EITI: Spearheading Transparency in Mexico’s Mining SectorBy Alejandro Ehrenberg | Wed, 09/30/2020 - 10:55
Q: Why is it necessary for the mining industry to foster transparency?
A: Ten or 15 years ago, transparency was the buzzword among governance professionals. Since then, the hype has calmed down but EITI has institutionalized the commitment to transparency in different countries. This commitment has survived shifting trends and changes of government. Continuous commitment means that there is a demand for transparency within civil society and that governments want to respond to that demand. The private sector is crucial in this effort. EITI is an ideal partner to push this agenda forward. We present a practical way to deliver on transparency. At the government level, we promote for the creation of frameworks for transparency, among other goals. Mexico is a leader in this area, given its law on free access to information. Participating in EITI is a way for governments to be associated with best practices, to boost their attractiveness to investors and to have a strong international standing.
The kind of transparency EITI advocates is evidence-based. This is very useful for the mining industry. The sector has had to deal with a legacy of obscure business deals and suboptimal environmental practices that has eroded its legitimacy. Collaborating with initiatives like EITI is a formidable way to restore legitimacy and prove to civil society that the industry today is committed to paying taxes and behaving responsibly. It is a win-win situation. Governments attract investment from the best and most responsible players. Companies build trust that leads to strong, long-term relationships and stability.
Q: How is EITI collaborating with the López Obrador administration?
A: The EITI conversation with Mexico started with the Energy Reform. It was a key aspect in approving the reform. But the agenda under López Obrador has shifted. Fighting corruption is certainly at the top the agenda. But the way the oil and gas industry is envisioned also is different. As pieces are still being arranged, EITI has found a new home in the mining sector.
The Mexican government published our second report and it is updating the portal where EITI’s milestones are published. We look forward to continue working with government, industry and civil society. It is important to mention that the latter two have been very active in our tripartite organization: Mexico EITI Commission. Civil society is especially focused on environmental issues.
The Undersecretary of Mining has been axed as a result of austerity measures. But when we started working in Mexico, the country did not have an undersecretariat and a great deal of progress was made anyhow. Now, it seems that we are back in that situation. It should not be a major hurdle, as the sector still needs to be regulated. We need to work with what is available. While the former undersecretary was well-respected by stakeholders, institutions and policies should survive people. The important thing is to institutionalize Mexico’s commitment to transparency.
Q: What are EITI’s most urgent priorities in Mexico?
A: Environmental issues are key drivers for civil society. In response, EITI has started to expand the conversation with SEMARNAT and ASEA. Broadening the conversation should ensure that these issues are addressed.
We are also intensifying our conversations to regain contact and momentum with PEMEX. The NOC previously supported EITI officially. It does not anymore, as such, but that does not mean that it is uninterested and that we cannot cooperate.
We know that the anticorruption agenda is crucial for the government. There are many angles that EITI can address in this regard. One is beneficial ownership. The identity of the real owners – the beneficial owners – of the companies that have obtained rights to extract oil, gas and minerals is often unknown, hidden by a chain of unaccountable corporate entities. This problem feeds corruption and tax evasion. By 2020, all EITI countries need to ensure that companies that apply for or hold a participating interest in an oil, gas or mining license or contract in their country disclose their beneficial owners. We hope this data can be added to the database that the Ministry of Finance is building.
Q: What lessons from other Latin American countries can EITI bring to the effort against organized crime in Mexico’s mining industry?
A: Artisanal and small-scale gold mining in Colombia is interlinked with criminal forces. We have been in discussions with the OECD to help companies in the supply chain implement their own due diligence to assess whether a potential business partner is involved with organized crime. EITI can shed light on the healthy elements of the supply chain and help with this due diligence. We can be the vehicle for information on authorized smelters, for instance. EITI can be the place where companies check for legitimacy. For governments, the international community can see if an effort has been made to regularize artisanal mining. How Mexican organized crime interacts with small-scale mining is not often discussed but EITI has experience that can help in Mexico’s dealing with the issue.
The Extractive Industries Transparency Initiative (EITI) is a global standard for the good governance of oil, gas and mineral resources. It seeks to address the key governance issues in the extractive sectors.