FAQs: Uruguayan Pulp Mills

Frequently Asked Questions | Espaņol |


What type of involvement is the World Bank Group contemplating relating to the construction of pulp mills in Uruguay?

The International Finance Corporation (IFC), the private sector financing arm of the World Bank Group, will seek approval by its Board of Directors for the financing of the Orion pulp mill plant in Uruguay. In addition, the Multilateral Investment Guarantee Agency (MIGA), also a member of the World Bank Group, will seek approval by its board of Directors to provide political risk insurance for investors in the Orion plant.

Why is only the Orion project being considered? What about the CMB plant by Grupo Empresarial ENCE?

IFC had been considering support for both the Orion and CMB projects. However, following Grupo Empresarial ENCE’s announcement to relocate its plant, 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, and to consider only the financing of the Orion mill at this time.

How much financing is IFC considering?

IFC is considering providing Botnia’s Orion plant with a $170 million loan. IFC promotes sustainable private sector investment in developing countries as a way to reduce poverty and improve people's lives.

What is MIGA’s proposed involvement?

MIGA is considering support for the Orion pulp mill. The investor, Botnia, has requested $300 million in coverage against potential political risks. MIGA provides political risk insurance (guarantees) against losses arising from currency transfer restrictions, breach of contract, expropriation, and war and civil disturbance, for private foreign investments into developing countries. Unlike IFC, MIGA does not finance projects.

What is the timeline for the project to be reviewed by IFC and MIGA’s Boards?

IFC and MIGA will seek Board consideration for the Orion project in mid-November.

Why is IFC considering supporting this project?

As a development institution, IFC finances projects that benefit emerging economies and local communities. The Orion project will have a significant, positive impact on the economy of Uruguay. It is expected to generate revenues equivalent to 2 percent of the country’s GDP (based on 2005 figures) and more than 8 percent of the country’s exports annually for an estimated 30 years of full production. The employment impacts will also be significant. The project is expected to create 2,500 jobs, of which 300 in the mill and 2,200 in related forestry and local transport. This project represents the largest foreign investment in Uruguay's history and will establish the country as one of the world’s major pulp exporters. Moreover, this project fits in with the World Bank Group’s long-term strategy for the development of Uruguay, which recommended investments in forestry and in the diversification of the country’s export base to increase its competitiveness globally.

THE CUMULATIVE IMPACT STUDY

What was the purpose of the Cumulative Impact Study (CIS)?

As part of IFC due diligence to consider financing for projects with anticipated environmental and social consequences, Environmental Impact Assessments (EIAs) are carried out by clients in order to ensure that the proposed projects are environmentally and socially sound. Each of the pulp companies prepared comprehensive EIAs of their projects in accordance with Uruguayan and IFC requirements. These EIAs were released for public review in 2005 and are available in IFC's pulp mills page:
http://www.ifc.org/ifcext/lac.nsf/Content/Uruguay_Pulp_Mills.

To supplement these separate EIAs, IFC commissioned a study of the two projects' cumulative environmental and social impacts.

What are some of the issues addressed by the CIS?

The cumulative impact study addresses more than 30 issues, ranging from social and economic (such as the effects on traffic, labor supply, and tourism in the region), to issues such as air quality, water quality, and biodiversity. For more details, please visit:
http://www.ifc.org/ifcext/lac.nsf/Content/Uruguay_Pulp_Mills_CIS_Final.

In terms of safeguarding the environment, what are the main findings of the CIS?

The Orion plant will use Best Available Techniques (known as BAT) in the making of wood pulp as defined by the European Union's Directive on Integrated Pollution Prevention and Control. The plant will also meet Uruguay's emissions regulations and World Bank Group guidelines, as well as European Union standards.

For a summary of the specific findings regarding cumulative impacts to the environment please read the CIS's Executive Summary. Click here to access the summary:
http://www.ifc.org/ifcext/lac.nsf/Content/Uruguay_Pulp_Mills_CIS_Final.

THE TECHNOLOGY USED

What is the main difference between pulp bleaching methods?

Two approaches have been taken by pulp manufacturers in response to concerns on dioxin emissions from mills using chlorine bleaching in the 1980s. One approach was to eliminate molecular or elemental chlorine-based chemicals (i.e., bleaching sequences in which molecular chlorine (Cl) and hypochlorite are not used), referred to as ECF bleaching. The second approach was to bleach with no chlorine-based chemicals, which is called TCF bleaching (i.e., bleaching with oxygen, ozone, alkaline or acidic peroxide). Botnia and ENCE were leaders in the adoption of TCF technologies and today 21% of Botnia’s and 38% on ENCE’s production is manufactured using the TCF process. In selecting a bleaching technology for Uruguay, both companies investigated a range of ECF, TCF, and ECF-Light technologies (an “ECF-Light” technology essentially has attributes of both ECF and TCF production). The ECF-Light technologies were selected as pulp from the TCF sequences has lower yields and poorer final quality than the ECF and ECF-Light pulps.

