22 notes on a shameful agreement between the Uruguayan State and the Finnish company UPM

By Andrés Núñez Leites

The history of our countries seems to repeat itself eternally: to raise a nationalist flag, to promote an independentist mysticism and to transport the economic interests of some country or foreign company in alliance with the local dominant elites. At the same time. To this postcolonial fatality, the progress of the process of globalization is added, with which the States are losing sovereignty infront of the transnational companies. It is not a simple act of corruption, but something more structural: companies have managed to adapt to the operation of the State, to which they ask the generation of a secure environment (economic, legal, environmental and labor policy) and to which they pour contributions through taxes, PBI results and a certain "spill" towards local investors in the form of services and provision of raw materials. Hence, investment contracts are signed in which the State stands as an agency contracted by the company, and cedes its sovereignty. Hence, the company will dictate conditions and evaluate the performance of the State.

Following are excerpts and some very brief comments on the investment contract between the Uruguayan State and the Finnish company UPM [1]:

1. Only one party risks

The State agrees to make a huge public investment, but the company reserves the right not to make its investment or "final investment decision" (DFI): "ROU recognizes and agrees that it is intended to carry out the ROU Project independently of the UPM Project. "

2. Only one part has investment options

"The Cellulose Plant Project involves the design (...) construction (...) of a pulp mill and, at the option of UPM, the following related infrastructure (...)"

3. Benefits for Uruguay are not mandatory

"ROU expects that the benefits of the UPM Project could include the matters referred to in Clauses 2.2 and 2.3 / economic benefits / These benefits are only indicative and do not constitute any obligation or commitment for UPM and the UPM Project reaches said benefits or results. "

4. Legal safeguard or public image?

In international lawsuits, the simple dialogue for investments is taken as the beginning of the hiring process and enables the request for economic compensation in the event that a business is not completed. But it is also the government's will that UPM recognizes that the installation of a pulp mill is not a fiction but a real process. In any case, other subsequent provisions imply the recognition of the government that the company can abandon the project without being forced to compensate. "UPM recognizes its interest in carrying out the UPM Project and has had discussions with ROU on the terms established in this Contract to facilitate the implementation of certain requirements for UPM's investment."

5. Minimal contributions for the State

In relation to their earnings, the contributions of UPM will be ridiculous. UPM1 (smaller than UPM2) earned US $ 290.4 million in the second quarter of 2017 [2] UPM2 will pay US $ 1.75 million per quarter …

6. Freezing of the fiscal capacity of the State

Even if the company generates higher than expected earnings, which could allow the State a readjustment of the tax burden, Uruguay and UPM will negotiate an "Advance Price Agreement (APA), instrumented between Forestal Oriental SA and / or UPM and any other of its Affiliates appearing on the application and the DGI (...) Likewise, ROU will endeavor to ensure that the term of the APA is for 3 (three) fiscal years from the year following its signature. "

7. Environmental authorizations in illogical short terms

The State is obliged to grant environmental authorizations in short terms. Even though it substantially reinforces the technical and operational capacity of its environmental authority, this obligation implies a serious risk of carrying out incorrect evaluations of the possible environmental impact of the UPM project. To this it is added that, according to the Uruguayan environmental legislation, it is not the State that designates the consultants that make the previous environmental impact analysis of the projects, but the interested company itself that contracts the consultants, which inevitably skews the documents in favor of the company that is hiring them. That is, expert opinion from an interested party and with unsustainably short deadlines, constitute a possible scenario of environmental impunity. "ROU will issue a resolution (...) in case UPM decides to request the AAP / prior environmental authorization / for the Free Trade Zone (...) independently / to the AAP of the Pulp Mill / (...) in a term no longer than 3 (three) months ... "

Other terms of prior environmental authorization for the State:

Pulp mill, 12 months

Railway project, 8 months

Port, 12 months

8. Contact in DINAMA (State environmental authority)

This may seem minimal, but it is crucial. When talking about a contact or link between parties that are associated in a joint venture, it breaks with state sovereignty, insofar as it is the function of the State to monitor, control, sanction breaches of its regulations. On the other hand, the designation of a stable official for the function of "coordination" with the company, is an augury of sure cooptation. "ROU will designate a general coordinator within DINAMA as a contact person with UPM for the respective authorization procedures."

9. Best available technologies is a saying

UPM will follow the European standard of 2014 regarding BAT (best available technologies) in relation to the environment. But nevertheless, this does not mean the least polluting technologies, but the least pollutants without affecting the profits of the company.

10. The State does not control, negotiates

This is significant. If UPM and the activities associated with the afforestation productive chain cause a negative impact on the environment, solutions are not sanctions or corrective, but a negotiation of parties with common agreement.

"/ The contracting parties / Jointly define the measures to be implemented by UPM, in response to other environmental effects significant that can be caused ... "

11. Freezing of environmental law

The following fragment means that, for example, if there are advances scientists that detect that UPM procedures contaminate in an unexpected way or to an unexpected degree, the State resigns its right to modify the environmental regulations, remaining tied to the European standard of 2014.

"ROU is committed to demand the levels of emissions to the environment in the range of the best available technologies according to the document IPPC BAT (2014), within the framework of national regulations. "

12. Flexible limit to phosphorus emission

A clause of this contract dissolves a current environment protection norm, as the application of the latter becomes conditioned by the EIA (environment impact evaluation procedure), which is produced by a consultant hired by the corporation and analyzed later by the State environmental authority. The company is allowed to throw phosphorus at levels of the norm of the last dictatorship (Decree 253/979: max 5mg / l) "unless the technical conclusions resulting from the environment impact evaluation procedure" say something else.

