Uruguay Plays Hardball Politics Against Argentina’s Kirchner

Pulp Mill Dispute Threatens to Do Grave Damage to MERCOSUR, Which Could Then Spread to Newly-Formed UNASUR

• Surely this dispute must not be permitted to get out of control

• The problem is that both sides can mobilize a strong case for themselves

• Uruguay needs a strong economy, while Argentina deserves to protect its environment

On October 23, Uruguay announced that it would block former Argentine president Néstor Kirchner’s ambition to become the first permanent Secretary-General of the newly formed Unión de Naciones Suramericanas (UNASUR).

In blocking his appointment, Uruguayan President Tabarè Vàzquez won the strong support of nearly his country’s entire political spectrum, particularly the two largest opposition parties, the Nacionales and the Colorados. Senator Jorge Abreu of the Nacionales explained: “We had a long discussion with Gonzalo Fernàndez, Uruguay’s foreign minister, and we have concluded that Mr. Kirchner will not give guarantees for the Uruguayan government.” As of now, Chilean President Michelle Bachelet serves as temporary Secretary-General of UNASUR. In behind-the-scenes and non-stop button-holing, Kirchner previously had received the backing of 11 of the organization’s 12 member-states, with only Uruguay dissenting. The UNASUR vote must be unanimous; if Uruguay stands by its decision, it will be a fatal blow to Kirchner, denying him what could become South America’s most important regional post.

Kirchner originally had been nominated by Ecuadoran president Rafael Correa, after a well-known Bolivian diplomat, Pablo Solón, failed to win the support of Colombia, Peru and Ecuador. If Kirchner’s bid ultimately fails, Solòn will be the most likely candidate to win out.

Argentina’s Foreign Minister Jorge Taiana has described Uruguay’s snub of Kirchner as an “insult to Argentines, to UNASUR and to the countries that support Néstor Kirchner’s candidacy.”

The Pulp Mill Dispute
Montevideo says it prefers a candidate who is not linked to old political traditions. However, many analysts believe that there is a lot of political animus behind the Uruguayan veto. During the last days of his presidency, Kirchner supported the setting up of roadblocks on the Argentine side of a bridge spanning the Uruguay River, connecting Argentina and Uruguay. These barriers were erected by Argentine protesters, who were objecting to the presumed environmental damage that would be produced by a Finnish pulp mill company, Oy Metsa Botnia, once it started operations on the Uruguayan side of the river.

The Argentine activists were protesting the pollution which would result from creating cellulose as an end product, claiming that by-products such as dioxins and furans would cause irreparable damage to the aquatic habitat of the Uruguay River.

The mill’s operation became the subject of a protracted and increasingly hostile dispute between the two MERCOSUR members and is currently being arbitrated by the International Court of Justice in The Hague (ICJ), as a result of an Argentine petition. On May 4, 2006, Argentina instituted legal proceedings against Uruguay before the ICJ, claiming that Uruguay had breached a bilateral treaty obligation to consult with Argentina before moving forward with its pulp mill project.

The question is whether appealing to the ICJ is the right road to go. Rather than a judicial decision which may invoke too much friction to allow for a feasible decision that would take into consideration the basic national interests of both sides, why not consider assigning the effort to a three or more “wiseman” panel that could be more sensitive to the emotions that would be unleashed, and more experimental in the concessions made, in order to win acceptance on both sides?

Details of the Deal
The dispute, which has severely strained relations between the two countries, relates to the construction of two paper mills near Fray Bentos, an Uruguayan town with a population of 23,000. The Finnish project lies 25 kilometers from the Argentine municipality of Gualeguaychú, a popular tourist resort area on the bank of the Uruguay River. The new Uruguayan installation, when it is completely operational, will consist of two pulp mills, which will use Elemental Chlorine Free (ECF) technology to produce Air-Dried Pulp (ADP). ADP is the primary input for paper production. The plants are scheduled to produce a combined total of about 1.4 million tons of pulp annually. The Finnish project is of enormous importance to Uruguay, as it represents the largest foreign investment in the country’s history and will serve as a key source for local employment. Argentina claims that Uruguay, by unilaterally authorizing the construction of the paper mill facilities, violated the Statute of the Uruguay River. This pact was concluded in 1975, and established “the joint machinery necessary for the optimum and rational utilization of the River Uruguay.”

On July 13, 2006, the ICJ, after reviewing the necessary controls to uphold environmental standards, stresses the necessary environmental studies which should be carried out to assess the environmental impact of the mills in terms of atmospheric emissions and liquid effluents. The ICJ found that “the construction of the mills did not represent an imminent threat of irreparable damage to the aquatic environment of the Uruguay River, or an imminent threat of pollution.”
Just one day after Argentina filed its case before the ICJ, the blockading of several bridges and roads between the two countries halted the transit of goods and people. The Fray Bentos bridge forms a major artery for Uruguayan exports to Argentina and for tourist traffic into Uruguay. Protest actions up to now already have caused heavy financial loss for the Uruguayan economy.

Argentina and Uruguay, as MERCOSUR members, are both committed to the advancement of South American economic integration. Thus, Uruguay’s Foreign Minister Gonzalo Fernandez condemned Kirchner’s backing of the Argentine protesters against the pulp mills, asking the question: “How can Uruguay support Mr. Kirchner to head for a regional organization when, as a president of his nation, he was unable to abide by MERCOSUR’s clear rules regarding the free circulation of people and goods?”

