Pulping the South:
Industrial Tree Plantations in the World Paper Economy
Ricardo Carrere and Larry Lohmann

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Chapter 9

Uruguay: 'Forests' on the Grasslands

The Uruguayan landscape is dominated by prairie ecosystems. Over 90 percent of the territory is grassland, a fact which led the Spanish conquerors to introduce cattle, which reproduced quickly and successfully on the country's fertile plains.

At the time the Spanish arrived, what native forests existed were mainly found bordering the many rivers. This is still true today, although the forests have dwindled and the variety of species has decreased, with some species even disappearing in some areas. At present forests cover three per cent of the national territory (some 600,000 hectares), down from an estimated original figure of about six per cent.

From tree planting to industrial plantations

Today Uruguay is embarking on intensive forestry, mainly the plantation of large masses of eucalyptus and, to a lesser extent, pine. Because these swathes of exotic trees are being planted on top of prairie ecosystems, where, by and large, forests never previously existed, this process clearly does not constitute reafforestation. On the contrary, as an ecosystem change, it amounts to an environmental disaster similar to the internationally-condemned replacement of tropical forests by grasslands, except that here it is the prairie which is being destroyed.

Tree plantings began with the arrival of the first Spanish colonists, who brought with them seeds of pine, olive, poplar, oak and many other exotic species, which were grown mainly for ornamental reasons. Later, the seeds of trees from even more distant regions were introduced, among them various species of eucalytus in 1853 and Pinus pinaster in 1890, both of which became staples of 20th-century plantations.

The initial plantation model might be described as one of 'spontaneous agroforestry systems'. In general it involved the plantation of small patches of eucalyptus on cattle ranches for the purpose of providing shelter and shade for the livestock which constituted the economic basis of the nation. Because the main aim was not timber production, no intensive management techniques were used. In general the plantations were made up of a mixture of various species of eucalyptus (Eucalyptus globulus, E. tereticornis, E. camaldulensis, E. saligna, E. robusta, E. diversicolor, E. cinerea, and so forth). No prior preparation of the soil was required (the trees were simply planted in holes), nor were fertilizers used, although some chemicals to combat leaf cutting ants were applied during the first two years of growth.

These plantations had no significant negative impacts. Their small extent minimized their effects on local hydrological systems and on flora and fauna. The main tree species used, in addition, did not turn out to be invasive of other ecosystems, and the use of a variety of species protected the plantation from pests and diseases. Only Eucalyptus globulus (the species most often planted in solid masses) suffered disease, being attacked extensively by the weevil Gonipterus gibberus. Soil was not lost, nor nutrients exported; when the plantation reached maturity, a balanced nutrient cycle was achieved. Low chemical use, in addition, prevented water contamination.

This plantation model generated confidence in eucalyptus plantations generally; indeed, today many Uruguayans believe eucalyptus to be an indigenous tree. At the same time, it provided experience in seedling production, plantation and plantation management techniques, and the best species were identified for various soils and regions.

As this plantation model developed, another was also being explored: pine plantations to stabilize the dunes lining the beaches in Uruguay's south. These plantations, copied from those established in southwest France (les Landes), were in line with other contemporary efforts to dominate nature. Even though the experiment ended in the near-elimination of the original ecosystems, one important by-product was the development of an economically very significant tourist industry which today draws visitors from foreign countries as well as from Uruguay itself. As with eucalyptus, the pine became 'naturalised' in the Uruguayan consciousness and its planting therefore tends not to raise resistance among the public in general.

These two models began to change as a result of an economic crisis which began in the late 1950s and forced the country to turn from foreign to domestic wood sources. It was then that the potential of wood supplies from self-regenerating pine plantations was discovered. Timber buyers also began to obtain supplies from the eucalyptus plantations on livestock ranches. When international oil prices rose in the 1970s, too, the manufacturing sector found in eucalyptus a far more economical and, initially, abundant source of fuel (gasified wood). Plantings increased, helped by a 1968 forestry law which, through tax exemptions, promoted species suitable for the timber industry. However, it was not until the military dictatorship of 1973-1985 expanded these exemptions substantially that large areas were finally planted, between 1975 and 1979, with eucalyptus _ mainly for fuel _ and pines. In 1979 this subsidy was eliminated and new plantation development came to a virtual halt.