ENCE found that pulp using the TCF bleaching method could not reach the necessary market brightness, and Botnia has found that TCF bleaching produces inferior fiber strength.

Is TCF bleaching better for the environment than ECF?

Studies by independent university and international research centers have shown that wastewater from ECF bleaching is virtually free of toxic chlorinated compounds such as dioxin. Current scientific opinion is that there is no appreciable environmental difference between ECF and TCF bleaching technologies—and that both are environmentally friendly. The United States and the European Union have both adopted ECF bleaching as Best Available Technique. ECF-bleached pulp is preferred in the market, since it has greater fiber strength and higher yield and produces paper that can be recycled more easily. Over the last 10 years, ECF has become the dominant bleaching technique, while TCF holds only a minor and declining market share.

The scientific opinion cited here reflects research carried out by numerous university research institutes (the Universities of British Columbia, Stockholm, and Helsinki); national research organizations (the National Water Research Institute in Canada, among others); industry research organizations (including NCASI -- the National Council of the Paper Industry for Air and Stream Improvement, in the United States; PAPRICAN -- Pulp and Paper Research Institute in Canada; the World Business Council for Sustainable Development; and Scandinavian institutes); and independent research organizations (e.g. the International Institute for Environment and Development, based in the United Kingdom).

The ECF versus TCF question was recently examined by RPDC, the government agency responsible for permitting new pulp mills in Tasmanian, Australia. The RPDC review concluded that TCF pulp and ECF pulp have similar environmental impacts from air and water emissions, and neither emitted dioxins at environmentally significant levels. Neither technology offers significant advantages in terms of operating risk, safety, and occupational health considerations. Both technologies are acceptable under the Stockholm Convention of POPs, IPPC-BAT, USEPA, and all significant permitting authorities.

THE CONSULTATION PROCESS

How have stakeholders in Uruguay and Argentina been consulted about the proposed pulp mills?

Both companies have carried out appropriate consultation, as required by DINAMA, Uruguay's Office of Environmental Resources, on their individual EIAs. With the release of the draft CIS, the World Bank Group initiated a minimum 60-day consultation period on the document. It became available for public review, comment, and possible modification on December 19, 2005.

During the consultation period the World Bank Group continued to engage with interested stakeholders through a series of meetings in Uruguay and Argentina. The meetings were held to enable stakeholders to provide comments and concerns on the draft CIS. IFC and MIGA experts and representatives of the teams working on the projects were among the participants in these meetings, which were facilitated by an independent third party to help ensure a focused dialogue and a fair process.

How were comments and suggestions brought forward during the consultation process incorporated in the decision-making process?

From release of the draft CIS through February 17, 2006, written commentary and alternative data or findings provided by stakeholders were submitted to the World Bank Group online, in person, or by mail. The World Bank Group compiled and provided this information to an independent panel of experts for his review.

Who convened the independent expert panel?

IFC invited Dr. Wayne Dwernychuk and Mr. Neil McCubbin to serve as an independent panel of experts to review the draft CIS and public comments on the document in February 2006.

Dr. Dwernychuk, a Canadian national, was appointed to serve as a senior scientist with extensive international experience in environmental impact assessment, particularly for the pulp and paper sector and other industrial developments. He has specific experience in the human health effects of dioxins and furans. Dr. Dwernychuk has carried out numerous field investigations for a range of government, private sector, and industry association clients, and he has provided expert advice to panels and task forces on related topics.

Mr. Neil McCubbin, also a Canadian national, is a renowned expert in the design of pulp production, pollution prevention, and effluent treatment systems for the pulp and paper industry. He has 40 years of experience in the private and public sector in Canada, the United States, and Latin America.

What was the role of the independent expert panel?

The panel reviewed the CIS and all the comments received on it. The experts panel had an advisory role. It assessed the validity of challenges and feedback to the content and technical analysis provided in the CIS and then provided the World Bank Group with findings and advice. The experts’ findings and advice were made available to the public in April 2006.

What was the role of EcoMetrix in the final study?

EcoMetrix is an independent Canadian environmental consulting firm, which was selected by IFC to revise the draft CIS for the two pulp mill projects in Uruguay. The final CIS specifically addresses the findings and recommendations of the independent expert panel, whose report on the draft CIS, taking into account all stakeholder feedback and previous environmental documentation, was made public in April 2006.

Upon completion of the work by EcoMetrix, the independent expert panel reviewed once again the final CIS and indicated that it addresses the findings of their April report.

How do the CIS and the consultation process fit IFC's procedures and role?

The CIS and the consultation process are an integral component of IFC's project evaluation process to ensure that projects financed by the Corporation meet its strict and internationally recognized environmental and social standards. As a member of the World Bank Group, IFC promotes the sustainable development of the private sector in emerging markets.