Peru's Validation commenced on 1 July 2016. On January 11 2017, the EITI Board found that Peru has made meaningful progress in implementing the 2016 EITI Standard.
The following documentation laid the basis for the Board's decision, attached below:
Peru's Validation commenced on 01 July 2016.
In January 2017 Peru was validated against the 2016 Standard.
Validation is the EITI's quality assurance mechanism and measures the progress countries have made in meeting the requirements of the EITI Standard. For more information about the country, visit the country page on eiti.org.
On 11 January 2017, the EITI Board came to the following decision on Peru's status:
The Board agreed that Peru has made meaningful progress in implementing the 2016 EITI Standard. In taking this decision the EITI Board noted the strong commitment by the Government of Peru to EITI implementation and the effective oversight provided by Peru’s Multi-Stakeholder Working Group (CMPE). The EITI Board highlighted that the EITI has provided a positive platform for discussion and debates about extractive sector management, involving all stakeholders. The EITI Board was encouraged by the government’s efforts to decentralise the EITI by implementing it at the subnational level and by the plans to work towards further mainstreaming of EITI disclosures.
The Board’s determination of Peru progress with the EITI’s requirements is outlined in the assessment card, below. The EITI Board agreed that Peru had not made satisfactory progress on requirements 1.5, 2.6, 4.1, 4.3, 4.9, 6.1, 7.3 and 7.4. The major areas of concern relate to the work plan (#1.5), state participation (#2.6); comprehensiveness of EITI reporting (#4.1), the coverage of infrastructure provisions (#4.3), data quality and assurance (#4.9), social expenditures (#6.1), the follow-up of recommendations and strengthening the impact of EITI implementation (#7.3) and documentation of impact (#7.4). The EITI Board disagreed with the Validator on the following requirements: work plan (#1.5), license allocations (#2.2), state participation (#2.6), in-kind revenues (#4.2), infrastructure provisions (#4.3), SOE transactions (#4.5), SOE quasi-fiscal expenditures (#6.2), follow-up recommendations and strengthening the impact of EITI implementation (#7.3) and documentation of impact (#7.4).
Accordingly, the EITI Board agreed that Peru will need to take corrective actions outlined below. Progress with the corrective actions will be assessed in a second Validation commencing on 11 January 2018. Failure to achieve meaningful progress with considerable improvements across several individual requirements in the second Validation will result in suspension in accordance with the EITI Standard. In accordance with the EITI Standard, the CMPE may request an extension of this timeframe, or request that Validation commences earlier than scheduled.
The Board’s decision followed a Validation that commenced on 1 July 2016. In accordance with the 2016 EITI Standard, an initial assessment was undertaken by the International Secretariat. The findings were reviewed an Independent Validator, who submitted a Validation Report to the EITI Board. The CMPE were invited to comment throughout the process. The CMPE’s comments on the Validation Report were taken into consideration. The final decision was taken by the EITI Board.
The EITI Board agreed the following corrective actions. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 11 January 2018:
The CMPE is encouraged to consider the other recommendations in the Validator’s Report and the International Secretariat’s initial assessment, and is required to document the MSG’s responses to these recommendations in the annual progress reports.
Section 7.5 of the Peru's Initial data collection and stakeholder consultation (see Validation documentation)
In 2005, Peru saw EITI implementation as a way to “strengthening mechanisms for transparency and improve management of revenues from extractive industries”. In particular, the EITI was presented as a tool for “improving the accessibility and acceptance of the figures [extractive sector data] by all”. More than a decade later, Peru has made substantial progress in achieving these objectives. The impact of the EITI can be seen in three areas: building trust, improved management of revenues from extractive industries, and in the institutionalisation of transparency.
Distrust toward the State and the extractive industries continues to be a major challenge. In this environment, Peru’s EITI figures are respected and used by parliamentarians, national and regional government officials, auditing bodies and civil society organizations. Throughout the course of this assessment, industry stakeholders stressed that:
“in a country with high level of distrust toward the mining industry, the fact that third party-verified information is available through the EITI has been of great value for extractive companies”.
Peru’s EITI is often cited as a source of reliable revenue data (see for example the report Towards a vision for mining in Peru in 2030). It is of course recognised that conflict associated with extractive activities is still high, multi-faceted and will not be solved through a single solution. Stakeholders agree, though, that the EITI has improved access to revenue data and has facilitated acceptance of this data as trustworthy.
Peru has a number of well-established government systems that are transparent, provide thorough data and are largely trusted by stakeholders. Contracts are transparent, licensing and cadastre information is reliable and accessible, monitoring the national budget and execution of public projects is possible by user- friendly systems. The EITI in Peru has demonstrated how revenue collection and distribution systems work. EITI-Peru could, however, make better use of the information available across all these systems. The EITI would then be in a position to strengthen its contribution to transparency and accountability.
Transforming extractive industry revenues to benefits for the whole society continues to be a challenge in Peru. In particular, Peru channels half of the revenues received from the extractive industry to regions and municipalities. It is widely acknowledged that governance at subnational levels of government is often weak; corruption is widespread and administrative and project-management capacity are low. EITI-Peru has sought to improve the management of extractive revenues in the regions. Peru’s regional EITI implementation has been slow and with limited results. However, it is a step in the right direction. Stakeholders in the pilot regions have welcomed EITI implementation as a platform for discussing local industry impacts and ensuring better utilisation of revenues. Local CSOs appreciate the efforts in lifting their capacity to monitor the industry and the local government’s use of extractive revenues. At the same time, they are clear that more resources and capacity is needed.
A third area where the EITI is recognised to have had an impact is in institutionalizing transparency practices. In 2005, Peru had recently enacted a framework for transparency that required public entities to make their work transparent. The EITI was embraced as a way to deliver on those objectives. The EITI has been implemented by four administrations and the national tripartite collaboration has become routine. The participating government agencies and the majority of companies are fully supportive of the process, and provide the requisite information in a timely manner. EITI figures are regularly published and used. A mechanism for addressing the confidentially of tax information has been developed and implemented. Stakeholders across constituencies acknowledge the value of having this platform for dialogue. At the same time, it is noted that the potential for using this platform is far from being exhausted. As identified throughout this assessment, EITI data, findings and linkages to other available information could be used to leverage a wider and more informed public debate about the outlook for these sectors.
A number of stakeholders, largely from civil society organisations, have argued that the same level of transparency should be extended to social contributions and environmental management (including adherence to environmental regulations). They believe that as these ten years of EITI implementation have made revenue collection more accountable, it is time to have a similar approach to these other aspects, which are also integral part of accountability of the extractive sector.
Two key challenges need to be addressed to ensure the EITI process is sustainable. First, company participation, while strong, is voluntary and needs to be secured each year, particularly with new entrants to the sector. As noted in this assessment, EITI-Peru is vulnerable to a material companies refusing to participate. Moreover, the work and time needed to secure the necessary waivers and approvals increases costs and reduce the timeliness of the data. Other EITI implementing countries have made legislative and regulatory reforms to embed transparency requirements. This ensures a level playing field for industry, reduces the cost of EITI implementation, and would enable more routine and detailed reporting by government agencies. After a decade of EITI implementation, which has made transparency the norm, it would be timely for the government and the CMPE to consider similar measures.
Second, the funding for EITI implementation needs to be secured. To date, funding has not been a major problem. The Peruvian Government, the World Bank (MDTF, EGPS) and bilateral support from development partners such as the Canadian cooperation, GIZ, SECO and USAID have ensured that there is sufficient funding. However, securing the same level of support in the future is uncertain. It would be timely for the government and the CMPE to consider this issue to ensure that the CMPE’s work is adequately funded.