Honduras has made meaningful progress with considerable improvements in implementing the 2016 EITI Standard.

Board decision

The Board came to the following decision:

The EITI Board agrees that Honduras has fully addressed seven of the twelve corrective actions from the country’s first Validation. Consequently, Honduras has made meaningful progress overall in implementing the 2016 EITI Standard, with considerable improvements across several individual requirements. However, following the assessment of Requirement 1.3 on civil society engagement as “inadequate progress”, Honduras will be temporarily suspended in accordance with Requirement 8.3.c.i.

The Board congratulates the Government of Honduras and the multi-stakeholder group (MSG) for improving transparency in areas of public interest. The EITI process has led to improvements in government systems, notably in the mining regulator INHGEOMIN. Processes have been established to improve disclosure of licensing and cadastre information, production and export data and voluntary social payments. The EITI Reports have covered extractive industry revenues and payments from 2012 to 2018, highlighting stagnation in the sector. The Board recognises that the mining sector has seen only modest growth in the non-metallic subsector in recent years, while the metallic mining, oil and gas sectors have stagnated. 

The EITI has represented an effort in advancing multi-stakeholder dialogue in the extractive sector in Honduras. However, 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. This occurred against a backdrop of deteriorating trust between stakeholders following the contested presidential election of 2017. There have also been several concerns raised by national and international civil society organisations (CSOs) regarding civic space and human rights. The Board expressed concern regarding the potential impact of the June 2020 Penal Code on EITI implementation and over threats to civic space, including indigenous organisations and human rights defenders. The interests of broader civil society working on extractive sector governance do not appear to be reflected in the objectives and priorities of the multi-stakeholder group. Therefore, the Board found that the objective of Requirement 1.3 is no longer being fulfilled and assessed progress on the provision as “inadequate”. The civil society constituency is urged to revisit its representation on the multi-stakeholder group and ensure that the challenges and priorities of diverse groups working on extractive sector governance are reflected in the objectives and scope of the EITI process. This process should be free from any suggestion of coercion. The government is encouraged to reiterate its commitment to the EITI’s civil society protocol and to ensure that civil society representatives can engage in the EITI process without restrictions or fear of reprisal.  . The Board will monitor adherence to this provision in Honduras’s third Validation.

The Board acknowledges that INHGEOMIN has made significant progress in making its procedures and information more transparent. Similarly, the lifting of secrecy provisions related to environmental licenses by the Institute for Access to Public Information (IAIP) in 2019 was an important step forward in improving transparency in the environmental aspects of the extractive industries. The government is encouraged to ensure that there are no other institutional or legal constraints that may impede the effectiveness of EITI implementation. Going forward, the Board  encourages stakeholders of EITI-Honduras to reassess its objectives for EITI implementation to ensure that they consider the national circumstances, the relative importance of the extractive industries and stakeholders’ expectations. All MSG representatives, in particular those from civil society and extractive industry, are expected to attend MSG meetings systematically and are urged to speak up for acceptable treatment of civil society activists within the communities around extractive sites. MSG industry representatives are also requested to showcase companies which choose their private security services carefully, train them properly and apply international extractive industry best practices for constructive engagement with communities, including publishing agreements with State police and security forces specifying those conditions and situations in which national police can be summoned by companies. The Board encourages Honduras to consider the options available in the EITI Standard and request EITI Board approval for recalibrating EITI implementation in the country to ensure cost efficiency, while also aligning it with the national objectives.

The Board assessment is that Honduras has fully addressed seven corrective actions, with assessments of either “satisfactory progress” or “not applicable” on requirements 1.1 (government engagement), 1.5 (work plan), 4.1. (comprehensiveness) 4.6 (subnational payments), 6.1 (social payments), 6.3 (economic contribution) and 7.4 (impact of EITI implementation). The International Secretariat’s assessment is that Honduras has made inadequate or meaningful progress in addressing the other five corrective actions. Having failed to maintain adherence to Requirement 4.7, Honduras is required to ensure that EITI data is disaggregated by each individual project, company, government entity and revenue stream. The Board has determined that Honduras will have 18 months before a third Validation , i.e. until 28 April 2022, to carry out corrective actions regarding industry engagement (Requirement 1.2), civil society engagement (1.3),  disaggregation (Requirement 4.7), data quality (Requirement 4.9), Public debate (Requirement 7.1) and follow-up to recommendations (Requirement 7.3). Honduras will be temporarily suspended following the assessment of Requirement 1.3 on civil society engagement as “inadequate progress”.

Failure to achieve satisfactory progress in the third Validation will result in temporary suspension in accordance with Article 6 of the EITI Standard. In accordance with the EITI Standard, Honduras’s MSG may request an extension of this timeframe or request that Validation commences earlier than scheduled.

