For Uruguay, the two mills represent the biggest foreign investment in the small country's history, worth about $1.9 billion, and promise to wake a moribund economy in need of jobs.

Yet the mills have triggered panic among Argentines on the other side of the Uruguay River. They say the mills will contaminate the region and threaten their booming tourist industry of river resorts and campgrounds.

That debate sharpened two weeks ago, when Argentines from the resort town of Gualeguaychu created a roadblock that cut access to a three-mile bridge across the river, one of only three bridges that connect the countries.

On Thursday, protesters began blocking a second bridge, and they have threatened to cut access to the third one about 120 miles upriver from Gualeguaychu.

With the Argentine government allowing the roadblocks, Uruguayan officials say their country has lost millions of dollars.

Thousands of Argentines have skipped summer vacations to Uruguay because of the roadblocks, and cargo trucks coming from as far away as Chile have had to turn back, cutting key transport lines across the southern part of South America.

Bruno Faraone, the political affairs director at Uruguay's foreign ministry, said his government had acted responsibly throughout the dispute and had taken steps to ensure that the pulp mills met international environmental standards.

Studies by the World Bank and the Finnish company Botnia, which is building one of the mills, conclude that the factories won't produce noticeable levels of water and air pollution.

"We have required the maximum level of preparation for these mills, but unhappily this has not been well understood by the residents in Argentina," Faraone said.

Uruguayan officials have demanded that Argentina reimburse their country for its losses and have even threatened to pull out of the Mercosur trade bloc, which includes Argentina, Chile, Brazil and Paraguay, to protest the roadblocks.

Argentine Foreign Minister Jorge Taiana responded that Uruguay broke agreements that required the country to consult with its neighbors before approving projects with a possible international effect. He asked that construction be halted while more studies were done.

Argentina's legislature is considering taking the matter before the International Court of Justice in The Hague, Netherlands.

Debate is also heated in the picturesque towns on both sides of the river.

Stores and homes throughout Gualeguaychu sport fliers urging No to the paper mills, yes to life, while thousands from the town gather nightly at the roadblock to decide whether to continue the protest.

At times, the roadblock takes on a festive air, with townspeople barbecuing and playing volleyball in front of a red cargo truck parked in the middle of the highway.

Children and their parents have painted pictures in bright, pastel colors on the asphalt of deformed fish and factories dripping blood.

For residents such as Antonio Rafael Campostrini, the pulp mills represent a death sentence for the town of 80,000 people.

"The future of our children and our grandchildren will meet an early death if this mill is built," Campostrini, an unemployed nurse, said. "If both governments can't reach an agreement, we'll block the roads until they do."

Campostrini's worries intensified late last year when Botnia began erecting the mill's 380-foot-high chimney, which is visible to thousands of bathers at a popular Argentine beach.

By then, thousands of demonstrators allied with activist groups such as Greenpeace had begun crossing the bridge to Uruguay to protest the mills.

On the Uruguayan side of the river, hopes are high that the pulp mills will bring jobs to Fray Bentos and surrounding towns, whose economies have shriveled since a foreign-owned slaughterhouse shut down two decades ago.

Botnia officials estimate that about 1,200 Uruguayans already are at work building the enormous pulp mill, more than half of them from Fray Bentos. The mill will employ 300 people and create an estimated 8,000 jobs in the region. It will pump out about 1.1 million tons of pulp every year.

It also will consume tons of eucalyptus wood grown in the interior of Uruguay, the product of government timber programs decades in the making.

Construction has not started on the pulp mill planned by Spanish company Ence about four miles upriver from the Finnish mill.

"People here think the Argentines are only angry because the factory is not on their side of the river," Laura Reina, a clerk at a Fray Bentos hotel, said. "With the construction, things are already getting better here."