The Board agreed that Guatemala has made inadequate progress overall in implementing the 2016 EITI Standard.

Board decision

The Board came to the following decision: 

Guatemala has made inadequate progress overall in implementing the 2016 EITI Standard.

The Board recognises Guatemala’s efforts to implement the EITI Standard but notes that EITI implementation has suffered from weak stakeholder engagement, gaps in reporting and lack of impact. The Board recognises that the lack of engagement and progress is related to the wider context of the extractive industries in the country, where activity has declined significantly in recent years with the closure of large mines and the de facto moratorium on new oil, gas and mining licenses since 2017.

While acknowledging the broader context, the Board expresses concern over the government’s apparent lack of commitment to the EITI and challenges in providing dedicated funding. The Board regrets that Guatemala’s EITI Reports are not comprehensible nor contributing to public debate, given inconsistencies and gaps related to issues of interest to stakeholders such as subnational payments and transfers as well as comprehensive and reliable disclosures of government revenues from the extractive industries.

The Board highlights the scope for Guatemala’s EITI implementation to support dialogue to address social opposition to mining as a means of improving the sector’s prospects for recovery. Guatemala is urged to re-energise its EITI implementation on the basis of renewed and sustained commitment from the Ministry of Energy and Mines. All stakeholders are strongly encouraged to demonstrate their commitment as partners in the EITI process. The Board urges Guatemala to improve the quality of its EITI reporting and to link EITI implementation to on-going challenges in the extractive sector and national reform priorities.

The Board has determined that Guatemala will have 18 months, i.e. until 23 July 2021 before a second Validation to carry out corrective actions regarding the requirements relating to government engagement (Requirement 1.1) and company engagement (1.2), civil society engagement (1.3), MSG governance (1.4), work plan (1.5), license allocations (2.2), license register(s) (2.3), the government’s policy on contract disclosure (2.4), export data (3.3), comprehensiveness of revenue disclosures (4.1), direct subnational payments (4.6), level of disaggregation (4.7), data quality (4.9), sub-national transfers (5.2), mandatory social expenditures (6.1), economic contribution (6.3), public debate (7.1), follow-up on recommendations (7.3) and outcomes and impact of implementation (7.4).

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by Guatemala. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 23 July 2021.

