EITI praise for Peru, but...
22 January 2017
The Extractive Industries Transparency Initiative (EITI) has just announced its ‘rating’ of Peru’s transparency for the country’s procedures and data against which the EITI’s new and tighter standard introduced in 2016 is measured. Of the 51 countries that have signed up to the EITI, none have so far reached the rank of ‘satisfactory’, and only five, including Peru, are in the next class down of ‘meaningful progress’. Other than Peru, these are Nigeria, Timor Leste and Mongolia (also pronounced on this month), and Azerbaijan which is in the same category as in 2014 but not yet re-validated. Peru has been ‘compliant’ since 2009; it was the first Latin American country to achieve this status.
Given this ‘lead performance’, we need to understand what the evaluation means. The EITI has developed over twelve years a list of seven requirements with many subcategories and some detailed institutional arrangements. The principal focus is on reliable and transparent publication of data and its accessibility, as well as on oversight. The emphasis is on the detail of contracts, the generation and use of revenues, and transparency in the accounts of public sector enterprises involved in the sector. In all these areas, Peru is assessed as having made significant progress. The country earns special praise from the EITI since, during the last year, two regions (Piura and Moquegua) have begun to develop local offices to implement the EITI scheme at the sub-national level. Of the seven requirements, the last two concern areas which are controversial: the ‘socio-economic contribution’ and ‘outcomes and impact of implementation’.
Turning to the EITI procedures, these are thorough. The key agent in oversight and implementation in Peru is the ‘Multi-Sectoral Strategy Group’ (MSSG, or CMPE by its Spanish acronym), the composition of which is carefully overseen by the EITI. Its members come from ministries and the company sector. The MSSG is tasked with annual reporting against the seven requirements, and the EITI board appraises the reports and other extensive documentation, and makes a field visit. The MSSG comments in writing on the Board’s report, this time a 104-page document. The report and the comments are then reviewed by an independent validator, and only then is a final decision reached on validation.
The independent validator in Peru’s case was quite critical and actually downgraded some of the Board’s rankings. The validator’s report says “Peru’s implementation of EITI thus appears to lack balance and consistency. On the one hand, it demonstrates exemplary progress in the area of contract disclosure, disclosure of production data, revenue management and allocation, and subnational transfers. On the other, its progress is strikingly inadequate on its work plan, follow-up on recommendations, and outcomes and impacts. Peru makes great progress in certain aspects of implementation but appears to focus far less on the reflection and analysis necessary for work planning and impact assessment”
The board did not fully accept the validator's critique, but its final report has strong requirements for improvement by next year.
We consider the achievements both of the EITI and of Peru in this regard to be significant and much to be welcomed. Civil society and the public sector can only gain from more, and more reliable, information. At the same time we need to recognise the limits of the achievements; not just those highlighted in the independent validator’s report cited above, but also what is not taken into account. Of the seven overarching requirements behind the evaluation, the categories of ‘socio-economic contribution’ and ‘outcome and impact of implementation’ raise difficult issues that go beyond the scope of the EITI.
In these respects, the process of the evaluation is itself less clear: evaluation of impact is extraordinarily complex and, most importantly, data on environmental impacts are not included in the assessment. Greater transparency in the EITI areas of data can help significantly, but for those who observe day-by-day just how non-transparent and inadequate the processes are around environmental impact, the questions provoked are many.
Further, the criteria welcome devolution of revenue to the regions unquestioningly, and Peru’s devolution of some 50% of revenue from the extractives sector earns unstinting praise. But as our readers know very well, we see devolution through the ‘canon’ mechanism in Peru as problematic: first for the weight the canon gives to producing regions at the expense of others; second for the lack of consideration of the ability to spend effectively and honestly at the local level; and third for the lack of a coherent national strategy on nationwide versus sub-national planning processes and expenditure needs.