Finnish pulp and paper maker UPM said on Tuesday it had decided to go ahead with plans to invest nearly $3 billion in the construction of a pulp plant in Uruguay, which will start operating in the latter half of 2022.

"The highly competitive mill investment of $2.7 billion will grow UPM's current pulp capacity by more than 50%," the company said in a statement, adding that the change would be reflected "in the scale of UPM's pulp business as well as in UPM's future earnings."

The production plant will be built on the banks of the Rio Negro waterway in the city of Paso de los Toros. As part of the deal UPM will invest $350 million in Uruguayan port operations.

"Thousands of good jobs will be created as a result of this venture," said a statement from Uruguay's government.