have been approved by congress.

The project itself is also problematic as it will lead to the further expansion of monoculture eucalyptus plantations, which will impact biodiversity, increase the risk of wild fires and worsen rural exodus. These impacts were not assessed by the Environmental and Social Impact Assessment of the mill, which did not even specify where the company will be sourcing its fibre from.

The project will also impact the water quality and availability in the region and worsen the eutrophication problems of the small Rio Negro river. Furthermore, the pulp mill, the plantations and the associated infrastructure projects will cause several social impacts, such as the eviction of people living next to the Rincon del Bonete Reservoire, as the water level will be raised to guarantee water availability for UPM. The establishment of the new railway will impact an estimated 35,000 people. The lack of consultation and the lack of compensation rights for these impacts have led to large protests by impacted communities.

Due to these and other impacts, we recommend international banks and other financial institutions to refrain from providing funds or support for the construction of the Paso de los Toros project, or any of the associated infrastructure, before the conditions below have been fulfilled:

·       The government should revoke the agreement with UPM.

·       A new agreement can only be made after broad discussion with society and with parliamentary approval

·       The environmental and social impact assessment (ESIA) should include the plantations, both existing and new ones, that will be required to feed the mill

·       UPM should ensure a high level of transparency, among others by publishing the ESIA and all other documents that are relevant for stakeholders, on its transparency page of the project

·       UPM should ensure it has obtained FPIC from all communities that will be impacted by the mill and/or the plantations (both new ones and existing ones), as well as for all the related infrastructure such as the railway.

·       UPM should adopt Best Available Technology, which includes a Total Chlorine free (TCF) bleaching process.

* Dodgy deals are projects with potential high social, environmental and governance impacts, and which therefore pose significant risks to investors. BankTrack keeps track of some of the most problematic deals that NGOs are campaigning on. For more dodgy deals visit: www.banktrack.org.