The Bolivian government, through its foreign minister, David Choquehuanca, has stated that his country, which strongly backs Kirchner’s candidacy, will try to find a constructive outcome to the problem caused by the Uruguayan veto. Vàzquez announced that he appreciated the action of Evo Morales’s government, but continued to condemn Argentina for blocking a financial undertaking that was so important to Montevideo.

The Role of UNASUR and its Secretary-General
The role of Secretary-General of UNASUR will be of the greatest importance in terms of the formulation of continental policy: UNASUR is a new body, with the role of Secretary-General needing to be defined and elaborated upon. After all, the aforementioned position is still being held on a temporary basis by Chilean President Bachelet (currently the temporary secretary-general position will rotate, but eventually the incumbent will be elected for a fixed term).

Once the Secretary-General is elected, he or she will establish a permanent secretariat in Quito, Ecuador. The evolution of UNASUR will depend on future decisions made by the Secretary- General. The incumbent in that position will be the leader of the General Secretariat, one of the four bodies of UNASUR (the others are the Council of Heads of State and Government, the Council of Ministers of Foreign Affairs and the Council of Delegates). The role of the General Secretariat will be to execute the mandates of the other organs of UNASUR, to represent member nations in foreign policy initiatives taken by UNASUR and to carry out institutional responsibilities. The Secretary-General, with the support of the Council of Delegates, will promote initiatives for dialogue on themes of regional or international interest and will attempt to strengthen cooperative mechanisms with other regional groups and states, focusing on projects in the areas of energy, financing, infrastructure, social policy and education.

The Secretary-General is also charged with preparing and submitting the annual report, drafting an annual budget for consideration by the Council of Delegates, and to adopt the necessary measures for the proper management and execution of UNASUR’s functions. The Secretary-General will be called upon to coordinate with other Latin American and Caribbean entities the development of initiatives requested or mandated by the various bodies of UNASUR, as well as integrate projects carried out by outside agencies.

The Secretary-General will play an important role in the organization’s future. As one of its earliest projects, UNASUR has developed plans for a massive cooperative infrastructure project: the Interoceanic Highway, a road which would connect Pacific-coastal countries to those on the Atlantic. Additionally, since 2005, major Latin American governments have been discussing a project to run a natural gas pipeline from Peru through Chile, to Argentina, Brazil and Uruguay called the “South America Energy Ring”. Although this project has been signed and ratified, due to economic and political differences among the various Latin American countries, it has remained merely a conceived, rather than functioning, project.

UNASUR’s Projects
Another matter being actively discussed within UNASUR is the Brazilian proposal for a South American Defense Council, aimed at resolving conflicts and promoting military cooperation in the region. Currently, Brazil is the major weapons producer in the region and could be the primary beneficiary from any increased weapons trade with its neighbors. As previously mentioned, member states of UNASUR signed an agreement on May 23, 2008 in Brasília to create a military coordinating component of UNASUR, the Conselho Sul-Americano de Defesa (CSD). The proposal obtained initial support from most of South America; Venezuela’s President Hugo Chávez expressed a keen interest in the CSD, saying that “the alliance will help the formation of a big South America.” On the other hand, Colombia’s President Alvaro Uribe has articulated his reservations, emphasizing his trust in the existing Organization of American States’(OAS) defense mechanism. Uribe explained that his opposition to CSD was due to the reluctance of some of his neighbors to recognize the leftist FARC as a “terrorist organization.”

The region must also deal with complex economic issues, the most significant being the development of the “Bank of the South,” which will finance economic projects aimed at improving local markets and promote technological development projects of UNASUR member states. But Brazil and Venezuela may have different objectives for the new regional bank. Venezuela suggested that the “Bank of the South” could become the South American version of the International Monetary Fund (IMF). Meanwhile, Brazil is interested in steering the lending structure toward servicing the infrastructure investment needs of an expanded MERCOSUR.

To conclude, strong ideological differences separating the members still exist: on the one hand, there is the formidable left-leaning and pro-socialist group comprised of Venezuela, Ecuador and Bolivia, and to a lesser extent, Brazil and Uruguay. On the other hand, Colombia and Peru are closely allied to the United States. In between, there is Chile, Guyana, Paraguay and Suriname.

At a special summit in Brasilia on May 23, in which the leaders of the 12 South American nations signed the constituent treaty of UNASUR, the president of Chile, and current pro-tempore Secretary-General of the new body, Michelle Bachelet, expressed her confidence about the unifying role of the organization: “We want to show that Latin America is capable of speaking with a firm and strong voice and of building effective integration,” she said.

The development of UNASUR provides many opportunities, but also many challenges. For these reasons, the new institution has an absolute need for a vigorous consensus to develop among its 12 members. If the objectives of UNASUR are to integrate South America’s social and economic policies, to collaborate for the sustainable use of the region’s energy resources, and to strengthen economic and commercial cooperation, then UNASUR must develop effective mechanisms to overcome the deep-seated asymmetries that usually are naturally present when a large group of nations attempts to reach consensus.