The Board agreed that Peru has made meaningful progress overall in implementing the 2016 EITI Standard.

Outcome of the Validation of Peru.

Decision reference: 2017-03 / BC-224
Decision basis: 2016 EITI Standard, Requirement 8.3 EITI Validation deadlines and consequences

11 January 2017

Board decision

The Board came to the following decision regarding Peru's status:

The Board agrees that Peru has made meaningful progress in implementing the 2016 EITI Standard. In taking this decision the EITI Board noted the strong commitment by the Government of Peru to EITI implementation and the effective oversight provided by Peru’s Multi-Stakeholder Working Group (CMPE). The EITI Board highlighted that the EITI has provided a positive platform for discussion and debates about extractive sector management, involving all stakeholders. The EITI Board was encouraged by the government’s efforts to decentralise the EITI by implementing it at the subnational level and by the plans to work towards further mainstreaming of EITI disclosures.

The Board’s determination of Peru progress with the EITI’s requirements is outlined in the assessment card, below. The EITI Board agreed that Peru had not made satisfactory progress on requirements 1.5, 2.6, 4.1, 4.3, 4.9, 6.1, 7.3 and 7.4. The major areas of concern relate to the work plan (#1.5), state participation (#2.6); comprehensiveness of EITI reporting (#4.1), the coverage of infrastructure provisions (#4.3), data quality and assurance (#4.9), social expenditures (#6.1), the follow-up of recommendations and strengthening the impact of EITI implementation (#7.3) and documentation of impact (#7.4). The EITI Board disagreed with the Validator on the following requirements: work plan (#1.5), license allocations (#2.2), state participation (#2.6), in-kind revenues (#4.2), infrastructure provisions (#4.3), SOE transactions (#4.5), SOE quasi-fiscal expenditures (#6.2), follow-up recommendations and strengthening the impact of EITI implementation (#7.3) and documentation of impact (#7.4).

Accordingly, the EITI Board agreed that Peru will need to take corrective actions outlined below. Progress with the corrective actions will be assessed in a second Validation commencing on 11 January 2018. Failure to achieve meaningful progress with considerable improvements across several individual requirements in the second Validation will result in suspension in accordance with the EITI Standard. In accordance with the EITI Standard, the CMPE may request an extension of this timeframe, or request that Validation commences earlier than scheduled.

The Board’s decision followed a Validation that commenced on 1 July 2016. In accordance with the 2016 EITI Standard, an initial assessment was undertaken by the International Secretariat. The findings were reviewed an Independent Validator, who submitted a Validation Report to the EITI Board. The CMPE were invited to comment throughout the process. The CMPE’s comments on the Validation Report were taken into consideration. The final decision was taken by the EITI Board.

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 11 January 2018:

In accordance with requirement 1.5, the CMPE is required to agree a revised and fully costed work plan which should include specific and measurable implementation objectives linked to the EITI Principles and national priorities for the extractive industries. The work plan should address the corrective actions outlined below. The CMPE is also encouraged to consider the other recommendations in the Validator’s Report and the International Secretariat’s initial assessment, and to consider the guidance note on developing an EITI work plan[1].

The CMPE should undertake a comprehensive scoping study that addresses all aspects of the 2016 EITI Standard. CMPE is encouraged to systematically review what information, required or encouraged to be disclosed under the EITI Standard, is publicly available through existing disclosures. The CMPE is encouraged to move toward more timely and mainstreamed transparency. In particular:

In accordance with requirement 2.6, the CMPE is required to conduct a thorough assessment of the role of Perupetro and Petroperu. In particular, the CMPE is required to clarify the situation with the operation of Block Z-2B owned by Perupetro and operated by Savia. The CMPE should confirm if the operation of this block gives rise to material payments, including the social expenditures of these companies.

In accordance with requirement 4.3, the CMPE is required to confirm the applicability of the infrastructure provisions made under the regulations of Law 29230 (Law of public infrastructure and private sector participation).

