Honduras publishes its first EITI Report.
On 28 May 2015, Honduras published its first EITI Report covering 2012 and 2013. The mining sector has a long history in Honduras. There are a number of opportunities to increase production, employment and government revenues, but also community concerns about the social and environmental impact of mining. In this context, the EITI is providing essential data about the economic contribution of the extractive industries. In 2013, the extractive industries contributed USD 10.7 million in tax payments, representing 0.5% of the government total fiscal revenues. Company payments at the municipal level are often an important source of revenue.
The report focuses on the eight largest mining companies and one hydrocarbon company that has started offshore exploration. Honduras’s mining sector currently only represents 1% of GDP, but it is expected that this could increase in the coming years with further investment and the formalisation of artisanal mining operations. The Government is undertaking several reforms, passing the 2013 Mining Law, and strengthening government agencies that manage the sector such as the Honduran Institute for Geology and Mines (INHGEOMIN) and the Secretary for Natural Resources, Environment and Mining (SERNA), among others.
Funding municipal budgets
Approximately 75% of reconciled revenues are collected by the central government through the tax collection agency, Executive Direction of Taxes (DEI) and INHGEOMIN. Mining companies also pay taxes at the municipal level. In 2013 the participating municipalities Las Vegas, Santa Barbara; La Unión, Copán; El Corpus, Choluteca; Juticalpa, Olancho, Cedros and Francisco Morazán reported municipal fees and property taxes payments of USD 2.6 million.
Contribution of mining to society
In addition to these mandatory payments, companies make voluntary contributions to the municipalities they operate in which are used to improve public infrastructure and other local services. These payments amount to USD 7.8 million - almost equal to the central government’s receipts from the sector. As these payments are not mandatory, they are not included in the reconciled figure (USD 10.7 million) but are disclosed by companies in the EITI Report.
Furthermore, part of the companies’ payments to the central government (40%) is directed to the Fund for Protection and National Security, which finances programmes to increase security – a key challenge in Honduras.
Ensuring transparency in hydrocarbon investments
The hydrocarbon sector is small but growing. To date, only a few exploration contracts have been allocated. So far, only the BG Group has started exploring for hydrocarbons in the southeast area of the continental shelf. The Honduras EITI Report confirms that the company made the first payment of USD 300,000 as the annual fee for holding the exploration license (“surface canon”) to the SERN), as established in the public contract.
Cadastre system to be developed
To strengthen the management of the extractive industries, INHGEOMIN is establishing an online cadastre system to publish mining licenses and information on the country’s subsoil and extraction activities.
Deputy Director of Mining at INHGEOMIN, Ericka Molina said: “To manage Honduran mining resources efficiently, the government needs to undertake a geological survey to enable us to certify the existent mining reserves”. Continuous improvement on the cadastre is just one of several efforts to improve national data and business climate.
On the publication of the report, Melisa Elvir Chavez, Coordinator of the Transparency and Access to Information Unit at the Foundation Democracy without Borders stated: “The publication of the first EITI Report in Honduras is a tangible result of transparency in the country. We hope that this first step, leads to proactive citizen participation to call for clear and truthful accountability”.
Infographic with key figures of the 2013 Honduras EITI Report: