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Peru’s journey: The importance of transparency in the extractives sector

We take every opportunity to be clear and open in the way we conduct business, and we support those working to promote transparency across our industry – including the Extractives Industries Transparency Initiative (EITI). In this article, Eduardo Rubio, External Affairs Manager for Anglo American, talks about the programme’s importance in Peru.

Launched in 2002 at the World Summit on Sustainable Development, the aim of the EITI is to encourage resource-rich developing countries to tackle corruption through the adoption of open accountability practices involving the flow of finances from the extractive sector to the state.

Anglo American has been involved in the Peruvian EITI process from the very beginning, when I was asked to represent the private sector as part of a Department for International Development mission that visited Lima in October 2004.

The mission met with different stakeholder groups – from government, civil society and private sector – to explain the objectives of the EITI and to encourage Peru to adhere to the initiative.

It has been more than a decade since that visit and Lima, the Peruvian capital city, has just played host to the seventh EITI Global Conference. 

It was the first time the event has taken place in Latin America, and the choice of venue was in recognition of Peru’s achievements in becoming the first country in the Americas to reach EITI compliant status – in 2012 – and for its leading efforts to further the transparency agenda.

Peru has been able to maintain its compliant status by releasing a number of conciliation reports, the last of which was completed under the new standards which mandate, among other requirements, full disaggregation of individual company payments to the state. The fifth and latest conciliation report – corresponding to the 2014 financial year and involving 18 hydrocarbon companies and 40 mining companies, representing 95.2% and 85.6% of each sector respectively – was just released and it should be validated by the EITI Secretariat in the foreseeable future.

Empowerment through transparency

Why is transparency important in relation to the extractive sector in general, and mining in particular?

The root of the matter lies in the age-old economic debate over natural resources endowment, more particularly as it relates to resource-dependent developing countries.

On one hand, there are those who claim that resource endowment is akin to a curse, as it fosters corruption and impedes development. And there are those who believe that, if well managed, resource endowment can contribute to sustainable development.

One way to address these challenges is through transparency, which is not an end in itself but is fundamental in empowering an informed constituency to demand the adequate and equitable use of natural resource rents for optimum development impact.

Peru is already going beyond traditional transparency by having conducted two pilot regional processes – presented at the EITI Conference – that follow the trail of fiscal monies generated by the extractive sector from the tax collection agency to local governments, and then proceed to evaluate how they are invested and if these investments translate into real development outcomes.

Anglo American has actively participated in the pilot experience involving the region of Moquegua on behalf of the mining sector. The hope is that all local governments in Peru will eventually follow suit.

Looking ahead, some civil society constituencies are now demanding that EITI should include other topics, such as disclosure of social and environmental expenditures, as well as beneficial ownership. Whether they will be adopted whole, in part, or none at all, is up for debate – there are strong opinions either way.

But one thing is already evident after all these years: the EITI process in Peru has made a significant contribution towards demonstrating that proper governance in the management of natural resources rent can and does contribute to true development.

Find out more about our approaches and policies at Anglo American.

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