Ecuador has achieved a fairly low score in implementing the 2019 EITI Standard

The International Secretariat’s assessment is that Requirement 1.5 is mostly met. In August 2020, Ecuador EITI approved its first work plan for 2020-2022. The plan was developed through a consultative process involving all constituencies and development partners. Consulted stakeholders viewed the work plan was a relevant tool for EITI implementation backed by meaningful work. The work plan includes a comprehensive list of activities that are relevant to issues in the sector. Consulted stakeholders noted that addressing emerging issues within mining sector is key for the future of EITI implementation in the country. The Secretariat’s view is that the objective of ensuring that the EITI annual planning supports implementation of Ecuador’s national priorities is only mostly met. Consulted stakeholders from the industry constituency noted that Ecuador EITI’s 2020-2022 work plan was elaborated through consultations with all MSG constituencies. Each constituency proposed priorities, which were consolidated into the work plan’s objectives during broader MSG meetings. The process included plenary sessions with the full MSG and targeted discussions with individual sub-constituencies. The MSG approved the 2020-2022 work plan during its 3rd meeting on August 4, 2020. The work plan and its addendum outline five broad objectives centred on EITI Standard adherence, ensuring the long-term sustainability of EITI implementation and strengthening systematic disclosures. It also emphasises the connection between transparency and development (disclosure to development) to ensure meaningful impact. In the “Outcomes and impact” template, stakeholders emphasised alignment with national priorities reflected in laws such as the Organic Law on Transparency and Public Information Access (Ley Orgánica de Transparencia y Acceso a la Información Pública, LOTAIP. However, it does not explicitly elaborate on how it contributes to national priorities. This presents an opportunity to better connect the work plan's objectives with concrete national development outcomes. The work plan outlines objectives, specific targets, and responsible parties, mapping activities across 2020-2022. While some tasks were continuous, others were time-bound to specific quarters. Ecuador's EITI work plan acknowledges the importance of capacity building, incorporating activities such as stakeholder engagement and training. Nevertheless, the implementation of these capacity-building initiatives appears limited. In addition to capacity building, the plan sets forth strategies to enhance disclosure practices for the first EITI Report. These efforts include a feasibility study on systematic disclosures and a disclosure roadmap. To support these goals, the MSG requested information from various entities and conducted a scoping and materiality study. Furthermore, the work plan includes specific activities aimed at identifying legal obstacles to EITI implementation. Proposed activities include analysing the legal framework and identifying barriers to contract transparency and beneficial ownership transparency. However, the MSG limited its efforts to data collection, without conducting in-depth analyses to pinpoint specific barriers. In terms of financing sources, the work plan, developed with support from the Pan American Development Foundation (PADF), also refers to contributions from the World Bank and government-provided in-kind resources. Stakeholders from all constituencies noted challenges in identifying funding for each individual activity since the work plan's inception. As a result, the plan included an aggregated cost structure by objective rather than by individual activity. The 2020-2022 work plan is accessible on both the EITI and the Ministry of Energy and Mines websites. The CSOs in the MSG established an EITI Observatory to track and evaluate the implementation of the work plan. While some progress was made in implementing the work plan, significant challenges emerged from 2022 onward. Insufficient funding prevented the MSG from executing additional priority activities to broaden the scope and depth of EITI implementation, including expanding civil society participation beyond Quito to encompass coastal and Amazonian regions. Consulted stakeholders noted that the MSG is developing its 2025-2027 work plan. This will include an overview of challenges and progress for 2024. During supplementary consultations, government, industry and civil society stakeholders emphasised that illicit extraction has become a pressing national concern, that requires urgent prioritisation and coordination. There is a demand for capacity building to enhance understanding of the mining value chain and establish strong traceability, with a focus on improving expertise and decision-making related to criminal activities and transnational issues.

The International Secretariat’s assessment is that Requirement 7.1 is fully met. Ecuador EITI has made significant efforts to promote public debate, despite challenges such as a lack of funding. Key achievements include the promotion of EITI implementation through various media outlets and online channels, the participation of the MSG and civil society in outreach activities and the creation of the EITI Ecuador website. Other accomplishments include the launch of audiovisual campaigns, activities that reached diverse audiences, as well as efforts to influence policymaking. The Secretariat’s view is that the objective of enabling evidence-based public debate on extractive industry governance through active communication of relevant data to key stakeholders in ways that are accessible and reflect their needs has been fulfilled. EITI disclosures in Ecuador were launched in 2021 through the Ecuador EITI website, funded by PADF. The platform hosts the 2020-2022 EITI Report alongside additional sector-specific information presented in a user-friendly format. The “Repository” and “citizen consultation material” sections link to systematic disclosures, while ensuring access to other pertinent Ecuador EITI disclosures as well as extractive sector reports. The Ministry of Energy and Mines publicised the EITI web launch and participated in a dedicated event organised by the MSG. During the period under review, EITI Ecuador faced challenges in its efforts to communicate key data to key stakeholders, primarily due to funding constraints. The MSG indicated through the Outcomes and impact template that, after the publication of the EITI Report in April 2023, no further dissemination activities took place. Civil society stakeholders had planned to engage subnational actors with the resources that were to be disbursed. However, these plans could not be realised because the funds were ultimately not disbursed. Some consulted civil society representatives deemed dissemination and outreach efforts relevant, but still limited given the sector's challenges. Consulted industry stakeholders acknowledged the value of the EITI Report but highlighted the need to make its content more understandable to the public. External publications highlighted the asymmetry of information among stakeholders as a key issue to address during the first three years of EITI implementation. Despite these challenges, the MSG, particularly civil society organisations, conducted various dissemination and outreach activities. Ecuador EITI launched an audiovisual campaign called “extractives without secrets” targeting youth of 18-35 years. Substantial evidence shows that EITI Ecuador actively promoted implementation through various outreach and public engagement efforts during 2020 and 2021 (see here, here and here). The MSG and the national coordination participated in over ten interviews with major news outlets, which were widely disseminated on platforms such as Facebook and YouTube (see examples in PetroEnergia, FMMUNDO, radio vigia, prensa minera, plan V, plan V, Energia podcast, OGP Ecuador, etc). Civil society organisations also produced videos highlighting the link between the Sustainable Development Goals (SDGs) and EITI implementation. Recognising government-led dissemination mainly focused on social media, CSOs complemented these efforts through a proactive approach. They conducted targeted outreach in six provinces, engaging approximately 200 individuals. This helped identify information needs, particularly regarding royalty allocation and management via subnational funds. Additionally, CSOs organised two workshops with indigenous communities, attended by 25 and 30 participants, respectively, and developed a tailored methodology for engagement, surveying participants to assess the impact. Other remarkable efforts include publications or contributions to studies such as a survey on women’s employability in the mining sector, as well as guidance notes on mining sector revenue allocation mechanisms – topics prioritised by local stakeholders. In 2021, the MSG approved the Strategy for Engagement with Indigenous Peoples and Nationalities, although this has not yet been made public. Ecuador also EITI explored ways to influence policymaking. The MSG presented twice to the Biodiversity Commission of the National Assembly, introducing the EITI Standard and advocating for mining law reforms aligned with the EITI Standard (see video referred to before). Looking ahead, based on supplementary consultations, industry stakeholders emphasised the need to continue tailoring communication to diverse audiences, while civil society representatives highlighted the social outreach efforts of MSG-represented mining companies along with their interest in supporting CSOs dissemination activities.

The International Secretariat’s assessment is that Requirement 7.2 is mostly met. Consulted stakeholders did not express any specific views on the progress towards fulfilling this requirement. The Ecuadorian government adopted an open data policy in 2020 (amended in 2022) to ensure that public administration data is open, comprehensive, accessible, reusable, comparable, and interoperable. Ecuador EITI has also linked its website to platforms containing relevant extractive sector data. The MSG has discussed efforts needed to improve data availability in open formats during its meetings. Ecuador EITI submitted the summary data files for fiscal years 2020, 2021 and 2022, in accordance with the template approved by the EITI Board. However, the MSG is yet to make all tables and charts used in EITI reporting available in open data formats. The MSG has observed that while systematic disclosures within the scope of EITI reporting are available through government publications and are electronically readable, they are not yet fully interoperable. Examples of these disclosures include the geoportal mining cadastre, the petroleum cadastre, and mining production data. The Secretariat’s view is that while Ecuador EITI has taken efforts to enhance access to EITI disclosures, the objective of enabling the broader use and analysis of information on the extractive industries is mostly met. There remains room for improvement in data accessibility and openness by ensuring that all EITI disclosures are published in an open format.

The International Secretariat’s assessment is that Requirement 7.3 is fully met. Consulted stakeholders noted that Ecuador EITI has established two mechanisms to follow up on recommendations from the EITI process: quarterly civil society reports and management reports, along with technical committees that work with the national secretariat to follow up on recommendations. The MSG is working on strengthening the capacity of the national secretariat, to ensure that technical committees can effectively follow up on recommendations from EITI implementation. It is the Secretariat’s view that the objective of ensuring that EITI implementation is a continuous learning process that contributes to policymaking is fully met. The MSG is encouraged to consider integration of the recommendations from various reports as updates in MSG meetings. While the MSG has indicated in the outcomes and impacts template that Requirement 7.3 is not applicable (Ecuador’s first EITI Report was only published in 2023), the mechanisms for following up on recommendations are not dependent on the existence of a report. They rely on the MSG’s ongoing consideration of findings and recommendations from the EITI process. During consultations, stakeholders noted that they had established two mechanisms to follow up on recommendations. The first involves quarterly reports from civil society and management reports produced by the national secretariat (“informes de gestión”, see here, here). Management reports provide a summary of MSG activities and clear, actionable recommendations. Consulted civil society stakeholders shared examples of acting upon lessons learned based on the EITI observatory reports, such as identifying the need to update the MSG governance mechanisms. The second mechanism highlighted by stakeholders is the use of technical committees, or “mesas técnicas” which coordinate with the national secretariat to follow up on recommendations. Additionally, Ecuador’s 2020-2022 work plan also included activities based on findings and recommendations from various MSG exercises, aimed at expanding the scope of EITI implementation. The MSG has noted that, due to a complex and volatile political landscape, actions specifically addressing recommendations from EITI reporting have been limited. Nevertheless, stakeholders successfully published Ecuador’s first EITI Report and gained valuable insights from its preparation. Ongoing discussions are focused on strengthening the capacity of the national secretariat to ensure that technical committees can effectively follow up with each constituency.

The International Secretariat’s assessment is that Requirement 7.4 is fully met. Ecuador has undertaken significant efforts to review the impacts and outcomes of EITI activities. Ecuador EITI’s management reports covering 2020-2021 provide a comprehensive overview of outcomes and impact of EITI implementation. These include a summary of EITI activities, and assessment of progress towards objectives and associated requirements outlined in Ecuador’s EITI work plan, including a narrative of accounts to strengthen EITI impact. Additionally, civil society contributed through the EITI observatory and a policy brief offering recommendations for sustainable EITI implementation. While there is room for a more detailed review of progress towards each EITI requirement, the Secretariat’s view is that the objective of regular public monitoring and evaluation of implementation has been fully met. Ecuador’s 2020-2022 national secretariat produced quarterly, half-yearly, and annual management reports that provided detailed information on various activities, milestones and impact of EITI implementation. These reports documented all meetings held, new MSG member inductions, agreement signings, champion nominations, and engagements with external stakeholders and key actors in the extractive sector. Additionally, the reports highlighted Ecuador EITI participation in national and international EITI events, tracked compliance with work plan objectives and EITI Requirements, and included information on communication product. The Ecuador EITI 2021 and 2022 management reports highlight that Ecuador EITI has been considered a relevant actor in policymaking and implementation processes. Civil society has also contributed to impact reviews through the EITI observatory (See Requirement 7.1 and 7.3), and two specific publications. These include, the “Evaluation on perception of relevance and challenges of EITI in Ecuador” (2023) which assess MSG members' perspective on the relevance and challenges of EITI implementation and provides recommendations to augment its value added. Additionally, a policy brief titled “Challenges in EITI implementation in Ecuador and recommendations to bolster value added and multistakeholder engagement” supported by development partners (PADF and USAID) offers key recommendations for efficient, impactful and sustainable EITI implementation. Consulted development partners noted that while EITI implementation in Ecuador started strong, frequent changes in the Vice-ministry of Mines, which previously held the EITI Champion position, negatively impacted engagement and effectiveness. Industry and civil society stakeholders acknowledged that one positive outcome of EITI implementation has been the increased ownership of the EITI process by both constituencies as well as strengthened collaboration between mining industry and civil society. Key achievements, as identified by the MSG, include the establishment of the MSG, the collection and disclosure of some 2010 to 2020 hydrocarbon and mining contracts, and the implementation of a pilot information system. During supplementary consultations, stakeholders also pointed to EITI-related reports and documents, such as the “Analysis of the extractive industry’s relevance for the Ecuadorian Economy and EITI adherence”, capacity building activities, and efforts to democratise the EITI Standard as relevant the achievements.

The International Secretariat’s assessment is that Requirement 1.1 is mostly met. Given the difficult political and security context that has been ongoing since Ecuador’s admission as an EITI implementing country, stakeholders from all constituencies noted large gaps in government involvement in the period under review. Nevertheless, industry and government stakeholders noted that government engagement has been on the upswing since the Noboa administration came to office in November 2023. Taken as a whole, the Secretariat views the objective of full, active and effective government leadership of the EITI process to be mostly fulfilled given recent government commitments to improved leadership and operational engagement in facilitating all aspects of EITI implementation. Since Ecuador’s admission as an EITI-implementing country in 2020, there have been numerous public statements of the government’s intention to implement the EITI (see here, here and here). In the period under review, there have been three different presidents of Ecuador, which has complicated the process of EITI implementation. Nevertheless, the consistent statements of support that each administration has made illustrate the ongoing commitment of the country to the EITI process. Concomitant with the changing of presidential administrations comes the changing of ministers, and by extension, senior individuals charged with leading EITI implementation. In the period under review, there have been seven EITI Champions, with months-long periods in which there was not an EITI Champion to lead the EITI process. While all EITI Champions have been of sufficiently senior level to resolve bottlenecks and organise across ministries and agencies, the lack of continuity has disrupted EITI activities such as work planning, assessments of outcomes and impact of implementation and most acutely, lack of continuous funding and regular MSG meetings. Stakeholders from all constituencies expressed their confidence in the individuals chosen as EITI Champion but did echo that such a high turnover rate made EITI processes more difficult, and at times led to civil society organisations and industry conducting outreach and analysis outside of the MSG structure. Commitments made by the last EITI Champion (see here and here) demonstrate increasing commitment from government against a more stable political and security backdrop. The financial, political and security situation that successive Ecuadorian governments have had to contend with during the infancy of the country’s implementation has limited the effectiveness and regularity of engagement in the EITI process (Ecuador was admitted in the midst of the COVID-19 pandemic). Most acutely, government has not provided any funding for the EITI process, the multi-stakeholder group or the national secretariat. This was raised as a concern in Ecuador’s candidature application, as discussed by the EITI Board, with a resolution entailing limited government funding, which was not carried out. Instead, the majority of funding has come from the Pan American Development Fund (PADF), which stepped in when technical issues held up funding that had been previously promised by the World Bank. Despite the intervention by the PADF, there was a period in which the national secretariat and MSG did not have funding from government or international development agencies. In order to fund the salary of the National Coordinator, as well as the EITI website, mining companies engaged in the MSG agreed to make a one-time donation to EITI implementation with the acceptance of the MSG in 2022. Industry and civil society stakeholders have warned that reliance on international development agencies as the sole source of funding for EITI implementation is not a sustainable model and that government must step in to become the technical and financial lead in Ecuador if the EITI is to be an effective tool in the country. In conversations held during the Validation mission, some international development partners agreed that their funding should not be considered a constant source of financing. Instead, these stakeholders considered project-specific grants complimentary of both their organisations’ priorities and those of EITI Ecuador to be a more viable path forward. Upcoming presidential elections could also change the level of investment and cooperation that international development partners can devote to EITI Ecuador. A review of MSG meeting minutes indicates that senior government officials were regular attendees of MSG meetings. Government representatives consist of officials at the vice-minister, subsecretary and director level, along with technical support staff. For the 2020-2022 EITI Report, Ecuador adopted a flexible reporting approach where government unilaterally supplied information for EITI reporting. Data supplied by government generally fulfils what is required from EITI reporting and within the timeframes mandated by the Law on Transparency and Access to Information (LOTAIP). Outside of data required for EITI reporting, there are numerous examples of government disseminating EITI data through twitter (see here, here and here), publications and interviews (see here, here and here). While there is not a lot of publicly available evidence of government outreach to government stakeholders that are not members of the MSG, this appears to be due to the high turnover of both presidential administrations and EITI Champions, at least in part. Subnational governments (called Autonomous Decentralised Governments, or GADs in Spanish) included in consultations indicated in their comments on the draft Validation report that while they welcome subnational efforts undertaken by civil society (see here and here) to promote the benefits of EITI implementation, they do not regularly receive outreach from the central government and would like to be more involved in the EITI process.

The International Secretariat’s assessment is that Requirement 1.2 is fully met. Industry stakeholders consulted confirmed their full and active participation in the EITI process and the Secretariat agrees that the objective of ensuring full, active and effective engagement of extractive companies in the EITI, through disclosures and participation in the MSG and EITI process, and that the government ensures an enabling environment for this, is fulfilled. The industry constituency is comprised of eight companies, with alternate members in some cases. Concerning the two extractive state-owned enterprises in Ecuador, EP Petroecuador is included in the industry constituency and it is anticipated that ENAMI EP will also be a member of this constituency going forward, though they were not MSG members in the period under review. Mining and oil and gas companies, as well as the Chamber of Mining of Ecuador (CME) and Society of Oil Engineers (SPE) make up the rest of the members of the industry constituency. There are four EITI-supporting companies operating in Ecuador (Repsol, BHP, Lundin Gold and AngloAmerican). Documentation provided for this Validation indicates that industry attended all MSG meetings and industry and civil society stakeholders noted that the technical industry coordinator works to transmit information to industry both within and outside the MSG and actively works with other constituencies to achieve consensus. Ecuador undertook a flexible reporting approach to the 2020-2022 EITI Report that did not ask for data submissions from companies. Given requirements by all companies to submit audited financial statements to government, the Independent Administrator deemed it prudent to unilaterally collect information from government sources in the face of time and funding constraints. Nevertheless, companies have demonstrated their full, active and effective engagement within the EITI process through outreach events to government, CSOs and local communities. The mining industry provided one-time funding to keep the EITI process going in Ecuador when other funding sources were not present. Industry has also clearly described the methods by which they gather views of their constituency outside of the MSG and how they reach consensus before presenting opinions and proposals to the MSG. Working groups are established when complex issues arise that require input from the greater constituency. Mining industry stakeholders stressed the importance of the role of civil society organisations in public debate and noted that local buy-in was essential for them to achieve legitimacy in the eyes of the general public. These companies highlighted their sustainability reports and roundtables with local communities as evidence of their involvement at the local level. Some mining stakeholders also brought up the importance of gender considerations both in terms of employment and the essential role of women in local communities in which these companies operate, demonstrating a level of awareness that was surely aided by an active Women in Mining civil society organisation in the country. Some mining companies have also pushed for, and demonstrate through practice, greater transparency when it comes to production, economic performance and financial information. Oil and gas companies echoed what was mentioned by their mining counterparts but explained that the oil and gas industry is more consolidated, with EP Petroecuador accounting for 80% of production. Nevertheless, the oil and gas industry constituency should strive to have greater representation and activity in MSG discussions and events. Oil and gas companies such as SERTECPET and SPE, which are both MSG members and represent oil production companies, expressed a willingness to work with the EITI to train their member companies on the importance of EITI reporting and how EITI implementation in Ecuador can benefit the oil and gas industry. While not cited by industry in documentation provided for this Validation, it is unavoidable that the lack of a national coordinator and irregular meetings by the MSG affected the ability of industry to operate in the context of EITI implementation. Mining industry stakeholders who were consulted added that the government’s decision to stop the award of new mining licenses has led to a diminished interest from companies that are currently not a part of the EITI process to join the broader industry stakeholder group and contribute to EITI-related discussions. It is the International Secretariat’s understanding, however, that the termination of the award of new mining licenses has not had a negative effect on ongoing operations in the country and mining stakeholders did not indicate that there are laws, regulations or administrative rules or procedures that have prevented them from participating in the EITI process. During the Validation mission, conversations with oil and gas industry stakeholders highlighted the need for more engagement with this group to convey the importance of active participation in the MSG and the benefits it can provide to oil and gas companies operating in the country.

The International Secretariat’s assessment is that Requirement 1.3 is fully met. Consulted civil society stakeholders, both within the MSG and in the broader civil society group, acknowledged that while there were challenges to civic space in the country, with some related to the extractive sector, these did not affect their ability to engage in the EITI process or in commenting on extractive sector governance more generally. Instances of self-censorship were not documented by civil society members engaged in the EITI process. The Secretariat notes the view expressed by civil society in consultations that the hurdles faced by this constituency, while significant, stem from limited efforts by government to facilitate civil society’s participation in the EITI process in the face of weak government control and violent third-party actors and do not represent a coordinated attempt by government to silence civil society voices. Therefore, the Secretariat considers that the objective of ensuring that civil society is fully, actively and effectively engaged in the EITI process, and that there is an enabling environment for this, is fulfilled. Composition and nomination procedures: The civil society nomination procedures are detailed in the assessment of Requirement 1.4. On composition, there are three full time members on the MSG and three alternates, which represent the largest civil society organisations (CSO) in the country. These organisations serve as umbrella organisations for other civil society groups, affected mining and oil and gas communities and indigenous communities that are not part of the MSG. Stakeholders from these CSO groups outside the MSG confirmed that their views were collected as part of the EITI process and there is a technical coordinator that presents these views to the MSG. This position rotates annually. From a review of meeting minutes, it appears that CSO representatives were regular attendees to MSG meetings and given the nascent nature of Ecuador’s EITI implementation, there has not been turnover in MSG representatives from civil society. Ecuador EITI is invited to clarify whether there are term limits associated with civil society representation on the MSG. Expression: While consulted members of civil society involved in the EITI process posited that there were no barriers to their participation in the EITI process, they did cite isolated incidents of wider civil society dissent against prevailing extractive sector governance decisions that were repressed by state actors, including recent cases where protests against mining expansion and gas flares were violently repressed by local authorities. Civil society stakeholders further explained that in parts of the country, there is weak state control where organised crime groups are involved in illegal mining and drug trafficking, which contributes to violent repression and environmental damage. International civic space rankings reflect the situation described above, with CIVICUS ranking Ecuador’s civic space as ‘obstructed’ and noting a “serious and rapid decline in respect for civic freedoms.” Local news outlets, such as Fundamedios, cited at least 197 incidents against freedom of speech and other fundamental freedoms in the first nine months of 2023, but noted that the main perpetrators of these actions were non-state actors and unknown individuals. Human Rights Watch also highlights the “sharp increase of crime and gang violence” and protests that are “sometimes repressed with excessive force by security forces.” Freedom House echoes these assessments by noting that while freedom of expression is generally respected, there are incidents of violent repression by government and criminal groups that have contributed in a downgrade of their assessment from ‘free’ in 2023 to ‘partly free’ in 2024. Despite these instances, consulted civil society stakeholders did not consider that their ability for self-expression was limited and the Secretariat has not identified any incidents or laws that affected civil society actors engaged in the EITI process. For example, despite the instances of government repression noted above, media organisations continue to report on these issues and civil society and indigenous organisations regularly express their opposition to mining activities in Ecuador, both domestically and in international forums. Participación Ciudadanía (a civil society organisation in Ecuador) also maintains a monitoring website related to EITI implementation, complete with analysis of MSG meetings, the work plan and efforts to complete EITI Reports. During the International Secretariat’s Validation mission to Ecuador, civil society stakeholders confirmed their freedom of expression but expressed alarm at a recent draft presidential decree that could severely limit freedom of expression, if implemented. These stakeholders explained that civic space remains vulnerable due to this decree and others like it, which give the government the ability to constrain CSO operation and expression, if exercised. While these methods of censorship were largely used in previous administrations, CSO representatives were cautious of a return of these practices. Operation: Consultations with civil society stakeholders did not reveal issues in their ability to operate in relation with the EITI process. Article 66.13 of the Constitution guarantees freedom of association. In practice, however, the ICNL expresses some concerns about executive oversight of the registration process for CSOs, noting that all CSOs must be approved by the Ministry of Economic and Social Inclusion. It does not appear that there were barriers to registration by civil society involved in the EITI process or in the larger community in the period under review, but the ICNL cautions against the level of oversight that government currently possesses over CSOs. Consulted members of civil society did not indicate that there were reporting or regulatory requirements that were applied unfairly or that there were restrictions on access to foreign funding but did note that funding shortfalls in general prevented them from operating at their full capacity. There were no documented cases of CSOs engaged in the EITI process that were subject to threats and violence non-government actors, though the International Secretariat notes that there are ongoing issues with security in many parts of the country, especially in areas where extractive activities occur. Association: In addition to constitutional protections on operation and association, successive presidential administrations have passed Executive Decrees and Ministerial Decisions to regulate the civic right to association. In practice, it appears that this right is respected and civil society stakeholders who were consulted, including the wider civil society group outside of the MSG, explained the communication channels used by various civil society groups. WhatsApp chats are used to collect views from stakeholders located around the country and to consolidate views ahead of MSG meetings. Regarding composition of the MSG, consulted civil society stakeholders informed the Secretariat that a proposal to include CSO members as chair of the MSG in a rotating capacity was rejected by the majority of those represented on the MSG. Nevertheless, consulted civil society stakeholders confirmed that there were not interferences in the nomination processes of their representatives to the MSG and CSO communication channels were respected. Likewise, industry and civil society stakeholders noted numerous instances of contact and cooperation between these two constituency groups at the local level, where industry negotiates social and environmental contributions with local groups. Engagement: Consulted civil society stakeholders did not identify any government restrictions on engagement other than citing that the lack of continuous government presence on the MSG has hamstrung the EITI process as a whole. When MSG meetings did occur, CSOs members were full participants. Likewise, CSOs were involved in the crafting and approval of Ecuador’s work plan and Terms of Reference for the Independent Administrator. In a clear demonstration of their involvement with the EITI process, CSOs kept Ecuador’s EITI website up and running in the absence of government engagement and have even created their own website to summarise MSG meetings and other relevant issues in Ecuador’s implementation. Despite these tangible signs of engagement on the part of CSOs, some consulted stakeholders from this constituency cautioned that without adequate financial capacity, their current level of involvement in Ecuador’s EITI implementation could be at risk. From evidence available to the International Secretariat, there is a need to demonstrate plans for addressing financial constraints to the CSO constituency, in particular, and for EITI implementation as a whole. Access to public decision-making: Beyond institutional issues in the government’s engagement in the EITI process that affect all aspects of EITI implementation, there do not appear to be legal obstacles preventing civil society from using the process to influence public debate and policymaking on extractive industry governance. The constituency’s engagement with the broader civil society group in the country and presence in local communities demonstrates their ability to disseminate information and engage with those outside of the MSG. Given civil society’s active role in discussions on extractive resource governance, government should better facilitate access to information related to the extractive sector, particularly related to state-owned enterprises.

