Conversation between Argentina’s Secretary of Environment and one of Condoleza Rice’s top aides in the trenches of the State Department in 2007 during the Bush Administration – Argentina opposes the World Bank’s support (via the International Finance Corporation) of two controversial Finnish and Spanish pulp mills to be built in Uruguay on the border river with Argentina. The Argentine Environment Secretary has just made a long presentation to Rice’s aide, about the expected irreversible contamination of the mills to the area’s ecological surroundings, which include territories in both Argentina and Uruguay. She stresses the lack of social license from local communities, who oppose the mills. Argentina’s case against the investment is also backed by the IFC’s own ombudsman, the CAO, who has indicated that the investment violates the Bank’s social and environmental safeguards.

Condoleza Rice’s aide: Thank you for your presentation Ms. Secretary … so your country is asking the US to incline our influence at the World Bank to block the investment in these pulp mills in Uruguay? I just have one question to ask you. How did Argentina vote on Venezuela’s (Hugo Chavez’) entry into the Security Council of the United Nations?

Argentine Environment Secretary: We voted in favor of Venezuela’s entry.

Condoleza Rice’s aide: Thank you Ms. Secretary, we will duly consider your arguments in our final decision.

Ultimately, the US, along with most of the World Bank’s Executive Directors voted to give the Finnish paper pulp mill company Botnia, nearly US$400 million in assistance in what became a total investment of over US$1.2 billion (one of the world’s largest pulp mill investments ever), advancing what has been for years the progressive export of contaminating industries from industrialized countries to developing countries. Finland, who spoke for all of the World Bank’s Executive Directors at the time, coincidentally also presided over the European Union presidency. The EU countries rarely stand out against one another, and thus, voted as a block, with Finland leading the lobby in favor of the mill.

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This is a story about the cold, hard, and sometimes cruel international development politics faced by communities and non governmental groups all over the planet trying to build a more sustainable society.

It’s a story about what really influences international politics and economics. It’s a story about real politik, which doesn’t generally work according to ethics or formalities, but rather by the forces and interests that make up big economic investments. It reflects on who are the real decision-makers, why and how their decisions are taken, and what are the driving forces that influence the decisions that they make.

In the example above, the Executive Directors of the World Bank, who generally have some decision power to approve projects, became mere puppets on the strings of their home country foreign ministries. They voted to finance a mega-pulp mill complex, not because it was a sound investment (it wasn’t), but rather because global financial politics at that time were aligned against Argentina.

For most of the world, and particularly for NGOs and communities dealing with the social and environmental impacts of large investment projects, there is a sense that there is some sort of procedural integrity and justice in the decisions to send billions of dollars in to developing countries, for one project or another. In some cases, there is. However, in cases such as the Uruguayan pulp mill investment, politics would largely override this integrity. The World Bank, in such cases, conducts the usual charade to suggest that the vote is about  project quality and sustainability, but in reality, in this particular case, the real issues had little to do with paper pulp and where it comes from.

The vote certainly had nothing to do with whether or not IFC had complied with its due diligence to assure minimizing social and environmental impacts (which it had not according to the CAO—IFC’s own Compliance Advisory Ombudsman). We as NGOs invest lots of time and energy into participating in the World Bank’s efforts to establish policy guidelines, rules, and procedures, and sometimes, in cases where the politics are not polarized, the dynamics are such that these discussions are about efforts to achieve sustainability. However in this case, the decision was largely the result of international global politics.

The decision to invest US$400 million was mostly based on the favors and disfavors each country had with Argentina, which was presided at the time by Nestor Kirchner. President Kirchner had taken a brazen stance against paying onerous debts to greedy speculators making double digit dollar profits on highly risky investments in Argentina. Argentina refused to bail out bad debt, stonewalling international financial negotiators in Washington DC, inflexibly insisting on a 75% debt write off of commitments made under a previous administration.

