Building trust through transparency: The 2023 EITI Standard in Latin America & the Caribbean

Extractive resources have historically been crucial to the economies of Latin America and the Caribbean. Despite this, many countries in the region have struggled to fully benefit from these resources. As the world shifts towards decarbonisation, a new opportunity arises for the region. Countries like Peru and Argentina, with their rich lithium deposits, and Ecuador, with its Cascabel copper project, are poised to drive economic growth and support the global energy transition. However, this opportunity is tempered by a long history of challenges in managing these resources, including environmental degradation, social conflicts and weak governance.

While the region stands to gain significantly, concerns about environmental impacts and lack of meaningful participation persist. Weak governance exacerbates these issues, leading to social tensions and conflicts. The Observatory of Mining-related Conflicts in Latin America (OCMAL) reports over 250 conflicts in the past two decades, marking the region as a hotspot for mining-related disputes. Research shows that the LAC region exhibits a higher prevalence of violent conflicts related to mining than other regions. Low levels of institutional trust underscore the critical link between governance and trust among host communities, companies and governments.

The role of the 2023 EITI Standard

Transparent management of extractive projects and meaningful multi-stakeholder dialogue are crucial for building trust and securing social license to operate. The 2023 EITI Standard emphasises enhanced transparency, aiming to foster accountable and sustainable resource management. Recent virtual capacity-building sessions hosted by the EITI International Secretariat provided a platform for stakeholders to explore collaborative solutions, paving the way for a more inclusive and sustainable future for extractive industries in the region.

Key takeaways

Streamlining anti-corruption efforts

The 2023 EITI Standard reinforces the link between EITI implementation and anti-corruption efforts through a data-driven approach. Stakeholders discussed the critical connection between transparent beneficial ownership and the socio-environmental impacts of opaque ownership structures. Key strategies discussed included:

• Enhanced transparency from companies: Companies are encouraged to disclose more detailed information, including full ownership structures, project costs, and the use of beneficial ownership data in their due diligence mechanisms. This transparency enables benchmarking of corporate practices against national regulations and identifies areas for improvement.
• Empowering national and subnational efforts: The EITI Standard empowers countries and stakeholders to consider anti-corruption in work planning, providing opportunities to address corruption risks and strengthen collaboration with media and other anti-corruption actors.  

Shining a light on beneficial ownership

Progress in beneficial ownership transparency varies across the region due to inadequate legislation, weak enforcement mechanisms, poor quality assurances, and limited public access to data. Transparency in beneficial ownership is crucial, not only for preventing illicit activities but also for identifying those responsible for environmental and social impacts of extractive projects.

Some countries are strengthening public oversight of who owns and controls extractive projects. For instance, a study in Argentina, led by Fundación para el Desarrollo de Políticas Sustentables and Ruido, explored beneficial ownership in lithium projects, revealing the complexity of collecting such information and the need for accessible government systems. Building on such examples, discussions from the regional sessions emphasised the following:

• Broadening the scope of transparency: Discussions on beneficial ownership should go beyond disclosure to data use. When disclosing information, governments should consider diverse audiences and prioritise public accessibility, data timeliness, and user-friendly formats.
• Building trust: Awareness campaigns are essential to educate stakeholders on the benefits of clear beneficial ownership disclosure and the risks of non-disclosure. Addressing security concerns and emphasising citizen empowerment can build trust and encourage wider support.

The relevance of beneficial ownership transparency translates into understanding who benefits from companies and who is responsible for the resulting impacts. It is also connected to due diligence processes and human rights, extending accountability for environmental offenses.

Strengthening social and environmental disclosures

The region’s interest in social and environmental disclosures is growing. Discussions led by experts from CEPAL, DAR Perú and Guyana EITI highlighted the distinction between community consent and consultation, and the potential for countries to go beyond EITI disclosures to contribute meaningfully to these issues. Key points included:

• Strengthening regulatory frameworks: There is a growing recognition within regulatory frameworks across the region of the importance of involving stakeholders in decision-making processes. However, significant weaknesses and loopholes still exist, posing operational and reputational risks to extractive activities. EITI multi-stakeholder groups can identify weak regulations and promote best practices through dialogue and advocacy.
• Leveraging synergies to address regional priorities: Countries implementing both the Escazú Agreement and the 2023 EITI Standard (such as Argentina, Ecuador and Mexico) can leverage both frameworks to advance public participation and information sharing.
• Going beyond the EITI Standard: Countries can leverage the EITI framework to disclose more comprehensive social and environmental information. In Peru, subnational EITI reporting goes beyond disclosing the allocation of royalties from extractive industries by providing data on how these funds are used by local entities to fund transport, education, culture and health projects.

Multi-stakeholder dialogue between companies, government civil society can go beyond the EITI Standard to make progress on the critical issue of environmental management of extractive projects.

Vanessa Cueto, DAR Perú

The way forward

The EITI Standard offers significant opportunities for reforming the extractive sectors in the LAC region. Through capacity building, collaboration and the integration of the EITI Standard with instruments such as the Escazú Agreement, countries can enhance transparency, accountability and sustainability in resource management. This approach can support a future where resource wealth benefits all stakeholders and fosters sustainable development.