The International Secretariat’s assessment is that Requirement 1.4 is mostly met. Stakeholders from all constituencies considered that the MSG is an independent entity that is comprised of key stakeholders from the three main constituencies and that these groups operate in a balanced and consensual manner. While the Secretariat agrees that the rules governing the MSG, and composition of it, are in line with Requirement 1.4, in practice, there have been periods of time where a lack of a consistent government constituency has prevented the MSG from exercising active and meaningful oversight over all aspects of EITI implementation and that the objective of the requirement is only mostly fulfilled. Most acutely, in 2023 there were no MSG meetings due to a lack of funds and government turnover that inhibited the functioning of the MSG for a quarter of the period covered by Validation. Despite this lull in activity, the International Secretariat notes a significant uptick in activity in 2024 which should be maintained going forward. As noted throughout this Validation Report, Ecuador experienced significant political upheaval and in the latter stages of the Validation period, high levels of gang violence that only exacerbated the tumultuous political situation. As a result, there were six EITI Champions from 2020-2023, including months-long periods in which there was not an appointed EITI Champion to lead the MSG. In the case of Ecuador, the MSG has so far been an independent entity that is not hosted by a government entity. While the logic for this was to enable unbiased decision-making, in practice, this has led to a lack of consensus on how funds should be managed, resulting in the MSG attempting to function without funding for long periods of time. Mining industry stakeholders temporarily stepped in to ameliorate funding shortfalls before the PADF offered their financial support. Still, these funding sources are not sustainable nor consistent and the long-term viability of the MSG depends on a change in funding sources and more consistent government leadership. The lack of secure funding has also led to an unstable national secretariat. There have been two National Coordinators, both funded through the support of PADF, and during 2022-2023, the EITI Champion served also as the National Coordinator. The current National Coordinator contract is temporary and ended before the conclusion of this Validation. The lack of continuity in the secretariat leadership further reduces the capacity to follow recommendations, document decisions and continuously hold MSG meetings. During the Validation mission, ENAMI EP demonstrated their pivotal role in sustaining EITI activities in the country through hosting International Secretariat meetings and temporarily funding the position of the national secretariat. Various stakeholders pointed to the need for sustained support, both in personnel and funding and considered that a shift in the MSG from an independent entity to one hosted by government could support the MSG’s continued viability. Likewise, these stakeholders called for a co-Champion to be appointed from a second constituency group to ward against periods when a government Champion cannot be appointed due to political instability. During discussions with government stakeholders, however, the topic of direct government funding and hosting of Ecuador MSG received significant pushback. These stakeholders noted that securing direct funding from government is difficult and that reliance on government to spearhead progress on corrective actions may not be the most effective method for EITI implementation. Instead, increased involvement by state-owned enterprises, EP Petroecuador and ENAMI, was proposed by these stakeholders. From 2020 to 2024, there are published meeting minutes for 19 meetings and it is clear that when the MSG is functioning, stakeholders regularly attend and provide input in MSG meetings. However, the previously mentioned year-long gap in 2023 and the potential for further disruptions in the MSG indicate a need for new funding and management solutions. In terms of gender representation and diversity, the MSG is balanced, with eight women and seven men comprising the 15 main members of the MSG. Alternate members also appear to be balanced when it comes to gender. Government, industry and civil society all have MSG members of both genders. It is unclear whether there are explicit provisions in the MSG’s code of conduct or terms of reference that mandate this gender balance. The International Secretariat’s understanding is that the invitation to participate in the group was open and transparent. Industry and civil society outreach to their broader constituencies to garner views and solicit nominations to the MSG are documented via the Stakeholder engagement template, as are the nomination procedures of these two constituencies, which are codified. From documentation provided, it is not clear whether these codified policies include specific criteria for diverse representation but a review of the wider industry and civil society groups indicate that these groups are diverse and representative of the wider constituency. Each of these stakeholder groups also document how views from the larger group are collected and then transmitted to the MSG platform. It does not appear that there have been changes to the MSG composition (other than one change in industry representation due to company acquisition), which is appropriate given that the MSG was only first incorporated in 2020. Terms of Reference, both for the Independent Administrator and the MSG, can be found online, as can the work plan for the 2020-2022 EITI Report. Terms of Reference for the operation of the MSG follow the EITI’s Code of Conduct, according to the Stakeholder engagement template. Likewise, this template confirms that per diems are not paid to MSG members but Ecuador MSG is invited to confirm that per diems were not paid in practice.

The International Secretariat’s assessment is that Requirement 3.1 is fully met. Stakeholders held mixed views on the fulfilment of this objective, with some international development partners considering that there was an adequate overview of exploration activities in the country while the IA’s own assessment in the 2020-2022 EITI Report considers that there should be greater documentation of exploration activities and that datasets be in open and interoperable format. Despite these mixed views, the Secretariat considers that the objective to ensure public access to an overview of the extractive sector in the country and its potential, including recent, ongoing and planned significant exploration activities is fulfilled with room for improved data usability and encouraged aspects of Requirement 3.1. Ecuador’s 2020-2022 EITI Report provides an overview and history of the extractive industries. This information is also systematically disclosed on government websites, including the websites of the Ministry of Energy and Mines and the Central Bank. For example, the Boletín Institucional del Sector Minero (2021) provides information about Ecuador’s mining sector, including nationally-prioritised projects of strategic value, while the Estadística de Hidrocarburos 2022 provides information about the oil and gas sector. The Report describes oil and gas exploration activities in general and includes details on drilling by EP Petroecuador as well as private operators. The Ministry of Energy and Mines further discloses the Informe Anual del Potencial Hidrocarburífero del Ecuador (2021), which provides information on oil and gas reserves and resources as well as a map showing Ecuador’s petroleum blocks according to operator. EITI reporting reflects much of this systematically disclosed information. Further information on mining exploration activities is systematically disclosed in periodic reports from the Central Bank. This includes information on the location of significant mining projects in the exploration phase, estimated mine life, phase of exploration, estimated start of construction, estimated production date, expected total investment, investment to date, employment created, and total projected employment. Ecuador’s 2020-2022 EITI Report did not provide information on exploration activities related to informal sector activity, such as artisanal and small-scale mining.

The International Secretariat’s assessment is that Requirement 6.3 is mostly met. Stakeholders did not express particular views on the fulfilment of the objective to ensure public understanding of the extractive industries’ contribution to the national economy and the level of natural resource dependency in the country. The Secretariat notes significant efforts in employment disaggregation in the mining sector but considers that the objective is only mostly fulfilled given issues on comprehensiveness of the information that has been disclosed which falls short of the level of disaggregation required by the Standard. Government publications include some information on informal mining activities and it is the Secretariat’s understanding that this sector will be studied in more detail in future EITI Reports. Ecuador’s 2020-2022 EITI Report discloses an overview of the contribution of the extractive sector to the economy. This includes disclosure of the size of the extractive sector in absolute terms and as a percentage of GDP based on information from the Central Bank. An estimate of informal sector activity, such as artisanal and small-scale mining, is not included in EITI reporting but government publications provide some information about this sector. Ecuador’s 2020-2022 EITI Report also discloses government revenues generated by the oil and gas and mining sectors, respectively. These are reported in absolute terms and as a percentage of total government revenues based on information from the Internal Revenue Service. Information on government revenues generated by EP Petroecuador is also included. Further information on government revenues generated by the extractive industries is systematically disclosed by the Central Bank. For the oil and gas sector, the 2020-2022 EITI Report discloses extractive exports as a percentage of total exports and in absolute terms. For the mining sector, the Report discloses extractive exports in absolute terms, which enables readers to understand these exports as a percentage of total exports. The information provided is from the Central Bank. For the oil and gas sector, Ecuador’s 2020-2022 EITI Report does not disclose employment in absolute terms or as a percentage of total employment. Accordingly, information was also not disclosed disaggregated by gender and occupational level. For the mining sector, however, the Report discloses employment in absolute terms and includes information on employment disaggregated by gender, education, and occupational level. Information on the gender pay gap is also provided. The Report further discloses the direct and indirect employment generated by 10 significant mining projects in the country as well as further information on those projects’ gender-sensitive human resources management practices. Further information on mining employment is systematically disclosed in periodic reports from the Central Bank. For the oil and gas sector, Ecuador’s 2020-2022 EITI Report includes information on the major fields where production is concentrated. The Ministry of Energy and Mines provides a map showing Ecuador’s petroleum blocks according to operator in the Informe Annual del Potencial Hidrocarburífero del Ecuador. For the mining sector, the Report includes information on the key regions/areas where there are mining projects in the country as well as a map of the regions/areas and projects. Information on the area of mining concessions is also included. Further information on key regions/areas where production is concentrated is systematically disclosed in periodic reports from the Central Bank. The Empresa Nacional Minera also provides additional information on large mining projects in the country, including maps of the regions/areas and projects.

