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The right tools to fight corruption in the extractive sector

EITI Board Chair Helen Clark on the commitment to fighting corruption in Mexico and the opportunities and challenges that lay ahead. See the original article published on 11 October 2020 in La Jornada in Spanish here.

Mexico's natural resources belong to and should benefit its citizens. President Andrés Manuel López Obrador and the Extractive Industries Transparency Initiative (EITI) share that conviction. EITI is a global standard for transparency and good governance of the oil, gas and mining sectors, led in Mexico by the government, companies and civil society organizations involved in the extractive sector.

In his second State of the Union address, President López Obrador focused his message on transparency and the fight against corruption, and on the federal government's strategy in this regard. He highlighted Mexico's participation as an implementing country of the EITI as one of the achievements in the execution of that strategy. The President's commitment to the fight against corruption and Mexico's sustained involvement with the EITI have boosted the transparency agenda in the country, giving citizens access to relevant information on the extractive sector.

Transparency and data disclosure alone, however, are not enough to control corruption. The allegations of corruption and bribery against the former director of PEMEX, in the scandal with Odebrecht, show that there may be loopholes where corruption practices are hidden.

A global initiative - Mexican priorities

As an EITI member country, Mexico has led efforts for transparency in the extractive sector with a group that includes government representatives, PEMEX, private companies in the hydrocarbon and mining sectors, and civil society organizations. The balance between these diverse actors, sometimes with conflicting positions, has contributed to keeping efforts focused on achieving the goals of transparency in Mexico. The open debate on transparency and good governance of the extractive sector contributes to strengthening democracy and accountability.

The current administration's commitment to fighting corruption is timely and welcome. Provisions in the EITI Standard to integrate greater transparency in high-risk areas such as contracts and anonymity of company owners can further strengthen anti-corruption mechanisms in the extractive sector, including state-owned companies. By adopting them, Mexico has the opportunity to achieve compliance with policies that ensure greater profits from the extractive sector for the benefit of its citizens.

The opacity and non-disclosure of contracts and their amendments create a high risk of corruption, which if realised, represents losses of billions of dollars a year which could have been applied to the country’s development.

Mexico has shown leadership in the EITI Contract Transparency Network. Strengthening the routine disclosure of contracts and their amendments through government systems and the websites of companies in the extractive sector would give Mexicans better and more timely access to essential information about the income the nation receives from extractive activities.

Opportunities for increased supervision in the extractive sector

Transparency is not without its blind spots, as evidenced by the ongoing investigation into Lava Jato, Emilio Lozoya, and the scandal of various transactionsbetween PEMEX and Odebrecht.

While Mexico has made significant progress in making all hydrocarbon contracts available, further efforts are needed to ensure that the pattern of corruption stops. These efforts should also focus on disclosing mining contracts, and on calling on state and municipal governments to join the EITI network in Mexico, as well as promoting the publication of data in an agile and accessible manner.

A great opportunity for Mexico would be to lead on the transparency around beneficial ownership, revealing the names of the people who receive the profits from extractive operations. Open data about business owners is vital to good governance in the sector, and it reduces the chance that some individuals may retreat into anonymity.

According to the Financial Action Task Force (FATF), Mexico has a mature legal framework for the fight against money laundering and terrorist financing. It is less robust, however. With respect to disclosure of beneficial ownership information. Mexico supports the High-Level Principles on Transparency of Beneficial Owners in the G20, and its 2019-2021 Action Plan in the Open Government Alliance (AGA) includes commitments related to this goal, such as the ultimate goal of developing a national registry beneficial owners for 2023.

Achieving these goals would represent concrete and substantial steps on the road ahead.

President López Obrador's commitment against corruption and transparency supports EITI efforts in Mexico. While transparency is not enough to combat corruption, attention to high-risk areas can ensure that resources flowing from Mexico's natural resources are used to meet national priorities.

The involvement of the Mexican government, companies operating in the extractive sector, and a broad range of civil society organizations with EITI is an encouraging sign. The development of new policies on transparency will help ensure that the citizens of Mexico reap the benefits of the natural resources which are their birthright.