Honduras has made meaningful progress with considerable improvements in implementing the 2016 EITI Standard.

Outcome of the Validation of Honduras.

Decision reference: 2020-77 / BC-298
Decision basis: EITI Articles of Association 2019-2021, Article 12.1. ix)

28 October 2020

Board decision

The Board came to the following decision:

The EITI Board agrees that Honduras has fully addressed seven of the twelve corrective actions from the country’s first Validation. Consequently, Honduras has made meaningful progress overall in implementing the 2016 EITI Standard, with considerable improvements across several individual requirements. However, following the assessment of Requirement 1.3 on civil society engagement as “inadequate progress”, Honduras will be temporarily suspended in accordance with Requirement 8.3.c.i.

The Board congratulates the Government of Honduras and the multi-stakeholder group (MSG) for improving transparency in areas of public interest. The EITI process has led to improvements in government systems, notably in the mining regulator INHGEOMIN. Processes have been established to improve disclosure of licensing and cadastre information, production and export data and voluntary social payments. The EITI Reports have covered extractive industry revenues and payments from 2012 to 2018, highlighting stagnation in the sector. The Board recognises that the mining sector has seen only modest growth in the non-metallic subsector in recent years, while the metallic mining, oil and gas sectors have stagnated.

The EITI has represented an effort in advancing multi-stakeholder dialogue in the extractive sector in Honduras. However, stakeholders have not maintained the initial level of engagement and interest in the EITI process, due to the complex political situation and violence in the country. This occurred against a backdrop of deteriorating trust between stakeholders following the contested presidential election of 2017. There have also been several concerns raised by national and international civil society organisations (CSOs) regarding civic space and human rights. The Board expressed concern regarding the potential impact of the June 2020 Penal Code on EITI implementation and over threats to civic space, including indigenous organisations and human rights defenders. The interests of broader civil society working on extractive sector governance do not appear to be reflected in the objectives and priorities of the multi-stakeholder group. Therefore, the Board found that the objective of Requirement 1.3 is no longer being fulfilled and assessed progress on the provision as “inadequate”. The civil society constituency is urged to revisit its representation on the multi-stakeholder group and ensure that the challenges and priorities of diverse groups working on extractive sector governance are reflected in the objectives and scope of the EITI process. This process should be free from any suggestion of coercion. The government is encouraged to reiterate its commitment to the EITI’s civil society protocol and to ensure that civil society representatives can engage in the EITI process without restrictions or fear of reprisal. . The Board will monitor adherence to this provision in Honduras’s third Validation.

The Board acknowledges that INHGEOMIN has made significant progress in making its procedures and information more transparent. Similarly, the lifting of secrecy provisions related to environmental licenses by the Institute for Access to Public Information (IAIP) in 2019 was an important step forward in improving transparency in the environmental aspects of the extractive industries. The government is encouraged to ensure that there are no other institutional or legal constraints that may impede the effectiveness of EITI implementation. Going forward, the Board encourages stakeholders of EITI-Honduras to reassess its objectives for EITI implementation to ensure that they consider the national circumstances, the relative importance of the extractive industries and stakeholders’ expectations. All MSG representatives, in particular those from civil society and extractive industry, are expected to attend MSG meetings systematically and are urged to speak up for acceptable treatment of civil society activists within the communities around extractive sites. MSG industry representatives are also requested to showcase companies which choose their private security services carefully, train them properly and apply international extractive industry best practices for constructive engagement with communities, including publishing agreements with State police and security forces specifying those conditions and situations in which national police can be summoned by companies. The Board encourages Honduras to consider the options available in the EITI Standard and request EITI Board approval for recalibrating EITI implementation in the country to ensure cost efficiency, while also aligning it with the national objectives.

