The new kid: a Chilean forestry company finds out how hard it is to be big in a small town.

A deafening roar of cascading water tumbles down the world's mightiest single waterfall. The semi-circular Devil's Throat is one of hundreds of plunging cascades at Las Cataratas, a natural wonder in the sub-tropical rain forest that straddles the border of Argentina, Brazil and Paraguay. Tourists spend millions of dollars a year visiting this steamy region and the nearby 17th century ruins of a Jesuit mission, both in Argentina's northern Misiones Province.

Here, the air is moist, land is fertile and pine trees grow fast--four times faster than in other parts of the world. And that makes for perfect conditions for another industry three times bigger than tourism here: forestry. The tree-growing business in the province is worth US$154 million a year.

Two giants used to dominate tree exports from this part of the country, Argentina's Perez Companc (Pecom) and Chilean owned Alto Parana. In 2003, Alto Parana bought the forestry division of Pecom for $43.7 million. The purchase left small and medium-sized enterprises in the province, such as sawmills, fighting to survive and has made labor associations vigilant in enforcing restrictions on the deal. One such restriction calls for Alto Parana to provide nearby mills with 250 million tons of lumber over the next five years.

"We have businesses that were highly dependent on remanufacturing work generated by Alto Parana and Pecom," says Juan Pardal, head of the Wood and Sawmill Association in the region. "And if it wasn't for this agreement, smaller shops would be forced to close and about 500 jobs would be lost, which would have tremendous social consequences."

Exporting only became real for most of the 70 businesses in the association after Argentinas economy crashed in December 2001, says Pardal. All together, the group's sales are $20 million. "What we don't want is for Alto Parana to continue expanding because their sawmills already handle nearly hall the volume of the market," says Pardal. "They have a dominant economic position, and further growth would be harmful to all the small and medium businesses in Misiones."

Before the merger, Alto Parana owned just a third of the nearly 3.2 million acres of forest plantations in Misiones, says Eduardo Montamat, who led Argentina's Competition Commission's investigation into the purchase. The regulatory body automatically investigated Alto Parana's acquisition of Pecom's forestry division because of the multi-million-dollar price tag and because of the possibility that Alto Parana could become a monopoly. Brazil's state oil company Petrobras took control of Pecom in 2002 as Argentine companies struggled with a historic default and collapse, but Petrobras wasn't interested in Pecom's forestry assets. Alto Parana stepped in and made an offer.

"A lot of the people in the market were concerned that the merger would create a monopoly," says Ismael Malis, president of the regulatory body. "That was absolutely no concern for us and we approved the deal because Alto Parana caters to international clientele."

Chop, chop. An attorney for Alto Parana also plays down the idea of monopoly. Since Copec, Chile's largest conglomerate, bought Alto Parana in 1996, shareholders have seen just $3 million in profits, says Adrian Lerer, an attorney for Copec. That's in part because Alto Parana has invested $800 million back into Argentina, Lerer says. "Our stock holders have long-term plans on doing business in the area," he says. "We're not going to drop this much money and then leave. But we've been attacked a lot in the media, TV, newspapers, because we're an easy target."

One hot potato in the press has been the settlement between Alto Parana and the provincial government for alleged environmental violations. In 2000, the company bought a plot of land along Lake Uruguai and chopped too closely to the shore on about 486 hectares, the government charged. Alto Parana agreed to invest $100,000 in replanting pine trees and to avoid creating future damage in the area.

The forestry giant is not the first Chilean company to encounter trouble abroad. In Peru, a Chilean-owned pasta factory built on wetlands was ordered closed in 2001. In Argentina, there was tussling over power plants that failed. Some Chilean businessmen claim discriminatory treatment, abroad. For Alto Parana, Lerer says, it's a matter of eliminating fears and winning trust.

"It's like being the new kid on the block," he says. "People are critical because they don't know what to make of a Chilean enterprise."

PATRICIA NAZARIO * CATARATAS DEL IGUAZU, ARGENTINA