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by Honduras. Progress in addressing these corrective actions will be assessed in a third Validation commencing on 28 April 2022:

1. In accordance with Requirement 1.2, industry should demonstrate that it is fully, actively and effectively engaged in the EITI process. The industry constituency should review its engagement in the EITI, consider opportunities to work more closely with the MSG to ensure that EITI Honduras discusses, addresses and communicates more effectively not only the Standard-mandated disclosures but other issues of interest to the industry constituency.
2. In accordance with Requirement 1.3, Honduras should demonstrate that civil society is fully, actively and effectively engaged in the EITI process. Civil society should clarify its objectives for EITI engagement and ensure it is well represented and capacitated to participate fully in the process. They should work closely and directly with the MSG enhancing the dissemination and debate of EITI data and findings. This could include ensuring that EITI is better linked to national priorities. Finally, civil society could consider refreshing its representation to ensure all representatives in the MSG are fully engaged in the EITI work. The government is encouraged to reiterate its commitment to the EITI’s civil society protocol.
3. In accordance with Requirement 4.7, Honduras is required to ensure that EITI data is disaggregated by each individual project, company, government entity and revenue stream.
4. In accordance with Requirement 4.9 and with 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 within the agreed scope of the EITI reporting process comply with the agreed quality assurance mechanism in future EITI reporting. Any gaps or weaknesses in providing this information should be noted by the Independent Administrator in the EITI Report with an assessment of whether this is likely to have had material impact on the reliability of the financial data presented.
5. In accordance with Requirement 7.1, Honduras should ensure that future EITI Reports are actively disseminated, promoted and contribute to public debate, combined with effective outreach activities. Honduras is encouraged to make use of available funding for dissemination and communication activities. Honduras is required to agree a clear policy on the access, release and re-use of EITI data.
6. In accordance with Requirement 7.3, Honduras should take steps to discuss and, when considered pertinent, act upon lessons learned from EITI reporting. The MSG is also encouraged to strengthen a systematic mechanism beyond discussions in the MSG for following-up on the recommendations derived from previous reporting exercises, in order to ensure that their implementation is in line with the gaps identified and provides for ways to overcome them.

Background

Honduras joined the EITI in May 2013. Honduras’ first Validation under the 2016 EITI Standard concluded in 25 October 2017. The EITI Board found that Honduras had made ‘meaningful progress’ in implementing the EITI Standard. Twelve corrective actions were identified by the Board, to be assessed in a second Validation commencing on 25 April 2019. The 12 corrective actions related to:

1. Government engagement (Requirement 1.1);
2. Industry engagement (Requirement 1.2);
3. Civil society engagement (Requirement 1.3);
4. Work plan (Requirement 1.5);
5. Comprehensive disclosure of taxes and revenues (Requirement 4.1);
6. Subnational Payments (Requirement 4.6);
7. Data quality and assurance (Requirement 4.9);
8. Social expenditures by extractive companies (Requirement 6.1)
9. The contribution of the extractive sector to the economy (Requirement 6.3)
10. Public Debate (Requirement 7.1)
11. Discrepancies and recommendations from EITI Reports (Requirement 7.3)
12. Review the outcomes and impact of EITI implementation (Requirement 7.4)

Honduras has undertaken a number of activities to address the corrective actions:

• The MSG held 16 meetings between November 2017 and March 2019.
• The MSG published the 2015-2016 EITI Report on 29 June 2018.
• The MSG appointed the Independent Administrator, Jorge Tovar, on 31 July 2019.
• The MSG published Honduras’ 2017-2018 EITI Report on 11 February 2020.
• The MSG published the 2017 and 2018 annual progress reports on July 2018 and April 2019, respectively.
• The MSG updated and published the 2017-2018 EITI work plan on 11 November 2017.
• The MSG approved and published the 2019-2020 EITI work plan on 4 July 2019.

Honduras’s second Validation commenced on 25 April 2019. The Secretariat assessed the progress made in addressing the 12 corrective actions established by the EITI Board. Subject to the EITI Board’s consideration of new information published after the commencement of Validation, the EITI International Secretariat’s assessment is that Honduras has fully addressed seven of the 12 corrective actions and has achieved “satisfactory progress” on the corresponding requirements. The assessment covers the corrective actions established by the Board and the associated requirements in the EITI Standard. The assessment follows the guidance outlined in the Validation Guide. In the course of undertaking this assessment, the International Secretariat has also considered whether there is a need to review additional requirements, i.e. those assessed as “satisfactory progress” or “beyond” in the 2017 Validation. In particular, the 2017-2018 EITI Report was published on 10 February 2020, subsequent to the commencement of the second Validation.

While the Validation commenced as planned in April 2019, the International Secretariat encountered difficulties in completing the assessment in accordance with the schedule set out in the Validation procedures. The departure of key staff and challenges in managing a backlog of Validation work contributed to these delays. At the request of the MSG, the International Secretariat reviewed the most recent developments for consideration by the Board.  

The draft assessment was sent to the MSG on 27 March 2020. Following MSG comments received on 13 May 2020, the assessment was finalised for consideration by the EITI Board.

The Validation Committee reviewed the case on 16 July, 19 August and 7 October 2020. The International Secretariat has prepared a memo reviewing the assessment of Requirement 1.3 in Honduras’ two Validations under the EITI Standard and outlining the outcome of additional consultations with civil society representatives on and off the MSG conducted on 2-3 September 2020.

In its review, the Validation Committee found that the broader objective of Requirement 1.3 on civil society engagement was no longer being fulfilled and downgraded the Secretariat’s final assessment of Requirement 1.3 from “meaningful progress” to “inadequate progress”. This assessment would result in Honduras’ temporary suspension.