In accordance with requirement 6.1, the CMPE should review the coverage of social payments to all stakeholders including indigenous communities and agree an approach to address this requirement in accordance with the EITI Standard.

In accordance with requirement 4.1, the CMPE should ensure that disclosure of national and subnational taxes and revenues is comprehensive including the definition of materiality and scope of reporting. Specifically, CMPE should:

In accordance with requirement 4.1.c and the standard TOR for Independent Administrators, provide a comprehensive reconciliation of government revenues and company payments including ensuring that all companies making material payments and all government entities receiving material revenues comprehensively disclose these payments and revenues.

In accordance with the standard TOR for Independent Administrators, ensure that the Independent Administrator provides an assessment of whether all companies and government entities within the agreed scope of the EITI reporting process provided the requested information. Any gaps or weaknesses in reporting to the Independent Administrator must be disclosed in the EITI Report, including naming any entities that failed to comply with the agreed procedures, and an assessment of whether this is likely to have had material impact on the comprehensiveness of the report.

In accordance with the standard TOR for Independent Administrators, ensure that the Independent Administrator provides and assessment on the comprehensiveness and reliability of the (financial) data presented, including an informative summary of the work performed by the Independent Administrator and the limitations of the assessment provided.

In accordance with requirement 4.9, the CMPE should ensure that the next report follows the standard Terms of Reference for Independent Administrators. This should include:

That the Independent Administrator, in accordance with section 1.2 of the standard Terms of Reference, reviews the scope proposed by the CMPE with a particular focus on the comprehensiveness of the payments and revenues to be covered in the EITI Report (section 1.2.1);

That the Independent Administrator examines the audit and assurance procedures in companies and government entities participating in the EITI reporting process, and based on this examination, agree what information participating companies and government entities are required to provide to the Independent Administrator in order to assure the credibility of the data in accordance with Requirement 4.9. The Independent Administrator should exercise judgement and apply appropriate international professional standards in developing a procedure that provide a sufficient basis for a comprehensive and reliable EITI Report. The Independent Administrator should employ his /her professional judgement to determine the extent to which reliance can be placed on the existing controls and audit frameworks of the companies and governments. The Independent Administrator’s inception report should document the options considered and the rationale for the assurances to be provided.

Ensuring that the Independent Administrator provides an assessment of whether all companies and government entities within the agreed scope of the EITI reporting process provided the requested assurances. Any gaps or weaknesses in reporting to the Independent Administrator must be disclosed in the EITI Report, including naming any entities that failed to comply with the agreed procedures, and an assessment of whether this is likely to have had material impact on the comprehensiveness of the report.

In accordance with requirement 7.3, and together with addressing the gaps identified in requirement 7.4 below, the CMPE is required to review the lessons learnt from EITI implementation and document the discussion with stakeholders regarding strengthening the impact on natural resource governance.

In accordance with requirement 7.4, and together with addressing the gaps identified in requirement 7.3 above, the CMPE is required to consider recommendations resulting from EITI reporting and to review the outcomes and impact of EITI implementation on natural resource governance. The CMPE may wish to consider undertaking, in consultation with all constituencies, an impact assessment to identify opportunities to increase impact. The CMPE is encouraged to take a more active role in developing recommendations from EITI Reports and agree follow-up and implementation. The CMPE is encouraged to explore options for extending EITI implementation to address issues of greatest relevance to contemporary public debates.

The CMPE is encouraged to consider the other recommendations in the Validator’s Report and the International Secretariat’s initial assessment, and is required to document the MSG’s responses to these recommendations in the annual progress reports.

