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LATIN AMERICA: Boosting Accountability for Mining and Oil Industries

Danilo Valladares*

GUATEMALA CITY, Apr 12 2011 (IPS) - Guatemala has been accepted as a candidate country by the Extractive Industries Transparency Initiative (EITI), which aims to strengthen governance by improving transparency and accountability in the sector, and to reduce tensions between mining and oil companies and local people affected by their activities.

“It should be a great help in reducing conflicts,” Guatemalan EITI delegate Silvio Gramajo told IPS. “The EITI sets transparency standards for companies to publish what they pay in taxes, and for governments to disclose what they receive, and what use they make of these resources.”

The EITI is a coalition of governments, companies, civil society groups, investors and international organisations that promotes better governance in countries rich in natural resources, through the publication and verification of tax payments made by the companies and of government revenues from oil, gas and minerals.

Regina Rivera of the Gremial de Minas y Canteras, the industry association for mines and quarries, told IPS: “If the EITI process is implemented responsibly, it creates an opportunity to build trust in the extractive industries, as it makes two-way financial information accessible and transparent, which can contribute to reducing conflicts.”

Candidate countries must take five steps in order to gain compliant status: joining EITI, development of a working group and work plan, capacity building, disclosure and dissemination of the report, and validation. Guatemala has only taken the first step.

Only three countries of Latin America and the Caribbean are EITI candidates: Peru was accepted in 2004 although it has not yet qualified as a compliant country; and Guatemala and Trinidad and Tobago were accepted at the Mar. 2-3 EITI Global Conference in Paris.

To be admitted, Guatemala submitted a work plan for publishing reconciliation reports next year of financial flows for the mining and oil industries, to be agreed by consensus between companies, government and civil society.

The task ahead is not an easy one. The country is aspiring for EITI certification at a time when extractive industry companies are clashing with peasant farmers, who complain of serious environmental damage from mines and oil wells, and very few benefits, or none at all, for their communities.

“The mining industry does not provide appreciable support to our communities,” indigenous leader Pedro Bal told IPS. “We want to renegotiate terms so that the affected communities are the main beneficiaries.”

There have also been complaints of environmental risks and actual harm caused by the companies.

For example, the environment secretariat of the Dominican Republic and Central America Free Trade Agreement (DR-CAFTA) with the United States recommended on Mar. 29 an investigation into the extension of an oil contract in the Laguna del Tigre National Park, in the northern Guatemalan province of Petén.

The Anglo-French oil firm Perenco is operating there in a core area of the Maya biosphere reserve, home to a large number of wildlife species and archaeological sites, although it did not receive approval from the state National Council for Protected Areas (CONAP). Nevertheless, in July 2010 the government extended its contract for a further 15 years.

In another case, the Inter-American Commission on Human Rights (IACHR) called on the Guatemalan government to suspend gold and silver mining at the Marlin mine, in the western province of San Marcos, and to take steps to protect the rights and health of people in 18 local indigenous communities.

But Montana Exploradora, a subsidiary of Canada’s GoldCorp, which has been accused of polluting several rivers, is still operating the Marlin mine because of administrative delays in the suspension procedure.

In spite of the protests, mining has grown vigorously in Guatemala in recent years. Production climbed from 8.6 million dollars in 2005 to 370 million dollars in 2009, according to the Ministry of Energy and Mines.

But GoldCorp pays the government only one percent of its revenue from the mine, in accordance with the current mining law – which civil society groups protest is too little.

Meanwhile, in South America, Peru is working hard at becoming an EITI-compliant country.

In December Peru sent in its first reconciliation report, but failed to satisfy the EITI, which designated Peru as “close to compliant” but noted that some requirements still have to be met.

“The main criticisms were that some important companies had not participated in the account reconciliation,” economist Epifanio Baca, a civil society delegate on the working group in charge of preparing the report, told IPS. “And the figures presented were not entirely clear.”

Peru’s report for 2004-2007, presented in July 2010, indicates that mining companies paid 3.8 billion dollars in taxes, and between 871,000 and 873,000 dollars in royalties, while oil companies paid 237,000 dollars in taxes and 1.6 billion dollars in royalties.

Of the 24 mining companies participating in the report, six did not provide detailed figures, allegedly “for security reasons.” The EITI board said it would be “desirable” to include figures for 2008, as well.

Baca said the goal now is to prepare a second reconciliation report by June, with figures for 2008, 2009 and 2010.

More than 70 percent of social and environmental conflicts in Peru, one of the world’s leading producers of gold, silver, zinc and lead, are linked to mineral and oil extraction industries, according to the Ombudsman’s Office.

Was the first reconciliation report of any use in preventing conflicts in extractive industry areas? Economist Gustavo Ávila of the Grupo Propuesta Ciudadana, a coalition of local NGOs, said it was not, as implementation of the EITI programme in Peru is still “very rudimentary.”

“The process has not been disseminated widely among all those involved in the social and environmental conflicts,” Ávila told IPS, “and the reconciliation report does not contain up-to-date and detailed information from all the companies, so it is not a useful tool.”

According to the industry, mining and oil companies invested more than 24.1 billion dollars in Peru between 1992 and 2007.

While the overall poverty rate in Peru fell to 39 percent in 2009, it is considerably higher in highlands regions where the benefits of the mining industry have failed to trickle down to local communities.

* With additional reporting from Milagros Salazar in Lima.