In a 23 to one vote, bank directors backed the package of a 170 million dollar investment and 350 million dollars in guarantees for pulp and paper manufacturer Oy Metsa-Botnia to build the Orion plant near the Uruguay river separating Uruguay and Venezuela.

The 170 million dollars in capital will be provided by the bank's International Finance Corp (IFC) and the guarantees by the Multilateral Investment Guarantee Agency (MIGA), the bank said in a statement.

Since last year environmentalists have demonstrated and blocked bridges over the river to protest the Botnia plant and another, planned by Spanish firm ENCE, which they say will damage the river and its tributaries and harm the livelihoods of local people.

The protests provoked tensions between Uruguay and Argentina, which submitted a complaint to the International Court of Justice in The Hague, saying Uruguay did not consult its neighbor in approving the plants on the shared riverway.

But the World Bank insisted in its statement Tuesday that the Orion mill "will be operated to the highest global standards and comply with IFC and MIGA's respective environmental and social standards."

"A recently issued independent report provided conclusive evidence that the local area, including the Argentine city of Gualeguaychu, will not experience adverse environmental impacts," it said.

Argentina was the only dissenter in the bank vote on the project Tuesday, a source told AFP.

"Everyone voted in favor but Argentina used its voice to raise questions to the IFC," the source said, saying Buenos Aires' move was a rarely seen tactic at the bank.

Both the Botnia and ENCE cellulose pulp mills are planned for construction at Fray Bentos, on the east side of the river about 160 kilometers (100 miles) north of Buenos Aires.

The Botnia plant would be Uruguay's largest-ever foreign investment, the banks said, and would enhance the local environment by treating local wastewater as well as its own and producing electricity in a more environmentally-friendly manner than current power plants.

The bank said it would generate 2,500 local jobs and its overall economic effect would be equivalent to two percent of Uruguay's 2005 gross domestic product.

But on Sunday, Gustavo Rivollier, a civic leader of Gualeguaychu, which is close to the proposed building site, branded as "false" World Bank reports that they had consulted with Gualeguaychu residents and had their approval for the project.

"They never came," he said.