Further, Argentina’s public and vociferous support of the highly despised Venezuelan President Hugo Chavez, would also greatly affect how country representatives, particularly the US, at the World Bank’s Board of Executive Directors would vote in the pulp mill case. With heavy international financial and political points leveled against the country, Argentina wasn’t about to get any favors from the global north.

Despite the World Bank’s rhetoric that it works to ensure the sustainability of its projects, it didn’t matter that thousands of people were marching to protect their environment, or that there was an international dispute unfolding between two otherwise friendly countries, or that there was a multi-year road block in place between these same two nations due to this conflict, or that the World Bank’s own ombudsman had ruled that the International Finance Corporation and the pulp mill companies had violated the Bank’s social and environmental safeguards. These factors all turned out to be trivial.

Cold, almost infantile, tit-for-tat politics would decide this case.

This is a story within a much larger story about how a midsized town of 80,000 people in the hard-to-pronounce town of Gualeguaychú (pronounced walewaychoo), Argentina collectively opposed a large multinational investment, against all odds, and with global politics aligned to ensure that the investment would go through.

It’s a story about the successes and failures of this community and a handful of actors that opposed the interests of large financial and political players. It’s about countervailing forces fighting out development politics, with hidden agendas that only a hand full of people ever discover. It’s about the lives and livelihoods of local people faced with corporate interests more concerned with advancing personal careers and seeking a large profit.

It’s a story about the environment, economics, people, and the politics that drive them.

It’s not a story about the general success or failures of NGO advocacy which will forever run into the many visible and invisible barriers that stand before justice and sustainability. Nor is it a story which tries to draw conclusions about what works or what does not work in non-governmental advocacy. It’s also not a story which reveals answers for businesses or governments about how to handle conflicts with large social movements, which are becoming more and more entrenched in nearly dogmatic community opposition to large industry all over the world, particularly contaminating industries like the extractives sector.

The story does provide, however, innumerable lessons and points of reflection for actors engaging in global development politics and advocacy.

It’s a story about the experiences of one particular organization (CEDHA) and the individuals running it, and how this organization crafted multifaceted approaches and strategies, some very innovative (and some merely textbook responses), to confront the various global, financial, political and social challenges it faced throughout several years during which it was involved in this case. Sometimes those strategies worked, sometimes, they worked extremely well, sometimes they failed miserably, and other times, they were completely irrelevant.

It’s a David and Goliathan story about a small organization and a very vociferous community, coming up against the giants of local, national and global politics. In some cases David made important dents in Goliath’s infrastructure, other times, Goliath would win the battle, and David would return to come up with more innovative ways to try to destroy the beast.

Important to this story in particular, is that some parts of the case led to changes in the policy of very influential development finance institutions like the World Bank, large private financial banks like Calyon or Nordea, or at the OECD. In other aspects of the case, advocacy ran amok resulting in little or no change whatsoever, only revealing the inconsistencies and inefficiencies of government and private institutions to handle the most basic elements of conflict and accountability.

What we can say is that there is a before and after to this case, locally, regionally and internationally. In Argentina for example, the case ushered in an era of social participation and engagement in development investment. Numerous NGOs are today monitoring and informing on the activities of large transnational corporations, and are using forums like the National Contact Points of the OECD to push for upholding the OECD Guidelines for Multinational Enterprises.

On the heels of this case, communities around the country learned to engage and participate in their own development. They learned to claim rights and they learned what the term “social license” means for business and for government, a term we disseminated heavily in local media during this case. Today, this empowerment is being felt strongly in the mining sector, which advanced rapidly since the mid 1990s with little or no significant community opposition, but which is now running into serious hurdles in the sector’s attempt to exploit the precious metals in Argentina.