The Board assessment is that Honduras has fully addressed seven corrective actions, with assessments of either “satisfactory progress” or “not applicable” on requirements 1.1 (government engagement), 1.5 (work plan), 4.1. (comprehensiveness) 4.6 (subnational payments), 6.1 (social payments), 6.3 (economic contribution) and 7.4 (impact of EITI implementation). The International Secretariat’s assessment is that Honduras has made inadequate or meaningful progress in addressing the other five corrective actions. Having failed to maintain adherence to Requirement 4.7, Honduras is required to ensure that EITI data is disaggregated by each individual project, company, government entity and revenue stream. The Board has determined that Honduras will have 18 months before a third Validation , i.e. until 28 April 2022, to carry out corrective actions regarding industry engagement (Requirement 1.2), civil society engagement (1.3), disaggregation (Requirement 4.7), data quality (Requirement 4.9), Public debate (Requirement 7.1) and follow-up to recommendations (Requirement 7.3). Honduras will be temporarily suspended following the assessment of Requirement 1.3 on civil society engagement as “inadequate progress”.

Failure to achieve satisfactory progress in the third Validation will result in temporary suspension in accordance with Article 6 of the EITI Standard. In accordance with the EITI Standard, Honduras’s MSG may request an extension of this timeframe or request that Validation commences earlier than scheduled.

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by Honduras. Progress in addressing these corrective actions will be assessed in a third Validation commencing on 28 April 2022:

In accordance with Requirement 1.2, industry should demonstrate that it is fully, actively and effectively engaged in the EITI process. The industry constituency should review its engagement in the EITI, consider opportunities to work more closely with the MSG to ensure that EITI Honduras discusses, addresses and communicates more effectively not only the Standard-mandated disclosures but other issues of interest to the industry constituency.
In accordance with Requirement 1.3, Honduras should demonstrate that civil society is fully, actively and effectively engaged in the EITI process. Civil society should clarify its objectives for EITI engagement and ensure it is well represented and capacitated to participate fully in the process. They should work closely and directly with the MSG enhancing the dissemination and debate of EITI data and findings. This could include ensuring that EITI is better linked to national priorities. Finally, civil society could consider refreshing its representation to ensure all representatives in the MSG are fully engaged in the EITI work. The government is encouraged to reiterate its commitment to the EITI’s civil society protocol.
In accordance with Requirement 4.7, Honduras is required to ensure that EITI data is disaggregated by each individual project, company, government entity and revenue stream.
In accordance with Requirement 4.9 and with the standard terms of reference for the Independent Administrator, the MSG should ensure that the Independent Administrator provides an assessment of whether all companies and government entities within the agreed scope of the EITI reporting process comply with the agreed quality assurance mechanism in future EITI reporting. Any gaps or weaknesses in providing this information should be noted by the Independent Administrator in the EITI Report with an assessment of whether this is likely to have had material impact on the reliability of the financial data presented.
In accordance with Requirement 7.1, Honduras should ensure that future EITI Reports are actively disseminated, promoted and contribute to public debate, combined with effective outreach activities. Honduras is encouraged to make use of available funding for dissemination and communication activities. Honduras is required to agree a clear policy on the access, release and re-use of EITI data.
In accordance with Requirement 7.3, Honduras should take steps to discuss and, when considered pertinent, act upon lessons learned from EITI reporting. The MSG is also encouraged to strengthen a systematic mechanism beyond discussions in the MSG for following-up on the recommendations derived from previous reporting exercises, in order to ensure that their implementation is in line with the gaps identified and provides for ways to overcome them.

Background

Honduras joined the EITI in May 2013. Honduras’ first Validation under the 2016 EITI Standard concluded in 25 October 2017. The EITI Board found that Honduras had made ‘meaningful progress’ in implementing the EITI Standard. Twelve corrective actions were identified by the Board, to be assessed in a second Validation commencing on 25 April 2019. The 12 corrective actions related to:

