Philip Morris says closes plant in Uruguay amid lawsuit

U.S. tobacco giant Philip Morris said on Friday it shut down its plant in Uruguay because the country's anti-smoking policies make business unprofitable.

Philip Morris' local unit sued Uruguay at the World Bank's International Center for Settlement of Investment Disputes (ICSID) in February 2010. The company seeks compensation for damages allegedly caused by the state's anti-tobacco measures.

Uruguay imposed a ban on smoking in public spaces in 2006, raised taxes on tobacco products and forced firms to include large warnings and graphic images including diseased lungs and rotting teeth on cigarette packages.

It also banned the use of the words "light" and "mild" from cigarette packs to try to dispel smokers' misbeliefs that the products are safer.

"Plant operations are no longer viable because of the broad availability and presence of illegal products in the market, combined with a reduction in demand and fiscal and regulatory measures that limit our capacity to commercialize our products profitably," the firm's Abal Hermanos local unit said in a statement.

Philip Morris' domestic subsidiary said it will now import cigarettes from Argentina. Abal Hermanos laid off 62 of the 90 workers employed at its plant located in the capital Montevideo and said the rest will work at sales and import offices.

Uruguay's Labor Minister Eduardo Brenta said he was concerned that the company had taken a rushed decision without consulting the government first.

"We're worried that this decision was taken all of a sudden," Brenta said. "We can't understand why (the company) did not make pre-announcement so we could take preventive measures."

Members of the country's tobacco union occupied the plant on Friday to protest the workers' dismissal.

"They breached all agreements between the union and the company," said Mario de Castro, union secretary at the country's Autonomous Tobacco Syndicate.

"What they claim is lies," de Castro said. "They blame it on the court case, on the regulatory measures, but they are shutting the plant to bring in production from Argentina."

The World Bank's investment dispute tribunal has yet to rule on the case.