The International Secretariat’s assessment is that Ecuador has fully met Requirement 2.1. The 2020-2022 EITI Report and systematic disclosures reference the existing legal framework and fiscal regime including fiscal devolution policies, although these could be more clearly explained through EITI reporting. The Secretariat is of the view that the objective of ensuring public understanding of all aspects of the regulatory framework for the extractive industries is fulfilled but that there should be greater efforts between national and subnational governments to understand fiscal devolution practices. Consulted industry and civil society stakeholders agreed with this assessment of the objective. The 2020-2022 EITI Report describes the legal and fiscal regime, and confirms the practice of fiscal devolution, for mining and hydrocarbons, including the roles of government entities and a description of the different types of contracts and licenses that govern exploration and exploitation of oil, gas and minerals. While fiscal devolution occurs in Ecuador, the IA noted that rules are not centralised and information related to subnational transfers that was collected is from local government units and was not representative of the entire universe of such transfers (see Requirement 5.2). It appears that government websites, such as that of the Ministry of Economy and Finance, systematically disclose information on the legal and regulatory framework of the extractive sector, such as the Minerals Law and Petroleum Law. Information on ongoing and planned reforms should be highlighted through EITI reporting, with links to where reforms are published. Likewise, MSG involvement in policy discussions, such as Ecuador EITI’s participation in discussions on the recent Law on the Prevention of Money Laundering.

The International Secretariat's assessment is that Requirement 2.4 is mostly met. There is no explicit government policy on contract and license disclosure and disclosure practices do not follow a set procedure, which limits fulfilment of the objective of ensuring the public accessibility of all licenses and contracts underpinning extractive activities (at least from 2021 onwards) as a basis for the public's understanding of the contractual rights and obligations of companies operating in the country's extractive industries. The Secretariat considers that the objective has been only mostly fulfilled given a lack of clarity and MSG discussion on the government's position on contract transparency and a lack of comprehensive disclosure of all extractive contracts and licenses, despite improving publication practices of petroleum contracts. In their comments to the draft Validation report, government stakeholders considered that there was no need for a specific law on contract transparency given that they considered that mining contracts are published in practice, although it is not clear whether all mining contracts have in fact been published. International development partners agreed with the Secretariat’s assessment that there should be documented MSG discussions on where government policy on contract disclosure is embodied. Ecuador EITI has not documented relevant government policy on license and contract disclosure for mining and hydrocarbons and international development stakeholders confirmed that there is not a centralised policy on contract disclosure. It is not clear from EITI reporting where government policy on contract disclosure is embodied given the lack of focused legislation on this matter. While numerous pre- and post-2021 contracts have been disclosed in the hydrocarbons sector, it is not clear where the impetus for this disclosure came from or whether it will continue. International development stakeholders noted that there had been even more pre-1 January 2021 oil and gas contracts that had been disclosed but that they were not migrated to new government websites when these websites were updated, emphasizing the importance of a clear government policy on contract disclosure. Given that the last bid round for oil and gas contracts was in January 2021, there are active contracts that should be disclosed. Ecuador’s EITI reporting notes that there are 38 active oil and gas contracts, yet only ten are disclosed on the government repository. Of the pre-2021 contracts that are publicly disclosed, it appears that this disclosure includes annexes, amendments and riders, but without an inventory of which contracts are published and which are not, comprehensiveness is not able to be determined. While the comprehensiveness of disclosure of post-1 January 2021 contracts is unclear, there are newly awarded and amended contracts that are available to the public on via government publications (scroll down to “Contratos petroleros”). These disclosure practices in the hydrocarbon sector are commendable. Some petroleum contracts entered into and amended before and after 1 January 2021 are disclosed. EITI reporting lists all active petroleum contracts, though this list does not indicate which are publicly available and which are not. By contrast, the ARCERNNR hosts a mining register that contains what appears to be a complete list of mining licenses and contracts, although it is the Secretariat's understanding that there is no public disclosure of mining contracts or licenses, including model licenses. During the Validation mission, mining industry stakeholders expressed reservations on full contract disclosure, stating that this information could be misinterpreted or taken out of context to cast mining companies in a bad light. EITI reporting does provide a description of the general criteria applicable to different mining regimes but the mining register’s list does not touch on the public availability of these licenses. Information on large-scale mining projects in which ENAMI is involved can be found via publications on their website. Another recent large-scale mining project spearheaded by SolGold, the Cascabel Project, provides a clear precedent for companies interested in promoting transparency and anti-corruption in their mining projects. Through collaboration with local civil society groups, SolGold’s exploitation contract includes specific clauses that require adherence to the EITI Standard. However, to date, this contract has not been publicly disclosed and Ecuador MSG is invited to comment on when this contract will become publicly available. Given the lack of MSG discussion about what constitutes government policy on contract disclosure, and the lack of actual disclosure of mining contracts and licenses, it would be helpful for future discussions to document this policy and then document and explain any deviations from established procedure, with an explanation for why mining contracts and licenses are not disclosed and recommendations to disclose them.

The International Secretariat’s assessment is that Requirement 6.4 remains not assessed in the period under review. While the regulatory and monitoring framework related to the environmental impact of the extractive industries in Ecuador is well-explained, there is no clear documentation about how these frameworks are implemented and used in practice for all extractive companies, and this prevents stakeholders from assessing the adequacy of this framework and companies' adherence to environmental obligations, which indicates that the objective of this requirement remains unfulfilled. Consulted government stakeholders acknowledged that while the rules are clear, they are not as easily enforced and agreed with the Secretariat’s assessment. Consulted members of civil society and international development partners concurred with this assessment of the objective and noted that the true environmental impact of extractive activities is not known as there is not sufficient technical government capacity to control the environmental effects of these activities across the country. For example, while EITI reporting indicates that a large number of companies adhere to environmental rehabilitation programs, these companies are not identified and there is no reference to where contributions to rehabilitation funds are recorded, either through EITI reporting or through systematic disclosure. Similarly, while Environmental Impact Assessments are required for all companies performing extractive activities, these assessments do not appear to be publicly available. It is not clear whether there are planned or ongoing reform efforts related to the documentation and enforcement of environmental rehabilitation funds or environmental impact assessments. Reform efforts related to environmental consultations with affected communities and with the development of environmental indicators for the mining industry are briefly touched upon in the 2020-2022 EITI Report, but it is unclear where these reform efforts are disclosed on government websites or where they are in the debate process. EP Petroecuador, on the other hand, does provide some information on their environmental rehabilitation efforts, principally oriented toward the closure of gas flaring sites. EITI reporting has not yet extended to covering sanctioning mechanisms for non-compliance nor has it provided a comprehensive overview of extractive companies' environmental liabilities. MSG comments to the draft Validation report also pointed to the lack of defined procedures for mine closure, including government entities responsible and funds allocated for closure and rehabilitation. Given that some aspects of the requirement have yet to be comprehensively addressed, Requirement 6.4 remains not assessed.

The International Secretariat’s assessment is that Requirement 2.2 is mostly met. The objective falls short of being fully met because of gaps in the disclosures of mining license transfers in the period under review (2021) and a lack of information on technical and financial criteria used in mining bid rounds. While bid rounds in the oil and gas sector are published, not all bidders and applicants are listed. Stakeholders did not express particular views on the objective of providing a public overview of awards and transfers of oil, gas and mining licenses, the statutory procedures for license awards and transfers and whether these are followed in practice. The Secretariat considers this objective to be mostly fulfilled. EITI reporting explains that the process for allocating mining licenses and contracts and hydrocarbon contracts is governed by the Ministry of Energy and Mines, with the Mining Law and Hydrocarbon Law describing the legal and administrative processes for application. In mining, the 2020-2022 EITI Report and the Mining Law describe the different processes for awarding mining licenses, depending on the size of the allotment. Direct negotiation and competitive bidding are used to award mining licenses of all sizes but was not clear from a review of documents if there are technical and financial criteria used in the awards process outside of the bidder proving economic solvency. Guidelines outlining when direct negotiation or competitive bidding is to be used were not found and but in their comments to the draft Validation Report, the Ecuador MSG explained that guidelines on when to use one process over another depends on the size of the concession and whether existing exploration licenses apply to the concession area. In terms of size, small-scale concessions contain exploration and production privileges, whereas medium and large-scale concessions have distinct exploration and production contracting phases. Where a company does not already hold exploration privileges, a bid round is held. Where these exploration privileges already exist, priority is given to the company that conducted exploration activities and direct negotiation is used. During consultations, the IA noted that it was not clear the extent to which technical and financial criteria were used in the award of mining licenses through direct negotiation. While bid criteria for specific competitive bid rounds in the mining sector are publicly available, the list of applicants, outside of the winning bidder, is not disclosed. While EITI documentation did not specify whether mining license transfers are allowed – or the technical and financial criteria associated with them – consultations with government stakeholders clarified that the transfer of mining licenses is permitted for mining concessions, including those involving ENAMI. It is not clear if there were mining license awards or transfers that took place in 2021. More recently, SolGold was awarded a groundbreaking exploitation contract, principally for the production of copper and gold. SolGold held the exploration concession for the deposit and conducted viability studies of the area. In the MSG’s comments to the draft Validation report, they explained that the granting of the exploitation contract to SolGold was to ensure the lasting commitment of both the company and the government to the production phase of this project. International development partners consulted indicated that there were no mining rights granted in 2021 but that there were transfers. Consulted subnational government representatives that form part of the Association of Municipalities of Ecuador added to the information provided by international development partners, noting petitions for mining concessions made through the mining cadastre, the technological platform through which the State grants new mining concessions, have not been adjudicated in a timely manner, resulting in an increase in illegal mining. This linkage between an increase in illegal mining due to the lack of newly awarded mining concessions was also echoed by mining industry stakeholders during the Validation mission. Consulted members of academia posited that while there has been much work to standardise and formalise contract and license allocation processes, this information is not well understood by the public and consulted government stakeholders stressed the importance of formalising mining operations operating without legal backing. There is no evidence that the MSG or IA assessed the mining license award and transfer practices to determine whether there were non-trivial deviations from standard procedure. In oil and gas, the 2020-2022 EITI Report and the Hydrocarbon Law describe the scenarios by which oil and gas contracts are awarded through competitive bidding, and in exceptional cases, direct negotiation. Direct negotiation is employed when a foreign state-owned enterprise, or one of its subsidiaries, is to be awarded a hydrocarbon contract. While not a state-owned enterprise, the Gunvor bribery case involving EP Petroecuador where Gunvor used bribes to forego competitive bidding processes when obtaining oil-backed loan contracts illustrates possible risks associated with direct negotiation processes. Instances where EP Petroecuador and foreign state-owned enterprises engage in extractive contracts should be monitored closely by Ecuador MSG. Each bid round is published on the EP Petroecuador website and contains technical and financial criteria with which companies must comply to remain a viable applicant. Information on the applicants of bid rounds does not appear to be publicly accessible, though information on recipients is disclosed. Oil and gas contract transfers are permitted in Ecuador and the technical and financial criteria are described. However, the number of transfers in 2021 is not clear. Additionally, under the Lasso administration, international oil companies were given an opportunity, which is ongoing, to modify existing service-provision contracts to production-sharing contracts. While the MSG indicates in the Transparency template that there were no non-trivial deviations in the award and transfer of contracts, the methodology used to arrive at this conclusion is not provided. While information on various bid rounds is published on the EP Petroecuador website, these rounds could be better organized to ease public navigation of complex documents. More broadly, the MSG should assess gaps in publicly available information required and encouraged in Requirement 2.2 and document and explain barriers preventing comprehensive disclosure, with an account of government plans to overcome these barriers and the anticipated timescale for achieving them. Commentary on the efficiency and effectiveness of systems used in license and contract allocation, and actual practices and grounds for renewing, suspending or revoking contracts and licenses could be explained through EITI reporting.