A mere few years after this case, hundreds of “self-convened assemblies” around the country and in the region are organizing, learning, and casting their formal and informal vote over the decisions of their policy makers. And this, in and of itself, is a critical and valuable outcome. It represents the important influence that this case has had on society in general. Another pulp mill case like this one, for example, would be impossible today. Society is simply to sensitive now to large infrastructure investments to let one like Botnia or ENCE appear and gain traction. This is a major step forward for sustainability in this region.

The case drew quite unique and extensive local and international attention for various reasons, many having to do with the way in which it bluntly revealed the tenacity of financial actors to advance at all costs- social and/or environmental. It revealed the emptiness of the political rhetoric of financial institutions like the IFC, the World Bank, private banks, and export credit agencies, that in the end, for the personal ambition of international development agency staff, simply ignore the principles they claim to profess as institutions and as individuals. In the words of IFC’s Executive Vice President, Lars Thunnel, speaking before the Board of Executive Directors of the Bank, “We’re a bank, and if we had to stop every time a community complained, we would never give out any loans!”

The case also showed that when governments (and government officials in particular) want to, they can make a difference. They can take a stand and “do the right thing”. It showed that when there is a political will there can also be a political way. And conversely, when there is no will, the outcome is fairly predictable.

Many actors contributed substantially to the evolution of this case, both in favor and against the investments, and each of these played a critical role in advancing or halting the evolution of this investment. We include in this summary a section about these actors with a more detailed description of each and an accompanying assessment and analysis of their role. They were each, in their own way, mere players in a much larger game that would play out at the international level.

These “actors” included the community itself, which was practically unanimously engaged in a massive and universal social opposition to the investment, reflected in the ubiquitous presence of signs in store shops, gasoline stations, supermarkets, at banks, in the windows of private homes, on the road, and in nearly all walks of everyday life, reading “No a las Papeleras, Sí a la Vida” (No to the paper mills, YES to Life). This slogan permeated all communication mediums throughout the country, spreading like wildfire the readily believed notion that big multinational business is inherently irresponsible and contaminating.

It was indeed a perfect battle to fight: Finland’s largest ever foreign direct investment in the export of a contaminating industry like the pulp mill sector, which generates a rotten-egg-smell, as well as decades of opposition from local inhabitants in places like Finland and Spain where the industry thrived, but had reached intolerable levels. The need for industry expansion could not be (or would not be) absorbed in these home countries.

It was also Uruguay’s largest reception of a Foreign Development Investment (FDI), which was brought to Uruguay dating back to the 1980s, when studies by the Asian American Development Bank, the World Bank, and the pulp mills sector itself predicted that the invent of the personal computer would indeed not eliminate unnecessary printing of documents, but would instead triplicate (or more, as the sector eventually proved) the need for nice, clean, white paper.

The case offers a fascinating scenario to examine. Many of the usual actors that define development politics participated in this conflict, and we see in each of them many of the stereotypical characteristics that have come to define their genre in other similar cases. Some of these actors and dynamics include:

  • Industrialized vs. Developing Country
  • Big country vs. little country
  • International Finance Institutions (World Bank, IFC, MIGA and several others)
  • Export Credit Agencies
  • NGOs
  • Social Movements
  • Large private multinational banks
  • Foreign politics vs. local politics
  • Regional political/diplomatic disputes
  • Heavy media engagement
  • The International Court of Justice
  • The UN System
  • Regional Human Rights organizations
  • The OECD

The case also offers a unique introspection into the utility, functionality, and barriers to access to justice in formal and informal complaint mechanisms at the regional and international level. We provide a chapter about Comprehensive Advocacy and a section analyzing what we call “the governance gap” relative to corporate and government accountability of such forums, which varies widely in terms of quality and effectiveness depending on the case and the protection of the specific rights in questions.

In the Uruguayan Pulp Mill Case, over a dozen complaints were filed at various levels (international, regional, national, etc.), by a multiplicity of actors including States as well as non-governmental organizations. With so many complaints filed, it is interesting to review how each complaint mechanism responded to the case, how each forum dealt with the politics of the case, and how each forum was itself influenced by the higher politics involved.