Toward the end of the 1980s the country moved on to the export model, according to which 'forestry management does not differ much conceptually from the management of any business or factory' (Pou 1992). The aim was to produce for foreign markets at a competitive price using the technological package of the Green Revolution: intensive soil preparation; large scale monocultures of fast-growing species; fertilizers, herbicides and pesticides; and mechanised harvesting. The exportable product was initially to be eucalyptus roundwood for pulp, later on changing to pulp once a 'critical mass' of plantations was reached and pulp plants became feasible.

Domestic conditions encouraging the industrial model

The fact that Uruguay, originally lacking an industrial wood resource, has become an exporter of wood to countries as distant and traditionally as thickly-forested as the Nordic nations is very nearly beyond belief. It can be explained only by reference to an extraordinary set of conditions, partly internal to the country and partly external.

One domestic factor leading to the extensive growth of exotic tree plantations in Uruguay involves the country's cultural dependency. Uruguay, a nation of immigrants, has always looked at itself as a mirror of Europe and this vision is also reflected in its forestry practices. Instead of stressing that the country is covered by magnificent pastures, many Uruguayans have emphasised its lack of European-style forests as a negative element. For example, one of the first books on forestry edited in the country (Lopez and Cussac 1943), points to an 'insufficiency of forests in Uruguay', saying that Uruguay is 'by far the poorest nation in forests in Latin America', a state of affairs which 'brings with it serious economic, climatic and soil problems'. This point of view, shared by most technocrats and the public in general, helps explain the support tree plantation has historically received in the country.

Another relevant internal condition has been the stagnation of Uruguayan agriculture, due to a large extent to the constant fall in the international prices of its traditional products _ meat, leather, wool and cereals. Wood is currently seen as a more dynamic agricultural activity. On a more general level, the nation is being increasingly pushed to increase exports in order to pay off a large foreign debt. The global pulpwood market is viewed as insatiable and therefore well able to generate the necessary foreign currency.

At the same time, Uruguay attracts transnational corporate forestry investment for several reasons. For one thing, land is cheap, fertile and relatively flat, favouring mechanised forestry operations. Land titles are clearly defined and socially accepted. In addition, climatic and soil conditions favour the rapid growth of the species needed for the paper industry.

Opposition in the thinly-populated livestock-raising areas where the government promotes plantations, moreover, is minimal. Indeed, the lack of other job opportunities in these areas encourages expectations that plantations will result in net employment gains. Rural underemployment helps depress wage rates to less than US$2 per hour (which Forestry Department leaflets aiming to attract foreign investors claim falsely to be 'one of the lowest levels in the world' [Uruguay MGAP 1995].)

In addition, the country has built up considerable technical expertise in plantation management, and basic infrastructure for extraction and export of forestry products already exists _ though enormous additional investments will be needed to deal with the huge production levels that are foreseen. Officials project that 2.8 million tonnes of roundwood will be exported in the year 2001 and six million tonnes in 2004 (Buxedas 1995). This implies one loaded 30-ton lorry arriving at a port every 15 minutes year round, or seven shiploads per month (Prez Arrarte 1994).

A new forestry law (1987) to promote plantations with direct subsidies, tax exemptions and soft loans is also in place. The new law differs from the 1968 law mainly in offering plantation financing through a World Bank loan. Finally, Uruguay is attractive to foreign investors in that there is little likelihood they will be accused of destroying indigenous forests: not only are such forests a relatively small feature of the landscape, but they are also explicitly protected by national law.

External conditions

To take advantage of these long-standing domestic conditions, investors also required outside stimuli.

One long-term source of such stimuli has been the United Nations Food and Agriculture Organisation (FAO). In 1951, a joint FAO/World Bank mission made recommendations which, taken together with those of a later mission (Rogers 1955), formed the basis of the forestry laws passed in 1968 and 1987. The vision of Uruguayan forestry development which FAO articulated at the time has exerted a great deal of influence over the country's foresters, who to this day repeat unsubstantiated FAO statements about the supposedly protective properties of plantation 'forests' _ for example, that 'they will help to resolve . . . the extremely important water supply problem' (Hutton and Winkelmann 1953).