Government engagement (Requirement 1.1);
Industry engagement (Requirement 1.2);
Civil society engagement (Requirement 1.3);
Work plan (Requirement 1.5);
Comprehensive disclosure of taxes and revenues (Requirement 4.1);
Subnational Payments (Requirement 4.6);
Data quality and assurance (Requirement 4.9);
Social expenditures by extractive companies (Requirement 6.1)
The contribution of the extractive sector to the economy (Requirement 6.3)
Public Debate (Requirement 7.1)
Discrepancies and recommendations from EITI Reports (Requirement 7.3)
Review the outcomes and impact of EITI implementation (Requirement 7.4)

Honduras has undertaken a number of activities to address the corrective actions:

The MSG held 16 meetings between November 2017 and March 2019.
The MSG published the 2015-2016 EITI Report on 29 June 2018.
The MSG appointed the Independent Administrator, Jorge Tovar, on 31 July 2019.
The MSG published Honduras’ 2017-2018 EITI Report on 11 February 2020.
The MSG published the 2017 and 2018 annual progress reports on July 2018 and April 2019, respectively.
The MSG updated and published the 2017-2018 EITI work plan on 11 November 2017.
The MSG approved and published the 2019-2020 EITI work plan on 4 July 2019.

Honduras’s second Validation commenced on 25 April 2019. The Secretariat assessed the progress made in addressing the 12 corrective actions established by the EITI Board. Subject to the EITI Board’s consideration of new information published after the commencement of Validation, the EITI International Secretariat’s assessment is that Honduras has fully addressed seven of the 12 corrective actions and has achieved “satisfactory progress” on the corresponding requirements. The assessment covers the corrective actions established by the Board and the associated requirements in the EITI Standard. The assessment follows the guidance outlined in the Validation Guide. In the course of undertaking this assessment, the International Secretariat has also considered whether there is a need to review additional requirements, i.e. those assessed as “satisfactory progress” or “beyond” in the 2017 Validation. In particular, the 2017-2018 EITI Report was published on 10 February 2020, subsequent to the commencement of the second Validation.

While the Validation commenced as planned in April 2019, the International Secretariat encountered difficulties in completing the assessment in accordance with the schedule set out in the Validation procedures. The departure of key staff and challenges in managing a backlog of Validation work contributed to these delays. At the request of the MSG, the International Secretariat reviewed the most recent developments for consideration by the Board.

The draft assessment was sent to the MSG on 27 March 2020. Following MSG comments received on 13 May 2020, the assessment was finalised for consideration by the EITI Board.

The Validation Committee reviewed the case on 16 July, 19 August and 7 October 2020. The International Secretariat has prepared a memo reviewing the assessment of Requirement 1.3 in Honduras’ two Validations under the EITI Standard and outlining the outcome of additional consultations with civil society representatives on and off the MSG conducted on 2-3 September 2020.

In its review, the Validation Committee found that the broader objective of Requirement 1.3 on civil society engagement was no longer being fulfilled and downgraded the Secretariat’s final assessment of Requirement 1.3 from “meaningful progress” to “inadequate progress”. This assessment would result in Honduras’ temporary suspension.

