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Falling extractives revenues in Guatemala amidst political turmoil

Falling extractives revenues in Guatemala amidst political turmoil

Latest report can improve public debate around management of extractives sector.

The National Palace with its Constitution Square in Guatemala City has been less peaceful lately, as it has been the centre of protests in the past weeks. The report on the extractive industries can provide hard facts to the discussion around the future of the sector, which is one of the reasons for public grievance. Image: Flickr, creative commons.

Against the backdrop of citizens’ protests against corruption, the Guatemala EITI published its latest report on the extractive sector, covering 2012 and 2013. The report should contribute hard facts to the fraught debate about the management of the mining and oil sectors.

Significant drop of revenues

According to the report, there is a falling trend in the revenues provided to the State by the extractive industries. Mining income dropped by almost 20% (from USD 68 million to USD 55 million) and oil and gas revenue by some 8% (USD 143 million to USD 132 million) from 2012 to 2013. As a result, the total contribution of the extractive sector to the state decreased from 2.7% of total government revenues in 2012 to 2.1% in 2013, whilst the total share of the sector to the GDP fell from 1.9% to 1.6%.

Mining moratorium as possible cause

According to Mario Marroquín Rivera, Executive Director at Goldcorp and industry representative in EITI Guatemala’s National Commission, the fall in revenues should be seen in light of the so-called “mining moratorium”, which has severely limited the number of exploration licenses granted by the state. Although never technically adopted, the government has limited the allocation of licenses following a ruling by the Constitutional Court in 2008 declaring that seven articles in the Mining Law are unconstitutional - in particular those referring to the allocation of licenses. According to Mr. Marroquín, “the reports show that the industry’s contribution is falling, and the moratorium on new licenses suggests that the situation will continue. The time has come for a serious debate about the future that Guatemalans see for the development of the sector.”

Relationship between falling revenues and social conflict

The sector’s limited contribution to the country’s GDP can also be seen against the backdrop of social conflict around mining operations. According to a study by the Instituto Centroamericano de Estudios Fiscales (ICEFI) there is a strong correlation between mining and conflict. In the view of Otto Haroldo Cu, president of the Observatorio Nacional de Transparencia and civil society representative in themulti-stakeholder group“the fact that extractives count for less than 2% of the country’s GDP should make us stop and think. According to a report by ICEFI, 78% of municipalities with active mining licenses registered were engaged in some kind of conflict in 2010. Is this an adequate trade-off? Is this the kind of development that we want for our country?”.

Strengthening commitment to transparency

According to Mr. Francisco Paris, EITI Regional Director for Latin America “It is encouraging that the EITI process is helping to raise these issues and provide a public arena for their discussion in Guatemala”. The publication of the EITI Reportconfirms the government’s commitment to advancing transparency in the sector despite the wider political challenges. Recent corruption scandals have shattered public opinion and demanded priority attention from the government.  A recent meeting between Vice President Maldonado and members of t... ratified their mutual commitment to continue making progress with implementation of the EITI in Guatemala.

EITI Board lifts suspension

Guatemala has been an EITI implementing country since 2011 and was recognised as being compliant with the EITI Standard in 2014. The country had been suspended in April 2015 because it had not submitted the 2012 report on time (by 31 December 2014). With the publication of the report, the EITI International Board decided on 15 July to lift the suspension.

 

This news first appeared on eiti.org on 17 July 2015. To find out more about the EITI in Guatemala, visit the country page on eiti.org and their EITI homepage (in Spanish).

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