Other international organizations such as the United Nations Development Programme (UNDP) and the Organisation of American States (OAS) have also backed the industrial plantation model. The OAS, in particular, has contributed studies of markets, production, transport, industrialisation, and so forth. OAS has been the only international organisation to raise questions about the environmental sustainability of plantation forestry, stressing the need for research and for producers and technicians to maintain 'an open posture on the issue' (OAS 1994).

The principal external catalyzing agents for industrial plantation development in Uruguay, however, appear to be the Japan International Cooperation Agency (JICA) and the World Bank. In 1986 a JICA study team took up residence in the country for three months, working alongside Uruguayan government officials. On the basis of the team's studies, JICA published, in March 1987, a 'Study Report for a Master Plan for the Establishment of Tree Plantations and for the Use of Wood Planted in the Eastern Republic of Uruguay'. In December of the same year, the government passed the new forestry law, followed the next year by a national forestry plan explicitly based on the master plan put forward by JICA. JICA continued to participate in Uruguayan forestry thereafter, using staff permanently based in the country and new missions sent to study specific issues, though Japanese capital has not yet been directly invested in either plantations or wood-related industries.

While JICA gathered and analyzed much useful information, it restricted itself mainly to examining the economic viability of industrial pulpwood plantations and a pulp mill. The convergence in interests between the Japanese researchers and their Uruguayan counterparts _ who were exclusively foresters _ made it almost inevitable that the study would neglect non-plantation alternatives in rural development. The fact that the studies were seen to be Japanese gave the industrial plantation model additional credibility with Uruguayan investors and the Uruguayan public, as well as with foreign investors and the World Bank.

The JICA studies _ which, incidentally, could have been done entirely by local experts _ failed completely to investigate plantations' socioeconomic and environmental impacts. This irresponsible attitude is exemplified by the statement one JICA expert, Takahito Mikami, offered at a 1991 conference with the preposterous title 'Afforestation: Foundations for Building a Nation'. Contradicting available evidence, Mikami glibly assured the audience that plantations would offer 'advantages like regulating the climate, protecting against flooding, conserving water resources, fertilising the soil and improving the environment' (Mikami 1991).

In the final report for the 1987 Master Plan, JICA's arguments were equally lightweight. Evaluating the functions of afforestation, the agency asserted without substantiation or explanation that 'the public functions of the forests are to guarantee water resources, prevent soil erosion and sand displacement, and provide protection to the natural environment'. In relation to water, JICA states, again with no evidence, that 'it is supposed that afforestation improves the water reserve capacity by 1,000m3/h', going on to recommend the afforestation of one of the nation's main river basins where three dams already exist for hydroelectric generation (JICA 1987). It seems irresponsible, to say the least, to recommend afforestation in the way JICA has done if no previous studies have been done, taking into account the huge water consumption that fast-growing industrial tree plantations entail and the impacts they might therefore have on the water needed to feed the hydroelectric turbines.

The resources needed to back JICA's plantation vision were supplied largely by the World Bank. Indeed, it was World Bank finance that made the 1987 national forestry law into the effective tool for plantation development that the 1968 law had failed to become. In 1989, the Bank approved a US$65 million loan for the Second Agriculture Development Project. Some $27 million of this was aimed at helping to create 100,000 hectares of eucalyptus plantations for a short-fibre export kraft pulp industry and 60,000 hectares of pine plantations for both a sawmill and a chemi-thermo-mechanical export pulp industry. This 'critical mass' of plantations, to be planted over eight years, would also make possible both continued pulpwood exports and continued production of firewood (to consist increasingly of forestry residues) for the domestic market. Plantation enterprises were to be promoted in three ways: by developing wood products exports, by expediting the handing out of the financial incentives provided under the 1987 forestry law, and by providing credit for planting, logging and small industrial development (World Bank 1989).