Implementation of the 2016 EITI Standard

As of: 25 July 2020

Assessment of EITI requirements

Not met
Partly met
Mostly met
Fully met
Exceeded

Download full Validation report

Scorecard by requirement View more	Assessment View more
Overall Progress
MSG oversight
1.1Government engagement
The government has renewed its engagement in EITI through the participation of different government agencies in the process, as well as through the reallocation of the EITI national secretariat to INHGEOMIN, the allocation of funds in National Budget law, and the lifting of secrecy provisions on environmental licenses. The commitment of relevant ministries and agencies has remained active.
1.2Company engagement
There is an enabling environment for company participation in place. The industry constituency is engaged in the EITI, but could do more to help drive the process forward and increase the value and impact of the EITI.
1.3Civil society engagement
Stakeholders have not maintained the initial level of engagement and interest in the EITI process, due to the complex political situation and violence in the country. The Validation Committee concluded that the broader objective of Requirement 1.3 on civil society participation was no longer being met, and downgraded the Secretariat's final assessment of Requirement 1.3 from ‘significant progress’ to ‘insufficient progress’.
1.4MSG governance
EITI-Honduras has had an active and engaged EITI multi-stakeholder group. The composition, mandate and governance of the multi-stakeholder group seem appropriate. The government has shown commitment to working with civil society and companies, and there have been no obstacles to effective collaboration beyond the funding constraints mentioned above. While the lack of an adequately resourced national secretariat has affected the capacity of the MSG, the latter is functioning effectively.
1.5Work plan
Honduras has an updated EITI work plan. This plan was submitted in a timely manner. It includes activities for the period 2019-2020, with specific objectives in line with national priorities for the extractive sector, and sets out time-bound activities and identifies the necessary funding sources. The work plan also foresees outreach to different donors as a means to strengthen EITI implementation in Honduras.
Licenses and contracts
2.2License allocations
The required information regarding the award and transfer of licences is disclosed in the EITI Report.
2.3License register
Information on licences awarded to companies in the extractive sector, as required by the EITI Standard, is publicly available in the EITI Report. This information is extracted from the official register held in the regulator's information system, SIHMON.
2.4Policy on contract disclosure
The Honduran government supports and implements contract transparency. Contractual arrangements in the mining sector are uniform according to the mining law and are publicly available. Oil and gas contracts are published in the official gazette and on the portal of the Ministry of Natural Resources.
2.1Legal framework
The EITI Report provides a comprehensive description of the legal framework and fiscal regime governing the extractive industries, and discusses reform efforts. It also contains a description of the functions of the main regulatory body, as well as comments by the Independent Administrator on the clarity of some provisions of the mining law.
2.5Beneficial ownership	Not assessed
Honduras has published a roadmap for the disclosure of information on the beneficial owners in accordance with Requirement 2.5.b. ii.
2.6State participation	Not applicable
Through INHGEOMIN, the government confirmed that it has no involvement in any mining or hydrocarbon projects.
Monitoring production
3.1Exploration data
The 2014 EITI Report provided an overview of the extractive industries, including exploration activities.
3.2Production data
Information about production was based on export data, as all production in the metal sector is exported.
3.3Export data
The 2014 Report presented comprehensive data on export volumes and values. It did not address how the values were calculated. However, this is only a suggestion in the Standard.
Revenue collection
4.3Barter agreements	Not applicable
The legal framework in Honduras does not allow these types of transactions in oil, gas and mining activities.
4.6Direct subnational payments
The 2017-2018 EITI Report includes the disclosure of revenue flows from seven municipalities. The report discloses all significant direct payments made by reporting companies in the years analysed. This subnational revenue represented 9.9% and 7.1% of the total revenue (national and subnational) collected by the government. The 2017-2018 EITI Report includes the reconciliation of these seven revenue streams for each company.
4.7Disaggregation
The EITI Report 2017-2018 did not include any consideration by the MSG as to which assumptions are considered as an individual project. Disaggregation by individual project was one of the requirements of the 2016 EITI Standard for reports corresponding to the 2018 fiscal year, following the MSG's definition of what constitutes an individual project. This was not addressed in the 2017-2018 EITI Report.
4.9Data quality
For the 2017-2018 EITI Report, the Independent Administrator provided an assessment of the government and municipal data, but did not comment on the reliability of the company data, nor did it address the issue of non-reporting companies. In accordance with Requirement 4.9 and the standard terms of reference for the Independent Administrator, the MSG should ensure that the Independent Administrator provides an assessment of whether all companies and government entities included in the agreed scope of the EITI disclosure process adhere to the agreed quality assurance mechanism in future EITI disclosures.