The International Secretariat’s assessment is that Requirement 2.3 is mostly met. The Secretariat's view is that the underlying objective of ensuring the public accessibility of comprehensive information on property rights related to extractive deposits and projects is only mostly fulfilled due to gaps in the oil and gas contract register, and contradictory and missing data points in the mining cadastre. Consulted government stakeholders agreed with this assessment of the objective given gaps in data and lack of regular update of cadastral information. Ecuador's mining license cadastre is administered by the ARCERNNR while the oil and gas contract register is overseen by the Ministry of Energy and Non-Renewable Natural Resources. The cadastre and register are publicly accessible, though the oil and gas register is difficult to navigate and it is unclear how often it is updated. All data points listed under Requirement 2.3.b other than application date are available in the mining cadastre and from a spot check, it appears that many companies within the agreed scope of EITI implementation are present. However, given comments made by consulted government stakeholders on lack of comprehensiveness and regular update, the International Secretariat agrees that the comprehensiveness of this cadastre cannot be confirmed. Likewise, questions remain as to the veracity of the data points present in the register given irregularities in the classification of concessions as small or large-scale based on the size of the concession. It is also unclear whether all mining agreements entered into by ENAMI and international partners and foreign SOEs are included in the mining cadastre, though ENAMI independently publishes this information. In the hydrocarbon register, there is an interactive portal that may contain required datapoints listed under Requirement 2.3.b as there is an option to view active oil blocks. Further information about these blocks requires registration with the ministry and it is unclear how to register. There is a static version of this oil and gas register that contains information on the contract holder, but other aspects of Requirement 2.3.b such as coordinates, dates of application, award and expiry or commodity are not available. It is not clear whether gaps in these data portals have been assessed by the MSG nor if there is a documented plan to strengthen these systems. Multiple international development partners alluded to the fact that the mining cadastre had faced funding and confidentiality concerns in the past that resulted in a former version of the cadastre being shuttered. Considering government comments on the lack of regular update of the current cadastre, the Ecuador EITI should ensure that it remains updated.

The International Secretariat’s assessment is that Requirement 2.5 is partly met. Consulted stakeholders considered that Ecuador had made some progress toward the objective of enabling the public to know who ultimately owns and controls the companies operating in Ecuador’s extractive industries, especially through the Company Registry. The country has established a regulatory framework for collecting both legal and beneficial ownership information, with two main institutions responsible for this: the Ecuadorian Tax Administration (SRI) and the Superintendency of Companies (company registry). While the company registry discloses legal ownership, the beneficial ownership registry managed by SRI remains confidential and EITI reporting was not used as an alternative method to collect information on the natural persons, meaning that in practice there are no beneficial ownership disclosures in Ecuador. The MSG has not yet verified the accessibility, comprehensiveness, and reliability of the legal and beneficial ownership information reported by extractive companies to these entities. In both registers, there appear to be opportunities for improvement, such as tackling issues related to opaque ownership structures in the extractive sector, which are crucial to mitigate risks, such as those exposed by cases like Gunvor-EP Petroecuador and the more recent instance of shell companies exporting untaxed gold, where companies had fictitious addresses and minimal financial records. Consulted stakeholders highlighted the need for stronger government commitment. The Secretariat’s assessment is that Requirement 2.5 is partly fulfilled. EITI Ecuador has made some progress in initiating discussions on defining beneficial ownership (BO) and politically exposed persons (PEPs), as documented in meeting minutes (see here, here and here). Although the MSG has not yet agreed on a definition in line with the EITI Standard, existing legislation provides a foundation. Notably, the law on the internal tax regime and the 2021 Organic Law for Economic Development and Fiscal Sustainability mandate the establishment of a Beneficial Ownership Registry by the Ecuadorian Tax Administration (SRI). Recent SRI resolutions have broadened the scope of reporting entities, refining the definition of beneficial ownership to include other forms of control and establishing a threshold for non-tax residents with more than 10% participation (see here, here). The Tax Administration register requires to demonstrate the ownership chain and requires both legal persons and individuals who are beneficial owners of legal entities and structures to submit information. Additionally, SRI resolution 46/2022 and other laws indicate that access to beneficial ownership will be restricted to government entities, meaning this information is confidential, contradicting Ecuador's commitment to transparency under the Open Government Partnership (OGP) Action Plan. During the commentary phase, the MSG noted that the treatment of politically exposed persons is addressed across various monitoring systems. However, it remains unclear how information from these systems is integrated with beneficial ownership information collected by the SRI to unify data points in a singular repository. Ecuador EITI has not used its EITI reporting to provide a comprehensive description of the legal framework governing beneficial ownership data collection or to document actual disclosure practices. EITI reporting was not used to collect beneficial ownership information from extractive companies within the scope of reporting. The 2020 - 2022 EITI Report only refers readers towards information on legal shareholders, which is systematically disclosed by the company registry. This includes data points such as company name, type of entity/legal status, nationality, address, stock exchange, and percentage of shareholder ownership up to the natural persons. Ecuador’s MSG is yet to review if information on extractive companies disclosed through the company registry is comprehensive and reliable. During consultations, industry and civil society stakeholders acknowledged the value of this registry for tracing direct and past shareholders, including links across sectors and to foreign ownership. However, industry stakeholders highlighted areas for improvement particularly with regards to foreign entities (non-tax residents in Ecuador) that are not governed by domestic laws. With regards to beneficial ownership, there is potential for disclosure through the company registry, but stakeholders pointed out that the current disclosures do not consistently lead to identifying beneficial owners. Further, the company registry data collection framework does not fully align with Requirement 2.5 of the 2019 EITI Standard, as it lacks provisions for control mechanisms beyond shareholding and does not address ownership thresholds or reporting obligations for politically exposed persons (PEPs). The FATF Mutual Evaluation Report (MER) 2023 further highlights these limitations noting that the company registry does not cover control by other means (focusing on shareholders) and that the registry may not encompass all legal entities operating in the country (i.e. foundations, political parties and banks). In practice this means that the company’s registry capacity to comprehensively capture beneficial ownership for the extractive sector is limited. Development partners found the Ecuador 2020-2022 EITI Report helpful in identifying data sources for civil society. Consulted government stakeholders engaged in ownership data collection described ongoing inspections to the mining sector, which uncovered a growing number of registrations with the company registry. They also emphasised the need for increased collaboration with the mining SOE ENAMI EP to identify regulated and unregulated entities within the gold supply chain and the need for additional cross-checks and risk assessments for improved oversight. Collaboration with the Unit of Economic and Financial Analysis (UAFE) and participation in national and international assessments were mentioned as ongoing efforts to fulfil SCVS’s supervisory role. A new Anti-Money Laundering (AML) law is also under consideration. Ecuador EITI should document these reforms. Ecuador’s legal framework for collecting beneficial ownership is in a constant state of flux. MSG should comprehensively document the government’s policies, laws, and planned reforms related to beneficial ownership with a particular focus on reporting obligations for corporate entities seeking or holding exploration or production licenses or contracts in the oil, gas and mining sector. The MSG must assess the quality and comprehensiveness of beneficial ownership data collected by the different government entities, identifying any material gaps or inconsistencies. EITI implementation offers a valuable platform to enhance beneficial ownership transparency. Civil society organizations and international organizations, such as the Open Government Partnership, Global Financial Integrity, and Open Ownership, have played an important role in pushing this agenda forward. Additionally, Ecuador is a signatory of the Opening Extractives program, although progress has been hindered by the changing legal framework and political instability, making efforts in this area more challenging.

The International Secretariat’s assessment is that Requirement 2.6 is partly met. Stakeholders consulted did not express specific views on whether the objective of ensuring an effective mechanism for transparency and accountability for well-governed SOEs and state participation was fulfilled but considered that much of the legal basis and regulations in practice were available on company and government websites. The Secretariat’s assessment is that the objective is not fulfilled given that some data points are not easily accessible and the mining state-owned enterprise, ENAMI EP, was not included in the scope of reporting for this Validation despite being involved in multiple extractive projects. In the mining sector, there is one state-owned enterprise, ENAMI EP, that was not included in the scope of reporting for the 2020-2022 EITI Report. While ENAMI is now a part of the MSG and will be included in the scope of reporting in the next EITI Report, the Secretariat considers that ENAMI should have been included in the scope of reporting for this Validation period given ENAMI’s active role in exploration activities and entrance into four exploitation contracts in 2022. Despite much of the information asked for under Requirement 2.6 being published in ENAMI’s financial statements, the 2020-2022 EITI Report does not adequately reflect ENAMI’s role in Ecuador’s mining sector nor does it summarise systematic disclosures to ease public consumption of this material. In the oil and gas sector, EP Petroecuador and Petroamazonas EP both operated until January 2021 when they were merged due to Executive Order No. 723, which mandated that EP Petroecuador assume all assets and liabilities of Petroamazonas. Consulted government representatives confirmed this arrangement by which EP Petroecuador became responsible for the operations of Petroamazonas, including the exploration and production activities that were ongoing at the time of the merger. The 2020-2022 EITI Report, viability study (published in anticipation of the 2020-2022 EITI Report) and EP Petroecuador’s website outline the company’s role in Ecuador’s oil and gas sector, with key duties consisting of entering into exploration and production contracts with international oil companies, and at times, other national oil companies. EP Petroecuador’s responsibilities do not extend to emission of laws and regulations related to the extractive sector. The rules governing EP Petroecuador’s financial relations – including the ability to receive transfers from government, retained earnings, distribution of the state’s share of revenues, reinvestment and third-party financing – with the government appear to be described on the company’s website, which includes a page dedicated to providing links to where laws and regulations are located on relevant government websites. It is the International Secretariat’s understanding that EP Petroecuador is considered to be financially, economically and managerially autonomous in regard to its operations. The viability study indicates that the company received transfers from government in the period under review. However, from EP Petroecuador’s financial statements, it is not clear to the Secretariat where these transfers are documented and they are not summarised through EITI reporting, though consulted government stakeholders confirmed that EP Petroecuador’s financial statements contain this information. Also missing from financial statements and the latest EITI Report is a breakdown of the level of ownership that EP Petroecuador has in oil and companies and projects, including an assessment of changes in these ownership levels in the period under review. While information concerning EP Petroecuador’s own loans is detailed in its financial statements, it is not clear if EP Petroecuador provided loans or loan guarantees to oil and gas companies in the period under review. Information on retained earnings, reinvestment and third-party financing (though not for SOE subsidiaries) appear to be published in EP Petroecuador’s signed financial statements and annual reports but are not easily accessible for public consumption. Ecuador MSG should use future EITI Reports to summarise this highly important information. The Secretariat notes that EP Petroecuador’s financial statements, while signed, are not audited by third parties. While EP Petroecuador had previously committed to hiring an external auditor, it does not appear that this initiative was followed through upon. The independent audit of these financial statements should be a priority for EP Petroecuador given the recently concluded investigation into bribery and price-fixing between Gunvor and EP Petroecuador. Other encouraged aspects of this requirement, including rules and practices related to EP Petroecuador’s operating and capital expenditures and some corporate governance information on the composition of the Board of Directors and the Board’s mandate and code of conduct are published on EP Petroecuador’s website. Other encouraged aspects, such as procurement and subcontracting still appear to be missing.

The International Secretariat’s assessment is that Requirement 4.2 is partly met. Stakeholders did not express particular views on the objective of this requirement, other than to confirm that EP Petroecuador has historically handled all commercialisation of oil revenues, whether considered in-kind or not, though the Secretariat notes that private oil companies operating under production-sharing agreements are now able to commercialise their own production. The objective of this requirement to ensure transparency in the sale of in-kind revenues of minerals, oil and gas to allow the public to assess whether the sales values correspond to market values and ensure the traceability of the proceeds from the sale of those commodities to the national Treasury. The Secretariat considers that the objective of this requirement is not fulfilled given that documentation provided for EITI reporting and stakeholder consultations confirm the applicability of the requirement despite the lack of provision of data to aid in public understanding. The Viability study published in anticipation of the 2020-2022 EITI Report notes that information on the commercialisation of in-kind revenues collected by EP Petroecuador is available through the Ministry of Energy and Mines (MEM) publications, with regular update, but does not provide these figures or a link to where they can be found on the MEM website. Annual statistical publications (see here and here) may provide some of this information and the MSG is invited to note where data on in-kind revenues can be found. EITI reporting does not touch on in-kind revenues in the extractive sector outside of confirming their existence and stating that further efforts need to be made by the MSG to decide how these revenues should be reported. EP Petroecuador’s financial statements provide aggregate figures on commercialisation of in-kind revenues but the figures reviewed by the Secretariat were not disaggregated by those attributable to individual private companies’ in-kind payments and EP Petroecuador’s commercialisation of its own production. It is not clear if there are in-kind revenues collected in the mining sector, perhaps by ENAMI. There has not been a discussion by the MSG about the materiality of in-kind revenues and as noted above, existing information is not disaggregated in a manner that allows an understanding of volumes and values of in-kind revenues at the level of contracts or legal agreements. EITI reporting does not provide an assessment on the possibility of disclosing these in-kind revenues by type of product, price, market and sale volume, ownership of the product sold and nature of contract. These last two aspects are of particular importance given Ecuador’s involvement with oil-backed loans and the recent Gunvor bribery case where EP Petroecuador provided below market value oil as repayment for loans. Clear buyer information and disaggregation are necessary to ward against these practices in the future. Likewise, there is no comment on how buying companies are selected (including technical and financial criteria) or whether buying companies have disclosed volumes received from the state or state-owned enterprises and payments made for the purchase of oil and potentially solid minerals. While EP Petroecuador discloses information about its overall sales, this data is not disaggregated to allow a public understanding of which part of this production represents the SOE’s own production, or equity oil. Data reliability of in-kind revenues was not discussed.