The integrity of the OECD Guidelines was trampled by the political decisions of the Finnish Government, which was never able to balance its intention of promoting Finnish companies abroad, with its commitments to ensure the social and environmental sustainability of its investments.

The International Court of Justice (ICJ) allowed the lawyers of the two countries involved in the conflict to draft their own resolution, giving each a sense of both victory and defeat. This solution was more amenable to the political necessities of both governments at the time. We should stress that the initial contempt shown by Argentina against Uruguay dwindled as the case advanced at the ICJ. Once the national politics for the Argentina government no longer favored an alliance with the will of the community, support for the cause began to shift towards a quest for a diplomatic “way out”. We can say this with confidence because it was our own NGO founder and president who became Environment Secretary of Argentina and who, when the government was still aligned with the community, helped lead the prosecution at the ICJ. As soon as she departed from her government position however, support for the cause quickly dwindled, and the “way out” strategy took over as a priority for the government. Today, for instance, the still incumbent Argentine government, which once was on the side of the community and tolerated road blocks against Uruguay, is now criminally prosecuting those people that carried out those roadblocks. Times change, so do politics.

With IFC’s Management and staff heavily set on ensuring the projects would survive a board vote, the World Bank ignored the recommendations of its own Compliance Advisory Ombudsman. Little or no effort was made to adhere to the IFC’s Safeguard Policies (then under review), and, when push came to shove, it was clear that IFC would not stall or cancel this project under any circumstances. Even if it meant violating international law, which ultimately it did.

The US State Department put Security Council politics above the technical opinion of Treasury staff, who initially showed concerns over approving Bank financing of the mills.

Local courts both in Argentina and Uruguay catered to media and politics, letting their due process be influenced by local politics. The cases filed against company executives or state officials who had failed to comply with due diligence were stalled, or put away to be ignored entirely. Yet, for example, when the tides changed and the government of Argentina decided to drop support of the community, the justice system quickly engaged, not on the case against company officials, but on a new case against community activists.

The Organization of American State’s (OAS’s) Human Rights Commission bowed to national pressures from both Argentina and Uruguay to freeze the case, and since the original filing in 2006, has not yet even decided on admissibility. This was due directly to personal pressure placed on the Inter-American Human Rights Commission Secretariat by the Argentine Foreign Minister.

The large private French bank, Calyon (one of several privately owned multinational banks in the case), ignored the recommendation of its sustainability team, and chose instead to support the greed of its finance staff.

Export credit agencies like CESCE (of Spain) and Finnvera of Finland, which are public agencies providing public funds to private companies, both showed their ineptitude and lack of technical capacity by revealing (in confidential faxes that we were able to obtain) that they had no idea what was happening, and that they would blindly follow the recommendations of the IFC.

The legal teams of the large Scandinavian Nordea bank revealed that they were clueless as to the procedures of international law, leaving their company to make decisions without the benefit of sound legal analysis.

The list of revealing and surprising occurrences such as these goes on and on.

Most of us imagine that these weaknesses and these sorts of faults in such institutions exist- it’s almost a cliché in development circles and amongst advocates- but in this case the evidence was blatant. It is also interesting, to realize just how coordinated and interrelated all of these actors are. While we may have a sense that at the global level there is some sort of coordinated system of communication between the powers that drive international politics, many of these informal dynamics came to light very explicitly in this case allowing for unique insight and reflection over how development and investment decisions are made, and how power politics play out in international circles.

Every local and global advocate on nearly any issue, be it climate change, human rights, gender equity, or all of the above, has a sense of the underlying and non-transparent political nature of the world in which they move. This case offers a window into a world we often only imagine exists, and clearly reveals the unfairness, inequitable, unsustainable and often-times absurd world of global politics.

What we find fascinating about this case- and this is the reason we’ve decided to write about it- are the intricate relations, interests, and forces that drove each aspect of it. We hope to show just how far many of these deciding forces were, from the actual facts of the case.

