The International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (Miga) have approved a US$170mn investment by IFC and a guarantee of up to US$350mn from Miga for the Orion pulp mill project in Uruguay.


The two organisations, after completing a thorough review of the facts, are convinced that the mill will generate significant economic benefits for Uruguay and cause no environmental harm.


The Orion mill, majority owned by Finnish company Oy Mets-Botnia, will be operated to the highest global standards and comply with IFC and Miga’s respective environmental and social standards. A recently issued independent report provided conclusive evidence that the local area, including the Argentine city of Gualeguaychu, will not experience adverse environmental impacts.


“Today’s decision paves the way for us to move forward and engage with stakeholders to maximize economic, environmental, and social benefits to local communities on both sides of the river,” says Lars Thunell, executive vice-president of IFC.


The regional environmental improvements related to the mill include treating wastewater from the nearby town of Fray Bentos; generating electricity from mill operations that will offset 68,000 tons a year of carbon dioxide and reduce acid rain by replacing oil burned in public generating plants; treating the untreated effluent of an older, unrelated pulp mill in the nearby town of Mercedes; and producing sufficient sodium chlorate to allow local mills in Argentina and Uruguay to move to elemental chlorine-free pulp production.


The Orion mill represents the largest foreign investment in Uruguay’s history and will help the country move up the value chain beyond the export of raw materials, while generating some 2,500 much needed local jobs. The plant will generate value added equivalent to 2% of Uruguay’s entire GDP (based on 2005 figures) and slightly more than 8 percent of the country’s exports for each year of full capacity production.


Board members were presented with detailed facts on IFC and Miga’s extensive due diligence process, which included the conclusive and positive findings of a cumulative impact study and a subsequent review of the study undertaken by independent experts (the Hatfield report).


The experts “report assessed the final cumulative impact study, which examined the combined impacts of the Orion plant and Grupo Empresarial ENCE’s Celulosa de M ‘Bopicua (CMB) plant. The experts concluded that their recommendations and findings made in April 2006 were addressed in the final study.


IFC had been considering support for both the Orion and CMB projects.


Following Grupo Empresarial ENCE’s announcement to relocate its plant, however, IFC has decided to put the CMB project on hold until the Corporation has had an opportunity to assess that project in its new location.  IFC is only financing the Orion mill at this time.


IFC and MIGA are not taking any position on the eventual outcome of the case pending with the International Court of Justice in The Hague regarding this project.