4.1Comprehensiveness
The reconciliation exercise for the 2017-2018 EITI Report for Honduras covered 98.7% and 99% of all extractive sector revenues received by the government. The report also disclosed all revenues received by all government entities in accordance with the agreed scope.
4.2In-kind revenues	Not applicable
The legal framework in Honduras does not allow taxes or tariffs to be collected in any way other than in cash.
4.4Transportation revenues	Not applicable
The transport of minerals in Honduras is provided entirely by the private sector, and the State does not participate in the provision of these services.
4.5SOE transactions	Not applicable
There are no state-owned companies involved in the exploration, exploitation and commercialisation of minerals or hydrocarbons.
4.8Data timeliness
The first EITI Report (corresponding to 2012 and 2013) was published in May 2015, while the second (referring to 2014) was released in September 2016.
Revenue allocation
5.1Distribution of revenues
The reports from Honduras included a description of the distribution of income from the extractive industries. Income is categorised according to the Integrated National Financial Administration System (SIAF) and the Integrated Municipal Administration System (SAMI) available through the Ministry of Finance.
5.2Subnational transfers	Not applicable
According to the Constitution of the Republic (article 363), all ordinary tax revenues shall constitute a single fund. The revenue streams included in this Report, except for the population security levy and taxes collected directly by municipalities, are considered ordinary tax revenues. Municipal taxes were covered in Requirement 4.6.
5.3Revenue management and expenditures	Not assessed
According to Legislative Decree No. 199 of 2011, the population security tax goes to the Population Protection and Security Fund. The 2014 EITI Report indicates that 5% of the municipal tax goes to the Municipal Social Investment Fund.
Socio-economic contribution
6.1Mandatory social expenditures	Not applicable
The 2015-2016 EITI Report clearly states that no social expenditures are provided for in any law or contract governing resource extraction. Furthermore, all stakeholders consulted confirmed that social payments are voluntary and not mandatory in Honduras. This was also confirmed in the 2017-2018 EITI Report.
6.2Quasi-fiscal expenditures	Not applicable
Honduras has no active state-owned enterprise and no quasi-fiscal expenditure.
6.3Economic contribution
The EITI Reports for 2015-2016 and 2017-2018 disclose comprehensive information, in both absolute and relative terms, about the size of the extractive industries, exports, employment and certain key areas. Although the 2017-2018 Report only provides the value of extractive government revenues in absolute terms, and not as a share of total government revenues, it is possible to calculate the relative contribution of extractive revenues based on the total government revenue figures available from official government sources.
Outcomes and impact
7.2Data accessibility	Not assessed
Honduras has made no effort to address these issues. There is an opportunity to utilise government bodies such as SAR and INHGEOMIN to generate and make available data relating to the extractive sector on an ongoing basis. Honduras could also utilise the framework provided by the IAIP to ensure that information is available on a regular basis and incentivise the use of information by citizens, the media and other parties.
7.4Outcomes and impact of implementation
The MSG lacks a systematic approach to reviewing outcomes and impact. However, the records of its discussions show that some emphasis has been placed on these issues. Furthermore, the EITI Report 2017-2018 records and reports the impact areas discussed and identified by stakeholders. The impact assessment was endorsed by the MSG and is publicly available in the report.
7.1Public debate
Honduras has made improvements in terms of the availability of data in public form, for example, with the completion of the EITI Honduras website. This website presents the data in a more user-friendly way. The EITI platform has been used to discuss relevant issues in the extractive sector in Honduras. It has promoted interaction with local stakeholders included in the OGP action plans and the National Climate Change Strategy. During the years analysed, the use of EITI data in independent reports produced by civil society organisations was an improvement in the EITI's contribution to the public debate.
7.3Follow up on recommendations
EITI-Honduras has addressed discrepancies and identified shortcomings. Government agencies such as INHGEOMIN have incorporated lessons learned from EITI implementation. Other agencies have identified the possibility of using the EITI to generate additional improvements. The MSG has taken stock of what has been achieved and the opportunities for generating further improvements. However, the multi-stakeholder group has not been sufficiently successful in developing a clear set of recommendations that can be communicated to other stakeholders, including government agencies. The implementation of these recommendations is essential to ensure that the EITI contributes to Honduras' national priorities.