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The project comprises the construction of a greenfield bleached eucalyptus kraft pulp (BEKP) mill with annual capacity of one million tons in Fray Bentos (Uruguay) by Europe’s second largest pulp producer, OY Metsa Botnia AB (“Botnia”, the “Sponsor”) from Finland. Uryguay is one of very few locations in the world where already existing plantations can supply the raw material for a new pulp mill of this scale. This investment would be the largest foreign direct investment in Uruguay’s history. It is estimated to create employment for over 5,000 people by 2007 and is calculated to increase the GDP of the Fray Bentos region by 50% and the GDP of Uruguay by 1.5%. The pulp mill will be built in Fray Bentos, the capital of Rio Negro Department. The city is located some 200 miles North-West of Montevideo and has an estimated population of 23,000. Fray Bentos is an important trade conduit as it is located on the Uruguay River and next to an international bridge that connects Uruguay to Argentina. The mill site was acquired on a willing buyer-willing seller basis, and no involuntary resettlement was required. The site contains no critical forest or other critical habitat.Botnia will build and operate the mill, to be supplied with wood from its partner Forestal Oriental S.A., which operates its own plantations in the Paysandu area, about 200km northwest of the mill site. Processed pulp will then to be transported by barge to an export terminal located further down the Uruguay River. The mill will produce pulp using a conventional kraft pulping process, with chlorine dioxide used in an elemental-chlorine-free (ECF) bleaching process. This is an Environmental and Social Review Category A project. The following aspects of the project were analyzed during appraisal: public consultation; development impacts; impacts of air emissions and effluents, including downstream impacts; source and sustainability of raw material; and, compliance with IFC policies on involuntary resettlement, international waterways, forestry, natural habitat, and cultural property.-Public Consultation and DisclosureThe EIA as well as the Socio-Economic Study for the project were completed by a team of local and Finnish specialists and the final reports were presented locally during public hearings carried out in November 2004. The various concerns raised at the meetings as well as the comments from DINAMA, the local environmental authority, were integrated into the final project design and the final EIA. Information collection and consultation on the project started in 2003 and was pursued throughout 2003 and 2004. The Company has a continuing liaison and disclosure program with local communities. Consultations to date indicate that the project enjoys broad public support. The Uruguay government is also fully supportive of the project. -Development Impacts The project is expected to generate a 1.6 % increase in GDP compared to the 2004 level. Regarding employment, the project will generate 3,000 and 7,500 jobs in 2005 and 2006 with total employment impact (direct and indirect) of around 8,000.-Impact of Climate ChangeThe project will provide between 10 and 20 MW of excess, green, renewable energy that could be injected into the national grid. The project is expected to generate 1.7 M tonnes of CO2 annually and the emissions will be monitored by IFC. -Water Rights and UsesThe plant is located on the shores of the international Uruguay River, whose use is regulated by CARU—the Uruguay River Executive Commission—and CARU guidelines are being followed for water extraction and effluent discharge. The commission has also been consulted during project preparation and the project has been reviewed to ensure consistency with IFC’s International Waterways Policy. -Forest ManagementThe raw material is sourced from existing plantations which are largely owned by Forestal Oriental S.A., an associate company of the Sponsor. In the future, additional plantations will be developed on areas purchased from cattle farmers and previously used for ranching. No natural habitat will be destroyed by the establishment of new plantations. Over 80% of the wood procured for the plant will be from plantations that are either already FSC (Forest Stewardship Council) certified (63.7%) or from plantations that have already developed a step-wise approach to achieve certification over the next three years. -EmissionsThe plant is being designed and will be constructed and operated to meet the European Union’s IPPC’s recommendations and best practices. As a result, both air emissions and liquid effluent discharges will meet Uruguayan standards as well as IFC’s guideline for pulp and paper mills. The plant will have a comprehensive monitoring program for all air and water emissions. During its supervision, IFC will verify that the plant is fully compliant with all of the elements of its permit. Liquid effluents will be comprehensively treated via a biological Wastewater Treatment Plant using an activated sludge process. The process has a security system with 2x40,000 m3 safety ponds. The outgoing treated effluent will be channeled to the river via diffuser vents compliant with CARU guidelines. The atmospheric emissions collection and treatment system includes incineration, for treatment of TRS and volatile odorous gases, electrostatic precipitation for dust abatement, and a scrubber gas washer for SO2 and VOC abatement.-Environmental ManagementThe Company will implement a comprehensive Environmental Management System to cover all of its operations, and this is expected to be certified to ISO 14001 and OHSAS 18001 standards. As part of its environmental management system, the Company will have formal plans for handling of hazardous materials used in the process, as well as an emergency response plan to deal with accidents, spills and other upsets.