Honduras delisted from EITI due to stalled implementation

The government has renewed its engagement in EITI through the participation of different government agencies in the process, as well as through the reallocation of the EITI national secretariat to INHGEOMIN, the allocation of funds in National Budget law, and the lifting of secrecy provisions on environmental licenses. The commitment of relevant ministries and agencies has remained active.

There is an enabling environment for company participation in place. The industry constituency is engaged in the EITI, but could do more to help drive the process forward and increase the value and impact of the EITI.

Stakeholders have not maintained the initial level of engagement and interest in the EITI process, due to the complex political situation and violence in the country. The Validation Committee concluded that the broader objective of Requirement 1.3 on civil society participation was no longer being met, and downgraded the Secretariat's final assessment of Requirement 1.3 from ‘significant progress’ to ‘insufficient progress’.

EITI-Honduras has had an active and engaged EITI multi-stakeholder group. The composition, mandate and governance of the multi-stakeholder group seem appropriate. The government has shown commitment to working with civil society and companies, and there have been no obstacles to effective collaboration beyond the funding constraints mentioned above. While the lack of an adequately resourced national secretariat has affected the capacity of the MSG, the latter is functioning effectively.

Honduras has an updated EITI work plan. This plan was submitted in a timely manner. It includes activities for the period 2019-2020, with specific objectives in line with national priorities for the extractive sector, and sets out time-bound activities and identifies the necessary funding sources. The work plan also foresees outreach to different donors as a means to strengthen EITI implementation in Honduras.

The required information regarding the award and transfer of licences is disclosed in the EITI Report.

Information on licences awarded to companies in the extractive sector, as required by the EITI Standard, is publicly available in the EITI Report. This information is extracted from the official register held in the regulator's information system, SIHMON.

The Honduran government supports and implements contract transparency. Contractual arrangements in the mining sector are uniform according to the mining law and are publicly available. Oil and gas contracts are published in the official gazette and on the portal of the Ministry of Natural Resources.

The EITI Report provides a comprehensive description of the legal framework and fiscal regime governing the extractive industries, and discusses reform efforts. It also contains a description of the functions of the main regulatory body, as well as comments by the Independent Administrator on the clarity of some provisions of the mining law.

Honduras has published a roadmap for the disclosure of information on the beneficial owners in accordance with Requirement 2.5.b. ii.

Through INHGEOMIN, the government confirmed that it has no involvement in any mining or hydrocarbon projects.

The 2014 EITI Report provided an overview of the extractive industries, including exploration activities.

Information about production was based on export data, as all production in the metal sector is exported.

The 2014 Report presented comprehensive data on export volumes and values. It did not address how the values were calculated. However, this is only a suggestion in the Standard.

The legal framework in Honduras does not allow these types of transactions in oil, gas and mining activities.

The 2017-2018 EITI Report includes the disclosure of revenue flows from seven municipalities. The report discloses all significant direct payments made by reporting companies in the years analysed. This subnational revenue represented 9.9% and 7.1% of the total revenue (national and subnational) collected by the government. The 2017-2018 EITI Report includes the reconciliation of these seven revenue streams for each company.

The EITI Report 2017-2018 did not include any consideration by the MSG as to which assumptions are considered as an individual project. Disaggregation by individual project was one of the requirements of the 2016 EITI Standard for reports corresponding to the 2018 fiscal year, following the MSG's definition of what constitutes an individual project. This was not addressed in the 2017-2018 EITI Report.

For the 2017-2018 EITI Report, the Independent Administrator provided an assessment of the government and municipal data, but did not comment on the reliability of the company data, nor did it address the issue of non-reporting companies. In accordance with Requirement 4.9 and the standard terms of reference for the Independent Administrator, the MSG should ensure that the Independent Administrator provides an assessment of whether all companies and government entities included in the agreed scope of the EITI disclosure process adhere to the agreed quality assurance mechanism in future EITI disclosures.

The reconciliation exercise for the 2017-2018 EITI Report for Honduras covered 98.7% and 99% of all extractive sector revenues received by the government. The report also disclosed all revenues received by all government entities in accordance with the agreed scope.

The legal framework in Honduras does not allow taxes or tariffs to be collected in any way other than in cash.

The transport of minerals in Honduras is provided entirely by the private sector, and the State does not participate in the provision of these services.

There are no state-owned companies involved in the exploration, exploitation and commercialisation of minerals or hydrocarbons.

The first EITI Report (corresponding to 2012 and 2013) was published in May 2015, while the second (referring to 2014) was released in September 2016.

The reports from Honduras included a description of the distribution of income from the extractive industries. Income is categorised according to the Integrated National Financial Administration System (SIAF) and the Integrated Municipal Administration System (SAMI) available through the Ministry of Finance.

According to the Constitution of the Republic (article 363), all ordinary tax revenues shall constitute a single fund. The revenue streams included in this Report, except for the population security levy and taxes collected directly by municipalities, are considered ordinary tax revenues. Municipal taxes were covered in Requirement 4.6.

According to Legislative Decree No. 199 of 2011, the population security tax goes to the Population Protection and Security Fund. The 2014 EITI Report indicates that 5% of the municipal tax goes to the Municipal Social Investment Fund.

The 2015-2016 EITI Report clearly states that no social expenditures are provided for in any law or contract governing resource extraction. Furthermore, all stakeholders consulted confirmed that social payments are voluntary and not mandatory in Honduras. This was also confirmed in the 2017-2018 EITI Report.

Honduras has no active state-owned enterprise and no quasi-fiscal expenditure.

The EITI Reports for 2015-2016 and 2017-2018 disclose comprehensive information, in both absolute and relative terms, about the size of the extractive industries, exports, employment and certain key areas. Although the 2017-2018 Report only provides the value of extractive government revenues in absolute terms, and not as a share of total government revenues, it is possible to calculate the relative contribution of extractive revenues based on the total government revenue figures available from official government sources.

Honduras has made no effort to address these issues. There is an opportunity to utilise government bodies such as SAR and INHGEOMIN to generate and make available data relating to the extractive sector on an ongoing basis. Honduras could also utilise the framework provided by the IAIP to ensure that information is available on a regular basis and incentivise the use of information by citizens, the media and other parties.

The MSG lacks a systematic approach to reviewing outcomes and impact. However, the records of its discussions show that some emphasis has been placed on these issues. Furthermore, the EITI Report 2017-2018 records and reports the impact areas discussed and identified by stakeholders. The impact assessment was endorsed by the MSG and is publicly available in the report.

Honduras has made improvements in terms of the availability of data in public form, for example, with the completion of the EITI Honduras website. This website presents the data in a more user-friendly way. The EITI platform has been used to discuss relevant issues in the extractive sector in Honduras. It has promoted interaction with local stakeholders included in the OGP action plans and the National Climate Change Strategy. During the years analysed, the use of EITI data in independent reports produced by civil society organisations was an improvement in the EITI's contribution to the public debate.

EITI-Honduras has addressed discrepancies and identified shortcomings. Government agencies such as INHGEOMIN have incorporated lessons learned from EITI implementation. Other agencies have identified the possibility of using the EITI to generate additional improvements. The MSG has taken stock of what has been achieved and the opportunities for generating further improvements. However, the multi-stakeholder group has not been sufficiently successful in developing a clear set of recommendations that can be communicated to other stakeholders, including government agencies. The implementation of these recommendations is essential to ensure that the EITI contributes to Honduras' national priorities.