The World Bank's injection of money had immediate effects. Both national and international entrepreneurs began to invest in the sector, with the latter in particular boosting its perceived viability. According to the Forestry Department, annual private sector afforestation in the 1989-92 period was eight times greater than average annual afforestation between 1979-88 (Uruguay MGAP 1994) and annual plantation has continued to increase at a similar rate since (see Table 9.1).

The most important foreign enterprise has been Forestal Oriental SA, owned 60 per cent by Royal Dutch Shell and 40 per cent by Finland's Kymmene (shortly to merge with United Paper Mills to create Europe's biggest paper firm). Forestal Oriental is establishing 30,000 hectares of eucalyptus plantations to produce export timber for UPM-Kymmene mills in Finland. Drawing on the international experience of its partners (in particular Shell's failed plantation attempt in Thailand, where opposition from local people was strong), Forestal Oriental is currently the only company in Uruguay with a 'green marketing' policy. As a result, it carried out an environmental impact study for its plantation even before this was made a legal obligation under national law _ though only a short summary has so far been made available to the public) (Forestal Oriental 1993).

TABLE 9.1
Area of plantation established per year, Uruguay (hectares)

table under construction

Source: Buxedas 1995.

Spanish and Chilean businesses have also invested in Uruguayan plantations, encouraged by the President of the Republic himself, who recently wrote in a promotional pamphlet: 'With the experience of having invested in my own ranch, I recommend that you look into the opportunities and follow my example' (Uruguay MGAP 1995).

Voluntary blindness

Although current plans call for 200,000 hectares of tree plantations to be established in the five years from 1991, none of the multilateral or bilateral organisations supporting the plantations has studied their possible environmental impacts.

For example, Jaime Latorre, the Executive Director of the IBRD Forest Development Project in Uruguay, has denied that tree monocultures have any negative environmental effects _ even though his project has carried out no research into this issue. Latorre claimed in 1991 that with the new plantations 'the country would be showing the world that establishing forest where there was none before is to become a member of the short list of countries who effectively contribute to environmental improvement . . .' (Latorre 1991). The World Bank itself, in a report submitted for approval to its board of Executive Directors, assumes without evidence that industrial plantations, instead of bringing about environmental problems, will help counteract soil erosion and degradation (World Bank 1989). Although the OAS, by contrast, has suggested the wisdom of looking into 'how the expanding forest plantations behave and the ecosystems' responses to this' (OAS 1994), no research has resulted.

It has thus fallen to non-governmental organizations (NGOs) and a small number of independent researchers to study and disseminate information about the actual and potential social and environmental impacts of plantations. In particular, NGOs have presented evidence sufficient to justify allocation of government resources to continuing research on the matter. Possible impacts on water and soils have been documented by Panario et al. (1991); on fauna by Gudynas (1989, 1990) and Gudynas and Rudolf (1987); and on society and the economy by Carrere (1989, 1992), Carrere et al. (1995), Prez Arrarte et al. (1993), Damiani (1990), and Stolovich (1995).

Information countering official forestry propaganda has also been disseminated to the general public through a variety of activities. NGOs have used books and articles to raise consciousness about plantations, and workshops, seminars, conferences and public debates have been held with the participation of environmental NGOs, trade unions, agronomists, forestry company representatives, youth organizations, universities, and local communities in forestry areas. The different vision put forward by NGOs is allowing people to make more informed decisions about how to approach plantations. As a consequence, opposition is gaining strength.

Interestingly, transnational corporations are more receptive than local foresters to the idea that industrial plantations may have negative effects on the environment. For example, environmental impact assessments carried out by Forestal Oriental and by the consulting firm Informes y Proyectos S.A. (INYPSA) for Transpapel (a paper mill project reportedly backed by Swiss capital) point to possible impacts on water, soils and biodiversity. Such warnings have not been taken seriously or have been greeted with silence by government officials and foresters in general. In June 1995, Roberto Cal, the Director of the Renewable Resources Department, said that campaigns by Uruguay's Environmental NGO Network pointing out environmental problems with plantations were 'based on erroneous information' and that in Spain 'it was shown that negative impacts did not exist' _ an astonishing statement, given the work of Bermejo (1994, 1995), Groome (1994), Gonz lez Bern ldez et al. (1989), Castroviejo Bolibar (1985), M rquez Fern ndez (1985), Ruiz Prez (1990), PSOE (1979), Coordinadora Extremena de Proteccion Ambiental (1992), and others. In Uruguay, Cal maintained, 'there are no indications that . . . plantations provoke any negative impact or degradation' (La Rep#blica 7.6.1995).

