URUGUAY -- UPM-Kymmene, the world's biggest producer of graphic papers such as newsprint, says it is in talks with Uruguay on developing what would be its second pulp mill in the country, the company said on Wednesday.

The investment would require improvements to Uruguayan infrastructure, including possibly roads and a railroad to link expanded operations to a deep sea port, the Finish company said.

"If these challenges can be solved in the coming few years, Uruguay could be a competitive alternative for addressing UPM's pulp market opportunities in the 2020s," Jaakko Sarantola, UPM's senior vice president for Uruguayan development said in a statement.

Ramping up infrastructure investments might be hard for Uruguay as it faces a fiscal deficit that was 3.7 percent of gross domestic product in May.

Wood pulp exports from Uruguay, where UPM operates one of two mills, rose 7 percent year-on-year in the first half of 2016 to $625 million.