Environmental pressure group Greenpeace has joined the protests

It said it won't agree to the funding until it has more information on the potential environmental impact of the facilities on the Argentinean border.

The World Bank's move comes as Argentina continues to strongly oppose the mills, saying they will cause extensive pollution and deter tourism.

Uruguay says the mills are safe and will provide much needed jobs.

Big investment

The mills are being built beside the Uruguay River - which divides the two countries - by Finland's Metsa-Botnia and Spain's Ence.

Together they represent the largest-ever industrial investment in Uruguay.

Environmental-impact experts had earlier told the World Bank's International Finance Corporation private sector investment arm that the plants could be improved in terms of design, operating procedures and enironmental monitoring.

However, they said that fears of widespread damage were "unsupported".