In 2013 Honduras sought through the EITI to ensure revenues from the extractive sector were used transparently and for the benefit of society. They sought to avoid corruption in the sector by promoting accountable management and social monitoring throughout the value chain. They looked beyond the core requirements of the EITI Standard, by aiming to verify that tax payments have been properly collected, to consider environmental and social aspects, and the use of revenues. The extractive sector in Honduras represented in 2013 less than 1% of GDP. The country was hopeful that the exploration of a significant offshore oil block recently signed with the BG Group at that time would make a much larger contribution. With lower commodity prices the contribution of the sector has declined. The prospects of more oil and gas revenues are more distant. With continued widespread anti-mining sentiments, no new mining development is expected. The objectives EITI-Honduras sought to achieve in 2013 were more likely to be attainable in the mid or long term with favourable market circumstances. In the absence of those favourable conditions, the question of impact of EITI implementation in Honduras has to be approached from the perspective of how the EITI has contributed to set the foundations for achieving those goals.
The impact of the EITI can be seen in a number of areas:
Strengthening government systems. In 2013, the mining regulatory framework was updated with the passing of a new mining law. In the hydrocarbon sector, the contract signed with BG Group set the basis for, in the absence of a specific legislation, monitoring companies operating in the sector. In both cases, the EITI Standard was adopted as the reference to disclose and publish information and to mandate companies to report financial information beyond what was already established. This early institutionalization of the transparency requirements meant that Honduras has an important tool for monitoring the extractive sector. In practice, this has been realised through developments in three parts of the regulatory sector.
First, the mining regulator INHGEOMIN, created in 2013, had to update the entire cadastre system to be able to comply with the EITI Standard. The mining cadastre was updated from manual to automated records in 2014-2015, ahead of the publication of the first EITI Report. More recently, INHGEOMIN has worked with the customs agency to harmonize how production data is collected from extractive companies and shared between government agencies. Currently, INHGEOMIN is modernizing the collection, processing and documentation of the annual consolidated report. This annual dossier covers the technical, economic, social and environmental information that mining titles holders have to report to the mining authorities. INHGEOMIN uses the EITI Standard as the reference for what type of information should be included.
Second, the tax office was overhauled in 2016. The old agency (Direccion Ejecutiva de Ingresos (DEI)) was closed in early 2016 and replaced with a new agency, the Rents Administration Service – Servicio de Administracion de Rentas (SAR). A revised tax code is being developed and SAR has started to update modernise its systems. SAR has looked at the EITI for guidance on the type of information they can include in the revamped agency’s systems and regulatory framework. They are willing to work with EITI-Honduras and other government agencies such as INHGEOMIN to improve coordination and sharing of information between the agencies, including compatible classifications and coding of data. Similarly, the Ministry of Finance has considered the EITI Standard as a reference for the development of the system to monitor municipal investments and expenditures (Sistema de Administracion Municipal (SAMI)). They are also willing to ensure that their main system for monitoring public financial investment and open budget data can provide information in accordance to the EITI Standard.
Finally, the Law of Transparency and Access to Public Information, passed in 2006, mandates that all public entities have to publish information related to its mandate, its exercise of the public function and its relation with stakeholders. The law is enforced by the Institute for Access to Public Information (IAIP). The IAIP has worked with EITI-Honduras to host a transparency portal dedicated to EITI-mandated information. The IAIP has offered to use the EITI as one of the vehicles for complying with the transparency law for the agencies related to the extractive sector. They are ready to explore incorporating the requirements in the Standard in their own compliance mechanisms.
Put together, the EITI has informed the development of transparency practices in four key government agencies. These agencies have embarked on ambitious modernisation efforts, and the EITI is being used by all of these government agencies as a reference for what should be made public. They are also using the EITI to improve inter-agency coordination. EITI-Honduras could expand its scope and work closely with these agencies in embedding the EITI requirements into their systems and functioning.
Building trust. Stakeholders in the extractive sector recognise there is a high level of distrust. Companies are questioned for not paying adequate taxes and other contributions. Local stakeholders resent that mining activities do not bring benefits for communities. Companies feel that regulators and affected stakeholders do not understand their economic and social contribution. Opposition to mining is widespread among communities. The EITI has opened an institutionalised space for bringing together stakeholders. While the initial impact of this development was recognised by Tegucigalpa-based stakeholders, there is an appreciation that there are further opportunities. For example, both companies and local stakeholders are willing to bring more transparency to the industry’s contribution and to how revenues are utilised at local level. One municipality, Los Cedros, have been willing to pilot EITI implementation at the municipal level. The national association that groups all municipalities (Asociación de Municipios de Honduras (AMHON) is ready to work with EITI-Honduras on municipal-level disclosure of information that could help improving revenue management. These could include: audits of tax payments, social and environmental information, disclosing beneficial ownership of mining and hydrocarbon licenses, and more information and analysis on the use of revenues at local level and in dedicated spending mechanisms such as the fund that administers the population security fee.
Sustainability. As discussed throughout this assessment, access to adequate funding has been a major obstacle to effective EITI implementation. While the oil, gas and mining sector continues to be a small part of the economy and finding resources for EITI implementation could continue to be a challenge, this issues needs to be addressed. First, to materialise the potential to mainstream EITI disclosures through government systems. This assessment has highlighted that, in Honduras, key government agencies are well prepared to implement this approach. By embedding transparency in government systems as expected in the EITI Standard, Honduras will foster improved governance in the sector using the resources devoted to government systems normal functioning. Second, given resources limitations Honduras could also pool resources to implement the EITI Standard in an improved cost effective manner. For example, as suggested by some stakeholders, the EITI could be expanded to cover hydroelectric power generation and forestry.