The Uruguayan Pulp Mill case, as it is commonly referred to in English speaking circles, or “el Caso de las Papeleras—or Pasteras” as is more common in Spanish, continues to draw attention, marvel and wonder from an endless list of individuals and institutions, not because it is so remarkably unique, but because so many actors from so many institutions, and walks of life (not to mention so many thousands of people in the local community) have been involved at some level over the years. Furthermore, our organization, the Center for Human Rights and Environment (CEDHA), had a unique perspective on this case which allowed us to uncover many of the issues and dimensions that would normally have been invisible to an NGO.

We as an institution and I personally have learned an enormous amount from our engagement in the case. We have delivered hundreds of presentations and written an equal or greater number of short pieces, synopsis, press releases and the like, covering the many local, regional and international dimensions of the case.

We have used our experience in this case to analyze factors as diverse as corporate international law, the psychology of social movements, the World Bank’s Social and Environmental Performance Standards, the State’s duty to protect human rights violated by business, communication and media outreach strategies, the social and environmental implications of private international financial lending, international human rights access to justice instruments and their relationship to the financial sector, and many others.

What was perhaps extremely novel in terms of NGO advocacy (which usually occurs in opposition to government activity and interests) was that in the midst of the case, Romina Picolotti, then president of CEDHA, became Environment Secretary of Argentina (a post she held from 2006-2008). Romina crossed the NGO-government line, and took on responsibilities as a State actor, which meant becoming heavily invested and immersed in the bi-national and international politics surrounding the case.

Romina’s position gave us a unique perspective into national, regional and global development finance politics, which would have been impossible to see had we remained, as most NGOs do, on the outside of the government world.

Through the Environment Secretary’s unique vantage point, we were able to see simultaneously how a government approaches civil society conflict issues, and how a government engages bilaterally, regionally, and internationally to defend its investments (in the case of Uruguay) and to position itself vis a vis its global interests. While the community was isolated from the backroom politics of government and international organizations debating about how to handle the conflict, we were able to witness first hand these closed-door negotiation processes of the real politik which influences and ultimately shapes international development. And we saw how a non-aligned power, such as Argentina, pays the political and financial cost of its non-alignment with global politics, and how a community is entirely sidestepped in favor of economically more powerful corporate financial interests.

We were also able to extrapolate our experience in the Uruguayan Pulp Mill case to address many of the other circles in which we carried forth our public policy advocacy.

The lessons learned in this case helped us formulate and bring very tangible concerns and recommendations to the World Bank on how to improve the accountability mechanisms relative to the IFC. [LINK TO RECOMMENDATIONS FOR IFC/CAO REFORMS].

Following this case we were able to better analyze and convey recommendations to the OECD regarding their efforts to hold multinational enterprises accountable for social and environmental abuses under the OECD Guidelines for Multinational Enterprise [LINK TO RECS].

We also engaged very directly with the UN Special Representative to the Secretary General on the issue of Human Rights and Business, assisting him with his mandate on the inconsistencies and governance gaps which hinder truly sustainable development worldwide.

The case helped us better understand effective communication, including the various tricks of producing better and more influential press releases, as well as other tools to better affect change.

As one of the lead (and very few) civil society organizations that worked on this case, we have received hundreds of inquiries about it from people all over the world who have studied this story for innumerable reasons: for doctoral dissertations, for masters’ theses, for academic role play in business schools and law schools, to learn about NGO advocacy, for journalistic research, for international relations or political science classes, and the list goes on and on. We’ve fielded questions from PhD students, other pulp mill companies, private bank staff, government officials, CSR experts, and other NGOs reaching across a variety of fields. Because of these inquiries, as well as because of our own recognition that it is important not to loose the valuable knowledge generated through this case, we have decided to create this book. We feel that many of the issues surrounding this case are worthy of mention and can provide learning and reflective opportunities.