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EITI Chair Fredrik Reinfeldt with Colombian President Juan Manuel Santos in Bogota. Colombia is one of the countries in the process of joining EITI.  (Photo: EITI)
Monday, November 27, 2017

US EITI Withdrawal Hurts Latin America

The U.S. withdraws from the EITI, and Latin America’s civil society shudders.


On November 2, Gregory J. Gould, Director of the United States Department of the Interior, wrote a letter to the Board of the Extractive Industries Transparency Initiative (EITI) announcing the immediate withdrawal of the United States from the agreement. Though Gould attempts to shy away from the gravity of the decision (“While the U.S. government remains committed to fighting corruption in the extractive industries sector…, it is clear that domestic implementation of EITI does not fully account for U.S. legal framework”), critics have been quick to point out that the agreement never really affected U.S. domestic policy, since corruption in U.S. extractive industries is almost nonexistent.

The decision to withdraw from EITI should be counted as the latest in a series of decisions by the Trump Administration—both in Latin America and the Caribbean and in the global community as a whole—that have marked a U.S. retreat from its traditional role as an international leader. By doing so, the United States is sending a signal to other governments where corruption is a problem in the extractive industry that they can and should do the same. The decision is not innocuous, especially in the region where the U.S. has the most influence, and has served as an (imperfect) moral leader.  EITI has already had a tangible impact in the Americas, one of the regions most affected by corruption and impunity. The withdrawal from the agreement puts the hemisphere’s few examples of progress toward increased governmental transparency at risk.

EITI’s role fighting corruption

Formed in 2003 as an organization in which governments, corporations, and members of civil society collaborate to increase transparency and reduce corruption in extractive industries, by 2017 EITI membership included 53 countries, more than 80 multinational corporations (including giants like BP, ExxonMobil, Chevron, and Shell) and dozens of civil society groups and multilateral organizations.

EITI’s success has been subtle but tangible. Whereas in the U.S. oil and gas rights are owned by diverse actors (individuals, states, the federal government, and tribes), throughout the rest of the world extractive rights are typically owned by the national government. Without strong institutional checks and balances and an empowered civil society, these central government-dominated extraction rights give way to abuse of executive power and corruption. Indeed, Latin Americans need only look so far as Venezuela, Ecuador, Bolivia, and—earlier—Mexico to understand how consolidated control of extraction rights can lead to cronyism, favor granting and graft.

By creating a system of mutual accountability—under EITI’s institutional structure, member countries must publish data on payments received from extractive industries and companies must publish data on payments to governments—EITI made it easier for civil society groups and private citizens to hold their governments accountable.  EITI toes a moderate middle ground, espousing the belief that increased transparency and pressure from peer member nations would embolden civil society, increase government accountability and, as a result, distribute the wealth generated by resource extraction more responsibly.

EITI in the Americas

While not complete, EITI and its obligations have become increasingly embraced by Latin American and Caribbean states.  Peru and Honduras are full members of the agreement. Colombia, the Dominican Republic, Guatemala and Suriname are all in the process of joining. All told, Latin American members of EITI make up more than 10% of the region’s GDP and more than 20% of its total population.

In Honduras, resource extraction is a relatively minor economic factor, contributing only 1% of GDP and 4% of exports. Nevertheless, since joining the agreement, the Honduran government has created an agency that is legally mandated to manage the mining sector in accordance to EITI transparency principles and made information about mining licenses, revenue, and payments available to the public

EITI’s impact in Peru—where extractive industries account for 11.5% of the country’s GDP—is even more noteworthy, and today the country stands as a regional example for responsible management of resource wealth. In the ten years since Peru began reporting data to EITI, poverty levels have dropped from 55.6% in 2005 to 21.8% in 2015. In a sign of further progress, starting in 2017 the national government commissioned sub-national transparency reports from Peru’s regions. All told, EITI has had a profound role in increasing transparency in the country. In EITI’s assessment of Peru (which measures progress in seven categories including oversight, revenue allocation, and socio-economic contribution), the country has achieved “meaningful,” “satisfactory,” or “beyond satisfactory” progress in every category.

The impact of the Trump Administration’s withdrawal from EITI

The decision to withdraw the U.S. from EITI is confusing on two fronts. First, the agreement has little to no impact on U.S. domestic policy. Second, EITI has made tangible progress toward increasing transparency from governments and corporations in the developing world, which demonstrably leads to a more responsible management of income that benefits developing societies at large instead of the powerful few.  That basic concept has been at the center of U.S. foreign and development policy toward the region for decades.

The explanation for the decision is likely more nefarious then Director Gould’s letter lets on. The U.S. withdrawal from EITI didn’t happen in a vacuum. Instead, it is the latest example of what has become one of the pillars of Trumpism: a willful withdrawal from international leadership and the responsibilities that come with them. It’s been close to a year since President Trump took office. Since then, he’s withdrawn from the Trans-Pacific Partnership and the Paris Climate Agreement, threatened to leave NAFTA, and damaged important bilateral and multilateral relationships. Sadly, it’s time to add EITI to the growing list of examples of how Trump’s presidency has eroded U.S. leadership and weakened the global liberal order. And in this case, he may have also indirectly undermined the basic rights and economic futures of citizens throughout the Americas.

Originally published in Global Americans. Republished with permission. 

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