The International Secretariat’s assessment is that Requirement 4.5 is mostly met. Stakeholders consulted did not express particular views on the fulfilment of the objective of ensuring the traceability of payments and transfers involving SOEs and strengthening public understanding of whether revenues accruable to the state are effectively transferred to the state and of the level of state financial support for SOEs, outside of stating that budget decisions are taken in coordination with the MEF and MEM. It is the Secretariat’s opinion that while information on most of these payments and transfers are publicly available, the lack of financial statements from EP Petroecuador after 2020 prevents an up to date understanding of the SOE’s financial relationship with the state, especially in light of the company’s ongoing role in supporting the domestic economy’s use of petroleum and petroleum derivatives. Despite not being included in the scope of reporting, the role of all three extractive SOEs, including ENAMI EP, are described in EITI reporting. Consulted government stakeholders confirmed that private companies’ extractive payments flow straight to the MEF and that EP Petroecuador does not have a role in collecting these payments. EITI reporting discloses most of the payments that EP Petroecuador makes to government, clearly distinguishing between those payments particular to the SOE and those which all extractive companies are subject to. Payments specific to EP Petroecuador stem from exports of petroleum derivatives, the anticipated sale of petroleum and the direct export of petroleum. While private companies also make payments based on the export of petroleum, these payments represent the sovereignty margin applicable to the state, as noted in oil contracts, and are classified under a different revenue code. It is the Secretariat’s understanding from consultations with government officials and a brief review of EP Petroecuador’s most recently published financial statements that the company subsidises the country’s domestic oil and gas industry in many ways, with payments made into the Account for Financing the Derivative Deficit (CFDD), managed by the Ministry of Economy and Finance. While EITI reporting notes payments made into the CFDD, it does not properly identify them as a payment made from a state-owned enterprise to government, as required in Requirement 4.5. It does not appear that EP Petroecuador received any transfers from the state or private companies in the period under review but it remains to be confirmed whether there is the possibility of EP Petroecuador or ENAMI receiving transfers from government as it appears that until Petroamazonas was absorbed by EP Petroecuador, it was receiving transfers from government.

The International Secretariat’s assessment is that Requirement 6.2 is partly met. Stakeholders did not express particular opinions on the objective of ensuring that extractive-funded expenditures by EP Petroecuador, or other state-owned enterprises, on behalf of government that are not reflected in the national budget are disclosed to ensure accountability in their management, although consulted government stakeholders confirmed the existence of some such expenditures by EP Petroecuador. The Secretariat considers that the objective of this requirement is not yet fulfilled, despite some systematically disclosed information on the subject, due to a lack of MSG discussion and documentation of quasi-fiscal expenditures undertaken from 2020 to 2022 to determine the importance and financial terms of such agreements. Ecuador EITI acknowledges their inaction in developing a reporting process on quasi-fiscal expenditures and has committed to initiating this process in future reporting cycles. While this promise is welcome, Ecuador already discloses some information on potential quasi-fiscal expenditures, and it does not appear that these sources were reviewed in the spirit of including them in the 2020-2022 EITI Report. The MSG has not yet agreed upon a definition for these expenditures and is urged to consider the IMF’s definition to hasten the reporting process. Consultations with government stakeholders touched upon the subsidies that EP Petroecuador is providing to the domestic market when it comes to petroleum derivatives and domestic natural gas and oil consumption. The SOE systematically discloses information on some of these expenditures in its financial statements, but statements since 2020 are not available and the MSG has not indicated whether this information can be found elsewhere, or whether it is recorded in the national budget. From the Secretariat’s understanding, one method by which EP Petroecuador supports the domestic market is through contributions to the Account for the Financing of the Derivative Deficit. It is not clear whether there are financial statements associated with this account or whether these contributions are first recorded in the national budget. In addition to establishing a definition of QFEs, Ecuador MSG must consider these expenditures in terms of their materiality for EP Petroecuador and any involved subsidiaries or joint ventures. Given Ecuador’s previous willingness to enter into financing agreements involving future payment using extractive resources, and a renewed emphasis to move away from these methods to garner higher prices on the spot market, EITI reporting and studies could be a key instrument to provide the public with reference data on the status of ongoing loans and subsidies provided by state-owned enterprises.

The International Secretariat’s assessment is that Requirement 3.2 is mostly met. Some government stakeholders considered that the objective should be fulfilled but the Secretariat identified gaps in publicly available information that inhibit a full public understanding of production levels of all mining commodities and the valuation of produced oil and gas, as a basis for assessing expected government revenues from the extractive industries and the potential for government revenue leakages linked to under-reported production. Therefore, the Secretariat considers the objective to be mostly fulfilled. During consultations, government and international development stakeholders both agreed that opacity in mining sector production prevents a clear understanding of the revenues that should derive from this sector. In the oil and gas sector, Ecuador’s 2020-2022 EITI Report discloses oil and gas production volumes, including associated gas production and information for EP Petroecuador, at the aggregate level. This information is systematically disclosed in a more disaggregated manner in annual reports available on the government’s digital library, the Ministry of Energy and Mines annual publications, as well as in periodic reports from the Central Bank. Disaggregation of production volumes extends to state/region, company and project/field, but production values are not disclosed, even in aggregate. Publicly disclosed production values in the oil and gas sector are relevant given Ecuador’s ongoing oil-backed loans with China and the recently resolved Gunvor bribery case in which Gunvor received barrels of oil as repayment that were valued at below-market rates from 2012 to 2020. For the mining sector, Ecuador’s 2020-2022 EITI Report discloses aggregate information on production volumes for the Fruta del Norte and Mirador projects, which are the two large-scale mines reported to be in production. This information derives from a Central Bank publication that is published every quarter, which provides more detailed information on production of solid minerals disaggregated by project. Information on production volumes for artisanal and small-scale mining are not included in EITI reporting and the available official data seems to be outdated. The MSG’s comments to the draft Validation report clarified that while the Central Bank publishes production information, it is the Ministry of Energy and Mines and the Vice-ministry of Mines that generate these figures. These comments also pointed to a lack of financial and human capacity as reasons for the lack of up-to-date information on artisanal and small-scale mining. In the National Action Plan on the use of Mercury in the artisanal and small-scale mining, in accordance with the Minamata convention, a broad approximation on annual production of gold are disclosed. However, this report was published in 2020 and does not include other commodities produced from artisanal and small-scale mining. Ecuador’s 2020-2022 EITI Report does not disclose production values. Information on production volumes and values, however, is systematically disclosed in periodic reports from the Central Bank for the Fruta del Norte (gold, silver) and Mirador (copper) projects by commodity. Government stakeholders who were consulted stated that the quality of production information is poor, especially as it pertains to the small-scale and informal sector, and this prevents a clear understanding, by both the public and by government officials. There does not appear to be documentation related to the reliability of production information or how production data has been calculated, although the source of this information is clearly cited.

The International Secretariat’s assessment is that Requirement 3.3 is fully met. The Secretariat’s view is that Ecuador sufficiently ensures a public understanding of export levels and the valuation of extractive exports in the mining sector, as a basis for assessing expected government revenues from the extractive industries and the potential for government revenue leakages linked to under-reported exports. Consulted stakeholders broadly acknowledged the underreporting of some artisanal mineral exports but noted that export information in the oil and gas sector is systematically disclosed. Following reports from independent media organisations on irregular artisanal exports of gold, government agencies such as the SRI and the ARCOM have publicly signalled their commitment to investigate and resolve allegations concerning a lack of associated tax payments from some companies exporting large quantities of gold. Export information in the hydrocarbon sector is publicly accessible and disaggregated, which leads the Secretariat to conclude that the objective is fulfilled. For the oil and gas sector, Ecuador’s 2020-2022 EITI Report discloses disaggregated information on oil export volumes for private companies and for EP Petroecuador, with exports disaggregated by region of origin, commodity, company and project. Information on how oil exports were calculated is also systematically disclosed. It is the Secretariat’s understanding that all-natural gas produced in Ecuador is consumed domestically. Oil export data is reported from the Central Bank on a quarterly basis and the Ministry of Energy and Mines on an annual basis. Ecuador’s 2020-2022 EITI Report does not disclose oil export values or reproduce the data shown in systematic disclosures. EITI reporting could be used to discuss specific aspects related to petroleum exports using the data systematically disclosed in government reports. For the mining sector, Ecuador’s 2020-2022 EITI Report discloses aggregate information on export volumes of mining commodities, which are sourced from the Central Bank. Ecuador’s 2020-2022 EITI Report does not disclose export values. Information on export volumes and values, however, is systematically disclosed in periodic reports and publications from the Central Bank for gold, silver, lead and copper concentrate, zinc concentrate, salt, and other mineral products. The information is readily available via downloadable reports from the Central Bank, which include information on general product category, country of destination, specific product, volume, and value. EITI reporting provides the source of export data but it is not clear to the Secretariat whether information on how export data was calculated is publicly accessible. Likewise, it does not appear that the MSG made efforts to disclose estimates of artisanal and small-scale mining exports of solid minerals. While documentation of calculations and estimates is encouraged, but not required, the latter is of particular importance as it pertains to gold exports. While the 2020-2022 EITI Report documents the licensing procedures relevant to artisanal and small-scale mining, it does not touch upon the illegal production and export of both Ecuadorian gold and foreign-produced gold smuggled through Ecuador’s porous borders. This subject has been studied in detail by the Organisation of American States in its December 2021 publication on the linkages of money laundering and gold production in the country. Investigative journalism organisations based in the region, such as Ojo Público and Plan V, continue to uncover irregularities in export data between different government entities and in the amount of income tax that exporting companies are obligated to pay to government entities. In the MSG’s comments to the draft Validation report, they note that institutional weakness in the Internal Revenue Service and ARCOM are key areas to improve to provide more institutional control of this sector. Historically, mining export licenses were granted by regional offices of the ARCERNNR but it appears that beginning in August 2024, the ACERNNR’s (now ARCOM) central office in Quito will be remitting these licenses for provinces susceptible to illicit gold exports. Likewise, the SRI has committed to creating a system to detect revenue leakages in the gold export value chain. Recent government actions, taken in response to independent media investigations, signal a willingness by government to address a major issue from both a domestic resource management and security perspective. However, these commitments considering irregularities in export licensing procedures and improper tax payments related to exports call into question the comprehensiveness of export volumes and values provided through EITI reporting.