[1] https://eiti.org/document/guidance-note-on-developing-eiti-workplan

Assessment of EITI requirements

Not met
Partly met
Mostly met
Fully met
Exceeded

Scorecard by requirement View more	Assessment View more
Overall Progress
MSG oversight
1.1Government engagement
The Ministry of Energy and Mines and Mines has led the Government’s active participation in the EITI. It has maintained a satisfactory level of engagement, appointed senior officials to lead, and coordinated and mobilised resources for EITI implementation. Stakeholders confirmed that they trust and have confidence in the appointed officials
1.2Company engagement
There is an enabling environment for company participation. Companies are actively and effectively engaged in the EITI process. Obstacles to company participation regarding taxpayer confidentiality provisions have successfully addressed.
1.3Civil society engagement
Civil society is actively and effectively engaged in the EITI process. There is an enabling environment for civil society participation. The fundamental rights of civil society actors are respected and there are no major obstacles to their participation in EITI related activities and discussions. Civil society stakeholders speak freely, collaborate with each other, are not restrained, coerced or reprimanded as result of their EITI-related activities. There is, however, scope to increase civil society engagement in the EITI beyond the multi-stakeholder group.
1.4MSG governance
The CMPE comprises relevant actors and appears to function well with an inclusive decision-making process. Stakeholders have identified opportunities for reviewing the representation of government entities. The ToRs for the CMPE largely addresses the requirements of the EITI Standard and appears to be followed in practice.
1.5Work plan
The work plan does not include clear objectives for the EITI, linked to national priorities for the extractive sector. It also lacks a clear account of costs, and details on capacity building priorities. The work plan needs to be finalised, formally approved by the CMPE and made publicly available.
Licenses and contracts
2.2License allocations
While the E-cadastre system appears to comprehensively address license allocation in the mining sector, the issue of licence transfers in the hydrocarbon sector has not been addressed by the CMPE. Similarly, in the oil and gas sector, substantial information is publically available. However, the comprehensiveness of this information and the disclosure of license transfers has not been addressed by the CMPE.
2.3License register
The information required is publically available through the webpages of INGEMMET and Perupetro.
2.4Policy on contract disclosure
Peru’s approach to contract transparency is exemplary. Contracts are publically available via MINEM or Perupetro’s websites. The EITI Reports provide an overview of the mining projects that have signed special contracts for guarantees and promotion of investments and links to hydrocarbon contracts.
2.1Legal framework
Comprehensive disclosure of relevant laws, regulations and fiscal regime in the 2014 Report. Improvement in the disclosure vis-ávis the 2013 Report.
2.5Beneficial ownership	Not assessed
There is no evidence that the CMPE has discussed this topic in any detail.
2.6State participation
The CMPE does not appear to have thoroughly reviewed the arrangements relating to state participation in the oil and gas sector and whether this gives rise to material revenue payments.
Monitoring production
3.1Exploration data
The EITI Reports provides an overview of exploration including significant exploration activities. Links to further reading are provided. Stakeholders were satisfied with these disclosures.
3.2Production data
Production data by commodity is included in Peru’s EITI reports and on government websites
3.3Export data
The EITI Report contains the value of exports by main commodities. Although export volumes are not disclosed as part of the EITI Report, the International Secretariat has confirmed this data is readily available through other official publications.
Revenue collection
4.3Barter agreements
While stakeholders take the view that the Peruvian legal framework does not allow for these kind of transactions, the provision in the Law No 29230 that allows deductions for investment in public infrastructure warrants furthers investigation. Representatives from civil society organisations expressed interest in gaining a better understanding of the application of regulations related to fiscal credits such as the “infrastructure for taxes”, which maybe be relevant to this requirement and/or the coverage of social payments (see Requirement 6).
4.6Direct subnational payments	Not applicable
The International Secretariat could establish that subnational government entities do not levy any specific taxes to the extractives industries. Other taxes collected by subnational governments as registration fees appear to be immaterial.
4.7Disaggregation
It has been confirmed that the report is fully disaggregated by company and revenue stream.
4.9Data quality