Yet ample evidence already exists of the intrinsic weaknesses of monoculture industrial plantations in Uruguay. Although initially successful extensive plantations of Pinus radiata were established in the 1960s (just as FAO expert Lewis Rogers had recommended), within a few years the plantations were attacked by the European pine shoot moth Rhyacionia buoliana, which, along with an associated fungus, Diplodia pinea, spread rapidly to nearly all the plantations. As a result, plantings of this species had to cease (Morey and Porcile 1992).

Fortunately, the country had not yet embarked on an ambitious forestry plan, so economic losses were comparatively small. Today, however, with 200,000 hectares already in place, in addition to the 200,000 to come, losses could be enormous, particularly since the plantations consist mainly of two species of pine (Pinus elliottii and P. taeda) and two of eucalyptus (Eucalyptus globulus and E. grandis).

Indeed, most current species already have pest problems, including insects such as leaf cutter ants of the Atta and Acromyrmex genera, Platypus sulcatus (a eucalyptus wood borer), Pissodes castaneus (a pine weevil), Sirex noctilio (the sirex wasp, which infests pines), Gonipterus gibberus and G. scutellatus (eucalyptus weevils), Phoracantha semipunctata (a longhorn beetle) and fungi which attack pines (Diplodia pinea, Dothistroma pini) and eucalyptus (Phytophtora cinnamomi, Cladosporium eucaliptii, Septonema eucalipticola, Pestalozzia molleriana and Alternaria spp.) As Morey and Porcile (1992) state, 'increased forest resources entail a potential increase in pests and diseases along with a greater risk that new damaging organisms may find conditions more favourable for their expansion in the country'. And if chemical pesticides have to be applied every time that a pest cannot be controlled by silvicultural means, serious environmental consequences are likely to follow.

The country also already has some experience of the damage plantations can cause to the yields of small farmers. In the period from the mid-1970s to the mid-1980s when plantations were being designed to meet fuel needs, small producers were extremely active in trying to get a ban on planting eucalyptus in predominantly agricultural areas, although their reasoning was not fully assimilated at government level. Among other effects, the small producers mentioned crop pests, competition for water and nutrients, shade-out effects reducing agricultural yields, and the danger of fire. The latter, it was felt, even led to personal insecurity due to the proximity of plantations to farmers' homes (Damiani 1990).

Land tenure is also being affected by plantations. Before the plantation boom, large cattle ranches had been decreasing in size, mainly as a result of inheritance laws. Now, however, plantations are bringing about an agrarian reform in reverse. Investment in the forestry sector is allowing land to be concentrated in fewer, and, in many cases, foreign, hands. The typical Uruguayan estancia or cattle ranch covers 2-3,000 hectares, ranches of more than 10,000 hectares being extremely rare. Yet the ventures dominated by the transnationals Shell/Kymenne and ENCE, a Spanish pulp and paper company, already own more than 30,000 hectares each, and are planning to double their land holdings. The new landowners, in addition, are typically investors and not traditional farmers. This could lead to important changes in Uruguayan society, with an increased dependence on new transnational actors who are likely to come to dominate large areas of the country.

Rural workers, meanwhile have little to gain except for a few jobs. These, moreover, are characterised by low pay, instability, seasonality and poor working conditions _ particularly where contractors are involved (Carrere 1989, Stolovich 1995). Yet even these jobs are in some places preferable to being unemployed or living off the low wages on offer in the cattle-raising sector. Although conditions vary from place to place, moreover, the level of rural unionisation is extremely low due to unions' limited experience, low worker concentrations, seasonality of work (half of all forestry workers work on a seasonal basis), workers' fears of losing their only possible employment possibilities, and in some cases repressive management (Latorre 1995). Unions exist only in those few areas with liberal management regimes (for example, those of companies managing forest investments for bank workers retirement schemes) and large concentrations of full-time workers. The solution, as sociologist Ra#l Latorre (1995) suggests, is not plantations but rather 'a state policy which, in addition to incentives for investors, offers measures to ameliorate workers' quality of life'.

A bad investment for the nation

One of the main claims made by the government for tree crops is that they will generate substantial foreign exchange. However, analysis of the probable export figures casts doubt on this assertion. When all costs are included, the balance could even turn out to be negative. Pulpwood exports are likely to net the country only US$53 million in income by 2000 and US$82 million by 2010, or around three and four per cent of total annual national exports (Stolovich 1995).

But even to achieve these levels of exports, the country will have to take resources from other sectors and pour them into forestry. Tax exemptions, highways, bridges, railways, port facilities, state investments in plantation and machinery imports _ all must be paid for by the public. This is not even to take into account the income lost when land is taken out of other forms of production and planted to fast-growing trees. Economist Luis Stolovich (1995) has sketched out a balance sheet showing that financial gains from projected pulpwood exports in the year 2000 would be far outweighed by losses and that the balance would still be negative in 2010 (see Table 9.2). As one NGO analyst puts it, 'the export of roundwood for pulp . . . means going back to the 19th century':

Uruguay would not only become an exporter country of commodities with little added value, but would also be making a great social effort (of social transfers, investments, etc.) to promote an activity which, even in the best case, would make few social contributions and would not be a source of surplus to fund a global economic revitalisation of the nation (CIEDUR 1991).

TABLE 9.2
Uruguay pulpwood exports: gains vs. losses for the country as a whole in two indicative years ($US million)

table under construction

Source: Stolovich 1995.

According to Stolovich, the balance becomes positive only when pulp exports are also included. In that case, a projected surplus of US$20 million is generated for 2000 and US$60 million for 2010.

Even in current dollars, however, this is not very substantial in comparison with Uruguay's 1994 external debt of $5.253 billion (World Bank 1995). Stolovich's figures, moreover, do not include environmental costs such as the impacts of plantations on water, soils and biodiversity as well as industrial pollution. They also assume that the country will be able to export all its pulpwood and pulp, a dubious premise given that in 1993, for example, 'exports came to a near-standstill because the international price for pulpwood did not allow export dealers to buy wood internally' (Prez Arrarte 1994). As Stolovich notes, specialisation in commodities such as pulp, which may well fall in price in the long term, is likely to put the export sector 'in a state of permanent uncertainty at the mercy of concentrated demand' (Stolovich 1995). Such uncertainties and costs only add weight to the basic question of why the Uruguayan people have not been given the opportunity to decide whether so many of the the country's scarce economic resources should be spent on pulpwood plantations.

Conclusions

The successive Uruguayan governments which have promoted an industrial export model of forestry development claim to be following a neoliberal economic policy and thus to be denying all forms of subsidy to productive activities, leaving them to their own devices in an increasingly globalized and competitive international market. In truth, however, they are pouring resources into the sector. While withholding funding from education, social security, health, housing, and so on, the government is subsidizing giants like Shell, 'which, worldwide, move figures far greater than the whole national economy' (Stolovich 1995). Without such subsidies, this form of forestry development would not be profitable for private investors. Even with them, it cannot substantially improve the country's export earnings.

Industrial afforestation for export, moreover, not only does not improve the environment, but also threatens to degrade it. Plantations supplanting grasslands have a deep impact on local and regional ecosystems and their soils, water, plants and animals. At the social level, the employment opportunities created do little to improve the quality of life of rural people, at the same time that land and other forms of power are concentrated in fewer and fewer hands. In short, while the new industrial plantations will benefit Northern-based paper industries, who will be enabled to exploit a fresh source of cheap and homogeneous wood fibre, heavy environmental and social costs will be paid by present and future generations of Uruguayans.