13. The state periodically reports to the company

In as much it is about the implementation of conditions put by the company, this assumes the oversight role, and the State the part hired that must obey. It is the inverse of national sovereignty.

"ROU will inform UPM monthly of the evolution of the deadlines /Ferrocarrilero project / established in the previous literals "

"ROU must provide UPM Rail Observers with reports of integral progress that contain all the relevant information and updated related to the Railway Project. "

14. Even the transit flow of the country's capital city is subject to UPM requirements

The UPM rail project will cause enormous distortion in traffic circulation and in the environment, among other things, because of the noise. Initially, local governments protested because the train, with several lanes 24 hours a day, will pass through densely populated areas, to take advantage of the port infrastructure of Montevideo. Then the protests were silenced.

"If the Viaduct Works on the Rambla have not been completed by ROU on the Scheduled Date of Completion of the Railway Project or in any time after this, ROU will organize traffic in the Area of Crossing the Rambla (even, if necessary, stopping traffic) of the way that is necessary to allow trains to transport cargo of UPM to reach the Port Project without interruptions and as it is programmed and ensure that there are no interruptions in the use of the Ironing by UPM and the UPM Railway Operator. "

15. The educational policy of the State is subject to the will and control of UPM

The educational structure of basic and technical training (UTU) at the secondary level and Tertiary of the Uruguayan State in Tacuarembó, Paso de los Toros and Durazno, undergoes a reform to produce the technicians that UPM requires. As in the case of railways, UPM reviews, approves and controls changes Yes: UPM must approve the educational plan.

"3.6.4 Education

(a) After the date of the DFI /final investment decision/, ROU must organize and fund the improvement of the technical universities (UTU), mainly from Paso de los Toros, Durazno and Tacuarembó, to improve their capacity to provide facilities and educational resources with respect to the mechanical disciplines of instrumentation and electrical and, in doing so, should take into account and apply in good faith the views of UPM with respect to the following:

i. The needs of its value chain in relation to the project of UPM.

ii. How it thinks cooperation can best be facilitated between said universities and technical universities in Finland.

(b) After the date of the DFI, ROU must organize and fund programs to provide support to people in the region of influence to improve his ability to complete basic educational studies.

(c) Prior to the Deadline of Phase 2, ROU must provide UPM with a plan that states how you intend to fulfill its obligations with respect to to:

i. Clause 3.6.4 (a) and

ii. Clause 3.6.4 (b) "

16. UPM will be a source of Labor Law

The State commits to incorporate the result of the negotiations between UPM, the PIT-CNT workers union and the MTSS (Ministry of Labor) into Uruguayan Positive Law.

"Incorporate into Uruguayan Positive Law - in the form of law, decree or eventually collective agreement-, the rules resulting from the agreements / between UPM-PITCNT-MTSS / "

17. UPM forestry operations, protected

The State is obliged to quickly approve UPM environmental impact studies prior to their forestry projects: in 2 months (category A) and in 6 months (category B). And there is more, it is already running a period of 1 month for the State to present to UPM the conditions of the holdings forests in category B (more polluting).

18. Environmental authorizations, a procedure

The State seeks to protect UPM's forestry operations, ensuring its realization. The conditions that we pointed out in point (7), on an even crazier level. We are talking about plantations of monocultures ("green deserts") that have an enormous impact on soils and water:

"MVOTMA / DINAMA is committed to ensuring the availability of technical personnel in the Environmental Impact Division of DINAMA to analyze without delay, approximately 30 (thirty) projects per semester that UPM or third parties associated with its Development Program would present. "

19. For UPM contractors, everything

The Uruguayan society will be forced to concentrate its scarce resources of public works in the localities where the employees of the the company will reside. To the points mentioned by appointment below, you have to add the commitment of the State to provide transport and LTE level Internet:

"ROU recognizes, states, guarantees and accepts that it must provide in the System of localities the availability of the credit system with and without subsidy to facilitate access to housing for people with permanent income, as well as providing public services appropriate services (including health services, public education and care). "

The State prepares a project to show how it will develop the newly mentioned, and submits it to UPM for approval.

20. "Co-managed" training institutions ... between the State executive and UPM

"Governance" is the key name for the vassalage of the State against the multinationals. Thus, all training institutions and investigation that the State is obliged to create with the contributions of UPM will have "public-private governance": Forest Technology Wood Cente, Technological Center in Bioeconomy, etc.

21. Again: only one party takes a chance

"The Parties recognize and agree that the Final Investment Decision of UPM on whether or not to proceed with the Pulp Mill Project will be subject at the sole discretion of UPM, even if each of the Conditions Necessary have been met and the Complementary Contract has been subscribed. "

22. The State renounces its judicial sovereignty

The State is at the same level as the company and renounces its sovereignty, and also to the use of its judicial courts. If there is a conflict between Uruguay and UPM:

"The dispute will be resolved through arbitration at the International Center of Settlement of Investment Disputes (ICSID) ", located in Washington, United States. And if the ICSID declines competition, il n'y a pas de problème: an "arbitration governed by the Arbitration Rules of the United Nations Commission on Trade Law International (UNCITRAL) and administered by the ICSID Secretariat will judge. The place and seat of any arbitration governed by the Arbitration Rules of UNCITRAL will be Paris, France. "