The provisions of this requirement are substantially met. However, the standard ToRs for IAs have not been consistently applied. This has resulted in lacking of confirmation of a number of scoping and coverage decisions. Examples of these are the lack of clarity regarding the materiality of direct ownership of oil blocks by Perupetro and Petroperu and fees paid to OSINERGMIN and contributions to the social fund FISE.
4.1Comprehensiveness
The CMPE has agreed a definition of materiality based on value of production which is not optimal. The documentation of the CMPE’s discussions and decisions on the scope of reporting scope is not sufficiently detailed. Based on the agreed scope and materiality definition, Peru has provided a comprehensive reconciliation of government revenues and company payments except for one company (Minera Chinalco Peru). While the coverage of the reconciliation process is high, it is not possible to reliably estimate Chinalco’s tax payments based on the information provided. It appears likely that Chinalco’s tax payments are material.
4.2In-kind revenues	Not applicable
Based on the information that is publically available, it seems clear that this requirement is not applicable.
4.4Transportation revenues	Not applicable
The assessment confirms that the government does not collect material revenues from transportation of oil, gas or minerals.
4.5SOE transactions
The 2013 EITI Report addresses the role of the state-owned enterprises. Material revenues collected by Perupetro are well documented in the assessment of Requirement 4.1. Revenues collected by Petroperu are related to the downstream sector and are not relevant for the EITI in Peru.
4.8Data timeliness
Peru has published timely EITI Reports covering four fiscal years (2011-2014). Minutes of CMPE meetings document the decision regarding the fiscal period covered by the reports, the approval of the reports and a decision to pilot an online disclosure system.
Revenue allocation
5.1Distribution of revenues
EITI reports indicate how the income from the extractives revenues are distributed. Peru has a publicly available system disclosing the distribution and use of these revenues.
5.2Subnational transfers
Statutory subnational transfers in Peru are disclosed. Two regions are piloting EITI implementation.)
5.3Revenue management and expenditures	Not assessed
EITI Reports disclose earmarked revenues as part of the Requirement 5.2. Peru has publicly available government systems disclosing national budget, audit processes and studies addressing the sustainability and resource dependence. EITI Reports could be an opportunity to educate the public about these systems.
Socio-economic contribution
6.1Mandatory social expenditures
Mandatory social expenditures appear to not apply to Peru. However, discretionary expenditures appear to be an integral part of companies’ social license to operate. It is unclear the legal nature of the different agreements signed between companies and mining communities, therefore is not possible to determine if this requirement is applicable to Peru.
6.2Quasi-fiscal expenditures	Not applicable
Based on the information available, the understanding of the International Secretariat is that SOE’s quasi-fiscal expenditures are not applicable in Peru.
6.3Economic contribution
Information regarding the contribution of the extractive sector to the economy is widely available in the webpages of public entities as well as in the EITI Reports
Outcomes and impact
7.2Data accessibility	Not assessed
EITI-Peru has undertaken some work to make data from EITI Reports accessible like an online visualization tool. Nevertheless, additional efforts should be implemented to fully address this provision.
7.4Outcomes and impact of implementation
EITI-Peru has produced Annual Progress Reports in the last three years. These reports only provide an account of the previous year’s activities. They failed to document the multi-stakeholder group’s review of progress against the objectives in the work plan, progress toward compliance with EITI Requirements and addressing recommendations from reconciliation reports. Although different stakeholders have informally discussed progress and outcomes of EITI implementation, there is no evidence that the CMPE has formally reviewed the outcomes and impact of EITI implementation.
7.1Public debate
Peru EITI Reports have been actively promoted and distributed, are publicly available and contributed to the public debate. The government, parliamentarians, civil society, the media and the industry are familiar with the reports. Dissemination events have been carried out in the capital and in several regions. Civil society and the industry have separately disseminated the EITI Reports.
7.3Follow up on recommendations
EITI-Peru has taken steps to act upon minor technical recommendations arising for EITI Reports. Discrepancies have been found to be immaterial and representatives of the CMPE seemed to be satisfied with this result. The lack of evidence of any discussion regarding strengthening the impact of EITI implementation in natural resource governance is problematic.