The International Secretariat’s assessment is that Requirement 4.1 is partly met. Despite consulted stakeholders noting that the 2020-2022 EITI Report contains government revenue information, the objective of ensuring comprehensive disclosure of companies’ payments and government revenues was not yet fulfilled due to weaknesses in the reporting process. However, Ecuador EITI has made a positive step towards identifying material revenue streams through the scoping and materiality study. Consulted stakeholders highlighted collaboration among relevant stakeholders, but noted that institutional challenges, along with severe funding shortages, significantly disrupted the reporting process. It is essential that all companies holding contracts and licenses be requested to waive any confidentiality clauses that prevent the reporting of revenue information for the next reporting cycle. The Secretariat’s view is that the objective of ensuring comprehensive disclosures of company payments and government revenues from oil, gas and mining as the basis for detailed public understanding of the contribution of the extractive industries to government revenues is partly met. Ecuador adopted a flexible reporting approach, relying on government disclosures without reconciliation since no company data was collected. In Ecuador, companies are required to submit their audited financial statements and annexes to the company registry. Given access to this registry, the Independent Administrator (IA) did not establish a materiality threshold. Instead, the IA analysed data from the entire sector, including mining and quarrying. The EITI Report provides aggregate data on income tax paid, income tax accrued, and net profits of companies with active production-sharing contracts. It also compares the payments of companies represented in the MSG to the total of payments from all companies in the extractive sector. However, the data is presented by revenue and does not include company-level detail. The Report primarily focuses on income tax and profits, without addressing other revenue streams. A separate section includes disclosures from the Ecuadorian Tax Administration, showing that value-added tax generates the highest tax revenue, followed by income tax. This indicates that relying solely on data from the company registry and focusing on net profits and income tax is not sufficient to fully capture the most significant contributors to government revenue from the extractive industries. For the mining sector, the EITI Report discloses the names of the largest contributors to two revenues streams, which represent 93% of the mining revenues, based on the scoping and materiality study with information from the Ecuadorian Tax Authority for 2020-2022. Additionally, the report provides disaggregated data for nine companies regarding revenue from "mining conservation patents". However, consulted stakeholders highlighted discrepancies between mining revenue figures provided by different government entities, underscoring need for MEM, SRI, and MEF to harmonise data for more accurate and comprehensive information on mining sector revenue. While the Report lists 12 different types of revenue streams for the oil and gas sector and three for the mining sector during the fiscal years 2020-22, based on MEF classification. However, it appears that the MSG did not fully consider the revenue streams listed in provision 4.1.c of the 2019 EITI Standard, raising concerns about the comprehensiveness of the EITI Report. For instance, the report itself cites the distribution of gross oil revenues outlined in the Budget Proforma (a financial forecast that anticipates income, expenses, and overall financial performance over a specific period). This forecast includes other important revenue streams such as the sovereignty margin, oil royalties, net tariff payments and carry forwards, which do not appear to have been taken into account. The EITI Report does not address data quality assurances or the comprehensiveness of the disclosed information. Government stakeholders indicated that EITI Ecuador aimed to gather detailed tax information across different government levels, despite challenges in obtaining disaggregated data. In December-January 2021, Ecuador EITI commenced the scoping and materiality study, engaging with an experienced consultant to carry out this work. The consultant met with all relevant entities to evaluate the available information. Amidst funding shortages, the National Coordinator resigned in mid-2022 during the second consultancy. Consulted civil society stakeholders highlighted that preparing the EITI Report was challenging due to limited preparation time and a remaining budget of only 10.000 USD to complete the report. Development partners acknowledged the report's retention of crucial information, particularly in light of recent reductions in systematically disclosed data by the Ministry of Mines and Energy. Stakeholders observed that the Ministry of Energy and Mines (MEM) now only publishes information on its operational processes rather than on regulations and transparency. Additionally, the information provided by the Ministry of Economy and Finance was perceived as overly complex, and there were limited disclosures from the Ecuadorian Tax Authority (SRI), with accountability reports being less than 40 pages long.

The International Secretariat’s assessment is that Requirement 4.3 is partly met. Consulted stakeholders considered that this was a key transparency issue for the extractive sector of the country and that lack of effective coordination among government entities resulted in conflictive contract negotiation processes of natural resource management. The 2020-2022 EITI Report provides some information on external public debt and creditor breakdowns but falls short of detailing the specifics of oil-backed loans, their terms, and the values involved. The Secretariat's view is that the objective of ensuring public understanding of barter-type arrangements is not fulfilled given limited MSG efforts in addressing transparency in barter agreements through EITI implementation, despite the relevance, availability of third-party sources and documentation on government platforms, including EP Petroecuador financial statements. Following systematic disclosures from the Ministry of Finance, the 2020-2022 EITI Report includes a section on external public debt with a breakdown of creditors and debt balances. However, the report does not offer further details regarding the correlation between debt and oil-backed loans, a critical issue for the Ecuadorian government in 2022, evidenced by the extensive public debate surrounding these loans and efforts by EP Petroecuador to transition more sales to the spot market. This highlights a potential area for improvement in future EITI reporting. A clear recommendation resulting from the initial scoping and materiality study is for EITI reporting to disclose the scope of the Strategic Ecuador-China Alliance, the active long-term (oil) sales contracts, the volume and values of crude delivered for anticipated sales, as well as the values of sales still to be settled in volume and value of production. Ecuador faces significant debt obligations and part of this debt is financed through oil exports. Public information sources indicate that barter agreements existed for the period under review and suggest that as of 2020, Ecuador had yet to deliver 160 million barrels of crude oil. For instance, between 2010 to 2016, Ecuador’s Ministry of Finance signed various loan agreements or long term facilities (phase I, phase II, phase III, phase IV, and phase V) with China Development Bank (CDB) totalling USD 7 billion. These agreements involve crude oil delivery contracts with PetroChina (subsidiary of CNPC) and Unipec Asia. Among these, the Phase IV Facility under “PetroChina Intl. Sales and Purchase Contract”, signed in 2016, appears to be still active and has been amended at least three times: in 2018 (Amendment No. 1), in 2020 (Amendment No. 2) and in 2022 (Amendment No. 3). Various news articles covered the latest negotiation by President Guillermo Lasso's administration (see here, here and here). Ecuador sought to renegotiate loan terms to increase the amount of oil available for sale on the spot market, adjust price formulas, and alleviate its debt burden. Amendment No. 3, disclosed by the Ministry of Economy and Finance, revised the oil delivery schedule to April 2027 (instead of 2024). This document also discloses the total number of barrels to be supplied to PetroChina Intl., amounting to 190,440,000 barrels of crude oil, as well as the number of cargoes, delivery schedules, and oil volumes per cargo (pages 8-10). However, public sources indicate that there have been at least 13 different oil-backed loan agreements, most of which are not public due to confidentiality clauses. Comprehensive information on the number of other active agreements, the quantity of crude exported and the pricing details remains pending. In 2022, Ecuador’s National Assembly's Political Control and Oversight Commission approved a report about the commercialisation of crude with the Asian companies Petrochina International, Unipec and PTT International. The report established damages to the State of USD 4.8 billion due to the application of the formulas and conditions in the contracts signed with the aforementioned companies. The prevailing message from consultations regarding resource-backed loans highlights the need for enhanced transparency in resource-backed loans and noted that the lack of coordination between different government entities lead to conflict and complex resource management contracts. They also highlighted that a significant portion of Ecuador's oil production is used for debt repayment. Development partners pointed out that these agreements have been declared confidential, and it was only under the previous government that the extent of oil barrels committed as part of these agreements began to emerge, often revealed through investigative journalism. Some government stakeholders provided limited comments on this topic and noted that the responsibility for disclosure lies with the Ministry of Economy and Finance and the Ministry of Energy and Mines. Given that oil sales are one of the main sources of government income, EITI implementation should address barter agreements and any other agreements involving full or partial exchange for oil, gas and mining exploration or production concessions or physical delivery of such commodities.

The International Secretariat’s assessment is that Requirement 4.4 is mostly met. Ecuador counts systematically disclosed information about volumes and values of hydrocarbons transported through the state-owned pipeline SOTE. However, consulted stakeholders considered that information on transportation revenues remains unclear and there does not appear to be a consideration on the materiality of these revenues. The Secretariat’s view is that there is room for improvement to fully meet the objective of ensuring transparency in government and SOE revenues from the transit of extractive commodities as a basis for promoting greater accountability in extractive commodity transportation arrangements involving the state and EP Petroecuador. Ecuador systematically discloses information on the volumes transported through its pipelines via EP Petroecuador’s annual statistical reports and through the Central Bank of Ecuador “Oil sector report” This data, disaggregated by month, is available for years 2020, 2021, 2022. The EITI Report references these figures and notes that a tax is imposed under Law 40, which is derived from the difference between the transportation tariff and the cost of transporting oil through state-owned SOTE (Sistema del Oleoducto Transecuatoriano). This means that the revenue is not calculated in function of volumes but on the difference between what companies pay to transporting oil and what EP Petroecuador or pipeline operators actually incur in transportation costs. If a company pays a tariff higher than the transportation cost, that difference is subject to taxation and it’s what enters the state’s revenue. Values related to this tax are disclosed in the EITI Report. Additionally, there is a levy (gravamen a la tarifa de transporte) of USD 5 cents per barrel of crude oil imposed on the transportation tariff for oil transported though SOTE (owned by EP Petroecuador). EP Petroecuador collects this levy, which is then remitted to the state. Oil transported for internal consumption is excluded from this tax. In a separate section of the report, EP Petroecuador’s contribution to the state general budget -sourced from the Ministry of Economy Finance- is presented, showing the revenue generated by this levy for years 2020, 2021, and 2022. While the report establishes the significancy of this revenue stream compared to others (ranging from 0.1% to 0.3% of total revenues covered by the EITI Report), it does not appear that the MSG has considered whether these revenues are material and if so the need to publish data with a level of detail commensurate with other payments and revenue streams. Further transparency on transportation arrangements, including the companies involved and their contracts, would strengthen public oversight. To improve accessibility, future reports could include simplified summaries and visual aids to clarify how these revenues support the state budget.

The International Secretariat’s assessment is that Requirement 4.7 is partly met. Stakeholders did not express any particular views on the objective of ensuring disaggregation in public disclosures of company payments and government revenues from the extractive sector. Ecuador discloses, in aggregate, government revenues by revenue stream from the oil, gas and mining sectors. The MSG has not documented which forms of legal agreements constitute a project. The Secretariat’s view is that the objective of enabling the public to assess the extent to which the government can monitor its revenue receipts as defined by its legal and fiscal framework and that the government receives what it should from each individual project has not been fulfilled given the lack of disaggregation of all revenue streams at the levels required. Most of the financial data presented in the 2020-2022 EITI Report is presented by extractive sector and revenue stream, but not by company or by project. Government stakeholders confirmed this that this was due to confidentiality clauses in place. While information is presented by government entity, other relevant revenue-collecting entities, such as the Central Bank of Ecuador, were not included in the scope of reporting. Stakeholders emphasised the importance of including this institution given its role in managing production and export data. Only revenue stream “patentes de conservación minera” (mining conservation patent) is presented by company level and associated project names. The report explains that mining conservation patents are estimated per hectare and assessed at the mining concession level. The report includes partial information on projects managed by the mining SOE ENAMI EP, but not associated values. ENAMI was not considered material, and thus not in the scope of reporting for this Validation period. For the oil and gas sector, the report notes EP Petroecuador’s involvement in 15 different projects. It is also stated that 12.5% of oil production royalty payments are based on a “joint production of each company, and its subsidiaries and ventures.” However, the MSG does not appear to have documented what does constitute a project, i.e. if there are any operational activities that are governed by a single contract, license, lease, concession or similar agreement or by multiple agreements interconnected that give the rise to payment liabilities (and not by company).

The International Secretariat’s assessment is that Requirement 4.8 is fully met. The publication of the 2020-2022 EITI Report within Board-approved timelines (April 2023) ensures that public disclosures of company payments and government revenues from oil, gas and mining are sufficiently timely to be relevant for public debate and policymaking and the Secretariat considers the objective to be fulfilled. Ecuador's inaugural EITI Report spans the fiscal years 2020-2022. The MSG reached a consensus on the accounting period in March 2023. Per Ecuador's 2020-2022 work plan, the reporting cycle was slated for completion by the second quarter of 2022. However, the reporting deadline was missed, leading to two extensions granted to the country by the EITI Board (see here and here). Nonetheless, Ecuador managed to publish its report within the second deadline, encompassing two fiscal years. Consequently, the disclosures are deemed sufficiently timely to contribute meaningfully to public discourse and policy formulation, as the data presented is no older than the second-to-last complete accounting period upon publication. Looking ahead, the MSG could incorporate activities into its future work plans aimed at bolstering the timeliness of EITI data disclosures, potentially including an assessment of payments that could be reported more promptly.