1. In accordance with Requirement 1.1, the government, especially the Ministry of Energy and Mines is required to demonstrate commitment to EITI implementation by ensuring that the MSG is supported by adequate human and financial resources and key documents and data are produced in a timely manner. The Ministry of Energy and Mines is encouraged to reiterate high-level commitment to EITI implementation and utilise the EITI to promote national objectives related to extractive sector governance. Reporting government agencies should comply with data assurances agreed by the MSG. The MSG is encouraged to engage with municipalities to ensure that they participate fully in EITI reporting.
2. In accordance with Requirement 1.2, industry must be actively and effectively engaged in the EITI process. Thus, the Chamber of the extractive sector should be proactive and encourage companies to participate and comprehensively disclose their payments to the government, even prior to receiving any official request.
3. In accordance with Requirement 1.3, the civil society constituency should fully and actively engage in overseeing EITI implementation and contributing to public debate related to extractive sector governance. The government should ensure that it treats civil society as an equal partner in the EITI process in both regulatory and practical terms.
4. In accordance with Requirement 1.4, the MSG should update its internal governance rules to cover all provisions of Requirement 1.4.b and publish procedures for nominating and changing MSG representatives, including the duration of mandates. Each constituency is required to select representatives to the MSG through an inclusive, transparent and well-documented process. The government is required to ensure that all constituency can effectively table issues for discussion.
5. In accordance with Requirement 1.5, Guatemala must elaborate a new work plan including its sections (a) to (g). This new work plan must set EITI Implementation objectives and ensure that they reflect national priorities for Guatemala. In elaborating this work plan, the MSG may wish to consider applying for an adapted implementation in accordance with Requirement 8.1. The Board encourages the MSG in Guatemala to evaluate a recalibration of the scope of its EITI process for the future, to ensure it is useful and aligned with the concerns and national priorities of the country. The International Secretariat should offer and provide support to this end.
6. In accordance with Requirement 2.2, Guatemala is required to (1) disclose oil and mining licenses awarded or transferred in the year(s) under review, (2) describe the process of transferring a license, (3) highlight any non-trivial deviations in practice (4) clarify the technical and financial criteria used for assessing allocations and transfers of both oil and gas contracts and for mining licenses, and (5) disclose the list of applicants and bid criteria for licenses awarded through a bidding process. To strengthen implementation of requirement 2.2, the MSG may also wish to comment on the efficiency of the current contract allocation and transfer system as a means of clarifying procedures and curbing non-trivial deviations.
7. In accordance with Requirement 2.3, Guatemala should also ensure that the license holder names, dates of application, award and expiry, commodity(ies) covered and coordinates for all mining and petroleum licenses held by material companies are publicly available. Where this information is already publicly available, it is sufficient to include a reference or link in the EITI Report. Where such registers or cadastres do not exist or are incomplete, the EITI Report should disclose any gaps in the publicly available information and document efforts to strengthen these systems.
8. To strengthen implementation of Requirement 2.4, Guatemala is required to clearly document its policy on contract transparency and make voluntary royalty agreements publicly available.
9. In accordance with Requirement 3.3, Guatemala is required to disclose complete data on exports; specifically, on mining export volumes. Additionally, it is suggested to disclose how volumes and values documented in the EITI Report have been calculated.
10. In accordance with Requirement 4.1, in advance of the reporting process the MSG is required to agree which payments and revenues are material and therefore must be disclosed, including appropriate materiality definitions and thresholds. A description of each revenue stream, related materiality definitions and thresholds should be disclosed. In establishing materiality definitions and thresholds, the MSG should consider the size of the revenue streams relative to total revenues. The MSG should document the options considered and the rationale for establishing the definitions and thresholds. The MSG is also required to clearly define material companies based on the materiality decisions taken. The EITI Report should clearly document non-reporting companies and assess whether their omission materially affects the comprehensiveness of reconciliation. The government is required to ensure that all relevant government entities participate in EITI reporting and that the total figure of all government revenues is comprehensive. If there are significant practical barriers preventing full government disclosure, these should be documented in the EITI Report.
11. In accordance with Requirement 4.6, Guatemala is required to map and clearly define direct payments from extractive companies to subnational government entities. The MSG should discuss whether it considers the payments material and clearly document the decision and its rationale. If material, the MSG should ensure that the payments are comprehensively reconciled.
12. In accordance with Requirement 4.9, Guatemala is required to ensure that the EITI Report includes an assessment of whether payments and revenues are subject to credible, independent audits. The MSG is required to agree data quality assurances to be requested from reporting entities. The EITI Report should document whether reporting entities complied with the agreed assurances. The MSG is required to ensure that the Independent Administrator submits complete summary data based on the current template provided by the International Secretariat.
13. In accordance with Requirement 5.2, Guatemala must fully disclose revenues generated by the extractive industries which are transferred between national and subnational government entities. A more complete and understandable explanation of income’s distribution should be described, including the legal and real role of FONPETROL and the flows between this fund, the CODEDES and the COCODES. Also, the MSG must disclose the applicable revenue sharing formula, the amounts calculated according to such formula for transfers, and identify any discrepancy between the amounts calculated and the amounts transferred. Finally, if possible, these transfers should be reconciled.
14. In accordance with Requirement 6.1, where material social expenditures by companies are mandatory, these must be disclosed and disaggregated by type of contribution and beneficiary and reconciled where possible.
15. In accordance with Requirement 6.3, Guatemala must disclose complete information about the contribution of the extractive industries to the economy. This information must include the employment in the extractive industries as a percentage of total employment (Requirement 6.3 (d)) and an estimate of informal sector activity (Requirement 6.3 (a)).
16. In accordance with Requirement 7.1, Guatemala should ensure that EITI Reports are consistent, comprehensible, actively promoted, publicly accessible and contribute to public debate. The MSG should continue to seek to carry out outreach events to spread awareness of and facilitate dialogue about the EITI Report across the country. The MSG is required to agree an open data policy and make EITI Reports available in open data format.
17. In accordance with Requirement 7.3, the MSG is required to take steps to act upon lessons learnt; to identify, investigate and address the causes of any discrepancies with a view to strengthen the impact of EITI implementation on natural resource governance. In particular the MSG should consider improving its procedures to analyse and process recommendations resulting from EITI reporting.
18. In accordance with Requirement 7.4, the MSG is required to document its annual review of impact and outcomes of EITI implementation in an annual progress report or through other means, including for 2017. All stakeholders should be able to participate in reviewing the impact of EITI implementation. Civil society groups and industry involved in the EITI, particularly, but not only, those serving on the multi-stakeholder group, should be able to provide feedback on the EITI process and have their views reflected in the annual review of impact and outcomes.

The government and the MSG are encouraged to consider the other recommendations in the Validator’s report and the International Secretariat’s initial assessment, and to document the MSG’s responses to these recommendations in the next annual review of impact and outcomes of EITI implementation.

Background

In accordance with the 2016 EITI Standard, an initial assessment was undertaken by the International Secretariat [English | Spanish]. The findings were reviewed by an Independent Validator, who submitted a draft Validation report [English | Spanish | French] to the MSG for comment. The MSG’s comments on the reports [English | Spanish] were taken into consideration by the independent Validator in finalising the Validation report [English | Spanish | French].

The Government of Guatemala committed to implement the EITI in March 2010, and established a multi-stakeholder group (MSG) in 2010. The country was accepted as an EITI Candidate in March 2011. On 25 October 2016, the Board agreed that the country’s Validation under the 2016 EITI Standard would commence on 1 April 2018.

The Validation Committee reviewed the case on 8 January 2020. Based on the findings above, the Validation Committee agreed to recommend an overall assessment of “inadequate progress” in implementing the 2016 EITI Standard. Requirement 8.3.c of the EITI Standard states that: "ii.    Overall assessments. Pursuant to the Validation Process, the EITI Board will make an assessment of overall compliance with all requirements in the EITI Standard (...) iii.   Inadequate progress. The country will be suspended and requested to undertake corrective actions until the second Validation. For the suspension to be lifted, the country must in its second Validation demonstrate at least meaningful progress."

The Board has agreed that “If a country has made inadequate progress or less on any one of the requirements relating to stakeholder engagement (Requirements 1.1, 1.2 and 1.3), suspension pursuant to requirement 8.3.c.i would apply”. The assessment of “inadequate progress” on Requirement 1.1 therefore implies that Guatemala should be suspended.

The Validation Committee agreed to recommend a period of 18 months to undertake the corrective actions. This recommendation takes into account that the challenges identified are relatively significant and seeks to align the Validation deadline with the timetable for Guatemala’s upcoming EITI Reports.