The International Secretariat's assessment is that Requirement 4.9 is partly met. Consulted stakeholders did not express particular views towards the objective of ensuring the reliability of disclosures of company payments and government revenues from oil, gas and mining. Ecuador’s MSG relied on government disclosures and adopted a flexible reporting approach. However, the World Bank EITI feasibility report and third-party sources highlight weaknesses with the auditing mechanisms for the public sector. With regards to companies, consulted stakeholders noted that not all companies identified in the scoping and materiality study had their financial statements audited. The Secretariat’s view is that these shortcomings hinder the objective of ensuring that revenues and company payments are subjective to credible, independent audits, applying international standards. The World Bank’s feasibility study for Ecuador’s EITI adhesion, published in 2019, underscores that the Comptroller General’s Office (Contraloría General del Estado, CGE) is responsible for auditing public sector entities and state-owned enterprises (SOEs). The Organic Law of Public Enterprises establishes the use of international standards in the accounting practices of SOEs. However, the study notes that regulations across various government agencies are not harmonised, therefore, financial reports contain deficiencies. Additionally, the Comptroller General’s Office often outsources auditing processes to private firms, based on cost considerations rather than adherence to international standards. This frequently leads to shallow audit results not adhering to international standards and that in most cases there is insufficient follow-up on identified weaknesses. Ecuador’s Coordinator of Public Companies (EMCO EP), whose objective is to plan, articulate, coordinate, control and validate the policies and actions of all public companies, publishes online information on state-owned companies, but this data is not audited. The U.S Department of State 2023 investment climate statement notes that SOEs’ financial information is limited and lacks independently audited balance sheets. In 2023, the Inter-American Development Bank (IDB) confirmed financial support to EP Petroecuador for auditing its 2019-2021 financial statements. Consulted stakeholders from EP Petroecuador informed that the company has made efforts to audit its balance sheets but that these efforts have not yet resulted in publicly available audited financial statements. In Ecuador companies submit their financial statements and annexes to the company registry. However, only companies that meet specific thresholds for asset, revenue or size are required to have their financial statements audited annually. Stakeholder consultations underscored the lack of audited financial statements from companies identified in the scoping and materiality study, though the exact number of companies without audited financial statements was not specified. The Ecuador 2020-2022 EITI Report does not describe the types of quality assurances or provide comments on the credibility of information disclosed by government and corporate entities. For EITI to contribute to strengthening routine government and company audit and assurance systems and practices and ensure that stakeholders can have confidence in the reliability of financial data on payments and revenues the MSG should follow up the recommendations laid out in the feasibility study and undertake a review of the audit and assurance procedures in companies and government entities relevant for EITI reporting.

The International Secretariat’s assessment is that Requirement 5.1 is mostly met. The objective of this requirement is to ensure the traceability of extractive revenues to the national budget and ensure the same level of transparency and accountability for extractive revenues that are not recorded in the national budget. EITI reporting provides an explanation, and figures, for extractive revenues recorded in national and subnational budgets. While rules and practices around state-owned enterprises’ retention and use of extractive revenues is explained, gaps in comprehensiveness and in the concordance of extractive revenue data published by various government entities prevents the objective of this requirement from being completely fulfilled. EITI reporting provides an overview of the distribution of some extractive industry revenues in Ecuador, but it is not clear where this data is systematically disclosed. It is not clear whether explanations provided in the 2020-2022 EITI Report cover distribution of all extractive revenues in Ecuador and whether some revenues collected on behalf of government are retained by SOEs. Consultations with government stakeholders confirmed that extractive revenues can be retained by EP Petroecuador and that information about these retained earnings are published in annual reports. These stakeholders also confirmed that all extractive revenues flow to national or subnational budgets before being redistributed. The Secretariat understands that this confirmation indicates that funds such as the Fund for the Sustainable Development of the Amazon and the Common Fund for the Surrounding Amazonic Areas receive extractive revenues after being recorded in national or subnational budgets. The MSG is invited to comment on this conclusion. The Ministry of Finance website provides general information about the budget process, which can also be found in EITI reporting. While it is the Secretariat’s understanding that all extractive revenues are currently collected through national and subnational budgets, the establishment of the Fiscal Stabilisation Fund bears monitoring as this is to be financed with surplus extractive revenues. EITI reporting does not touch on this fund but the Secretariat understands that given the lack of surplus extractive revenues that no revenues have so far been transferred to this fund. The MSG is invited to provide further details about this fund in the MSG comment period. Regarding encouraged aspects, there is no reference to national revenue classification codes or international data standards.

The International Secretariat’s assessment is that Requirement 5.3 remains not assessed, given that several encouraged aspects of this requirement remain to be addressed by Ecuador EITI. The Transparency template notes that extractive revenues are earmarked for specific purposes but does not indicate where figures associated with these earmarks can be found. While revenues destined for specific geographic areas are noted in the Budget Execution Report on the Ministry of Finance website, it does not appear that these earmarks relate specifically to extractive revenues. EITI reporting provides information and links to the country's budgeting and expenditure processes but it remains to be confirmed in consultations which government entity is ultimately responsible for audit processes. It is not clear whether all government entities are subject to independent audits by public audit offices. EITI reporting does not include information on issues of revenue sustainability and resource dependence, including assumptions underpinning forthcoming years in the budget cycle and relating to projected production, commodity prices and revenue forecasts arising from the extractive industries and the proportion of future fiscal revenues expected to come from the extractive sector.

The International Secretariat’s assessment is that Requirement 4.6 is partly met. The 2020-2022 EITI Report acknowledges the existence of direct subnational payments and this was confirmed via consultations with all constituencies. The objective of this requirement is to allow for a public understanding of benefits that accrue to local governments via direct company payments and to strengthen management of these internally generated extractive revenues. Given the lack of public information around direct subnational payments, this objective is not fulfilled. Consulted industry stakeholders confirmed that they were making direct subnational payments and that they were waiting for direction from government as to how best to report these payments. The 2020-2022 EITI Report acknowledges that more work must be done to publish these payments, as they are not currently able to consolidate the data from the 23 prefectures, 221 municipalities and 821 rural parochial communities. EITI reporting notes that some of this information is available from subnational entities but that a request to the Ministry of Finance to supply this information has not been fully complied with. There is no commentary on the materiality of these payments or data quality assurances associated with these payments. The Viability study carried out by the World Bank and Ministry of Energy and Non-Renewable Natural Resources notes that subnational governments receive direct payments based on levies from construction materials and municipal patents related to extractive activities and includes a recommendation to include these payments in the 2020-2022 EITI Report.

The International Secretariat’s assessment is that Requirement 5.2 is mostly met. The Secretariat’s view is that the objective to enable local stakeholders to assess whether the transfer and management of subnational transfers of extractive revenues are in line with statutory entitlements is mostly fulfilled. While the financial statements from the main funds used to facilitate subnational transfers are publicly available, this is not the case for all revenue sharing formulas and limits the ability to examine discrepancies. The 2020-2022 EITI Report documents some avenues for transfers from national to subnational government entities but does not cover the complete universe of subnational transfers in Ecuador. Aggregate amounts transferred from the national budget to subnational entities are available but there is no disaggregation of this data by subnational entity or beneficiary. It is also not clear if subnational transfers stemming from the Fund for the Sustainable Development of the Amazon first flow through the national budget. EITI reporting notes that the Organic Code of Decentralisation, Autonomy and Territorial Organisation, Article 192, requires that the central government must transfer 21% of permanent revenues and 10% of non-permanent revenues to subnational entities. The majority of the non-permanent revenues that are to be transferred are related to oil production, according to EITI documentation. The amount to be transferred depends on numerous factors, though a numerical formula is not provided. The Viability Study carried out by the World Bank and the Ministry of Energy and Non-Renewable Natural Resources identifies three other funds that take part in subnational transfers of extractive revenues: The Fund for Regional Amazon Ecodevelopment levies a tax of US 1 dollar per barrel of oil that is extracted from the Amazon Region. The Central Bank maintains a special account into which these revenues flow. It is not clear whether financial movements in this fund are publicly available through Central Bank publications. The Fund for the Territorial Circumscription of the Special Amazon Area that is funded by portions of royalty payments and other revenues made in the area covered by the Fund. The Fund publishes its own financial statements that are publicly available and show transfers from the fund to subnational government entities. The revenue sharing formula and discrepancies between the formula and actual transferred amounts, disaggregated by local government unit, are provided The Fund for Sustainable Amazon Development levies a tax of 4% of the price of the sale of a barrel of oil that is extracted from the Special Amazon Territorial Circumscription. While there are additional details to these distributions, 28%, 58% and 10% of these funds are to flow to subnational governments in the Amazon at the level of province, municipality and rural parishes, respectively. Of the funds that flow to each of these entities, 40% is distributed equally while the remaining 60% is distributed based on the population of each subnational entity. The Viability study provides some information on how these revenues are earmarked for specific areas, with 30% to be invested in “areas of influence of hydrocarbon and mining exploitation projects” and 70% to be invested equally in amazon provinces. It is not clear if there are financial statements associated with this fund that show the specific financial movements. Financial movements of this fund are systematically disclosed. Concerning data quality assurances, the Viability study notes that the MEM is responsible for ensuring the veracity of transfers, which are published by the Central Bank in aggregate. This Study explains that there is no tracing of how these funds are spent, managed or disbursed, which is only encouraged under Requirement 5.2. Nevertheless, there are some data quality assurances provided through reports published by the Technical Secretary for the Territorial Circumscription of the Special Amazon area. The MSG has not agreed on a procedure for addressing data quality of subnational transfers in accordance with Requirement 4.9 nor has the MSG conducted a comparison of amounts expected to be transferred versus actual transfers. No recommendations on how to improve subnational transfers and its management were provided by the MSG in the EITI Report or other EITI documentation. In comments to the International Secretariat during the Validation mission, numerous stakeholders noted that GADs often lack the technical expertise needed to apply for subnational transfers and that this limits the transfer of funds in practice. While mandated under Requirement 5.2, technical training on the subnational level could improve the functioning of subnational transfers in practice.

The International Secretariat’s assessment is that Requirement 6.1 is partly met. EITI reporting provides some publicly accessible information on social and environmental contributions of extractive companies but this data lacks disaggregation and context. Therefore, the Secretariat considers that the objective of enabling for a public understanding of extractive companies’ social and environmental contributions and providing a basis for assessing extractive companies’ compliance with their legal and contractual obligations to undertake social and environmental expenditures is not fulfilled. Consultations with government stakeholders confirmed that there are mandatory social expenditures and environmental payments for mining companies that are decided through community consultations and spelled out in Community Relations Plans associated with licenses and contracts. From documentation and stakeholder consultations, it is not clear whether all oil and gas companies are required to make similar mandatory social expenditures and environmental payments. Ecuador EITI is invited to confirm whether similar arrangements are mandated for all companies in the oil and gas sector and where this data is published, if mandated. It is encouraging that EP Petroecuador’s sustainability reports are published on the Ecuador EITI website. There is no comment on the materiality of social expenditures and environmental payments, which leads the Secretariat to consider that all social and environmental expenditures are material in the period under review. While Lundin Gold’s sustainability reports are linked on the Ecuador EITI website, Ecuador’s MSG has not made the majority of this information easily accessible to the public, through methods such as including links to these statements and reports or publishing the entire universe of this information in EITI Reports or studies conducted by the MSG. Given ongoing discussions on the role of extractive companies in Ecuador’s economy, EITI reporting stands to serve as a source of information to promote educated public debate. In mining, the 2020-2022 EITI Report provides aggregate figures on the social contributions of ten mining companies, though it is not clear whether these totals also include environmental payments. It does not appear that the figures provided in EITI reporting represent the entire universe of extractive companies making social and environmental contributions given that there are more than ten companies operating in Ecuador’s mining sector and all mining companies are required to agree on their social and environmental contributions via community consultations. It is not clear whether expenditures were provided in cash or in kind, nor is there an indication as to whether social expenditures were made to third parties. Based on information shared during consultations, the Secretariat understands that social expenditures can be made to third parties, and in kind. In oil and gas, EP Petroecuador’s sustainability reports provide information to some levels of disaggregation required for social expenditures and environmental payments made by the company in the period under review. While information is available regarding the amount invested in different projects, the name and the function of the beneficiary to which the expenditure was made is not clear for each disbursement. It also appears that some of these expenditures were made in-kind and the deemed value is not provided. EP Petroecuador’s sustainability reports also discuss environmental projects that the company is involved in, yet the payments associated with these projects do not seem to be discussed, including the collecting government agency. The Secretariat was not able to locate the MSG’s procedure to address data quality and assurance of information on social expenditures and environmental payments, in accordance with Requirement 4.9, and considers that this procedure was not used to ensure the veracity of the social expenditures and environmental payments disclosed in the 2020-2022 EITI Report. Discretionary social expenditures and environmental payments are not discussed in EITI reporting in terms of materiality or otherwise. It appears that all social and environmental contributions are mandatory in nature but Ecuador’s MSG is invited to confirm this.