Good Governance in the Extractive Industries: Latin America and …20K_NRGI... · 2019. 12. 12. ·...
Transcript of Good Governance in the Extractive Industries: Latin America and …20K_NRGI... · 2019. 12. 12. ·...
Good Governance in the Extractive
Industries: Latin America and Mexico in
a global empirical perspective
Daniel Kaufmann,
Natural Resource Governance Institute (NRGI)
Opening Presentation at EITI Workshop,
Mexico DF, June 30th
, 2014
Overview
Proven reserves of oil in Latin America
(billions of barrels)
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
US Canada Mexico Argentina Brazil Colombia Ecuador Venezuela
1993
2003
2012
2013
Source: Own elaboration based on Statiscal Review of BP
America Latina oil production
(thousands of barrels day)
-
2000
4000
6000
8000
10000
12000
1990
2000
2010
2013
Source: Own elaboration based on Statiscal Review of BP
Fiscal contribution of hydrocarbons in LA
Source: Cepal
Resource Governance Index
Satisfactory (71-100)Partial (51-70)Weak (41-50)Failing (0-40)
Mexico’s hydrocarbons
sector overall
performance on the RGI
8
9
ffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffff
ffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffff
Mexico’s hydrocarbons sector
Institutional & Legal Setting (20%)
Reporting Practices (40%)
Safeguards & Quality Controls (20%)
Enabling Environment (20%)
Indicator Indicator Indicator Indicator
1 Freedom of information law 1 Licensing process 1 Checks on licensing process 1Accountability & democracy (EIU
Democracy Index & WGI voice and accountability)
2 Comprehensive sector legislation 2 Contracts 2 Checks on budgetary process 2 Open Budget (IBP Index)
3 EITI participation 3Environmental and social impact
assessments3 Quality of government reports 3 Government effectiveness (WGI)
4 Independent licensing process 4 Exploration data 4Government disclosure of conflicts
of interest4 Rule of law (WGI)
5Environmental and social impact
assessments required5 Production volumes 5 Quality of SOC reports 5
Corruption (TI Corruption Perceptions Index & WGI control of
corruption)
6 Clarity in revenue collection 6 Production value 6 SOC reports audited
7Comprehensive public sector
balance7 Primary sources of revenue 7
SOC use of international accounting standards
8 SOC financial reports required 8 Secondary sources of revenue 8SOC disclosure of conflicts of
interest
9 Fund rules defined in law 9 Subsidies 9 Quality of Fund reports
10Subnational transfer rules defined
in law10 Operating company names 10 Fund reports audited
11 Comprehensive SOC reports 11 Checks on Fund spending
12 SOC production data 12 Government follows Fund rules
13 SOC revenue data 13Fund disclosure of conflicts of
interest
14 SOC quasi fiscal activities14
Quality of subnational transfer reports15 SOC board of directors
16 Comprehensive Fund reports 15Government follows subnational
transfer rules
17 Fund rules
18Comprehensive subnational transfer
reports
19 Subnational transfer rules
20 Subnational reporting of transfers
Achievements
• Strong legal framework
• Freedom of information law
• Comprehensive industry data are available
online - but reports can be difficult to
understand and information must be pieced
together from different agency websites
• Quality of SOC reports
Pending Challenges: from RGI & beyond
• Auditors lack capacity to oversee the oil sector, and
review only a small fraction of public funds.
• Lawmakers weakness in reviewing service contracts
• Only limited information on Pemex's subcontracting
policies is published before contracts are awarded.
Information on the selection process is not always
available, and service contracts are not published.
• Not an EITI country yet (& mining needs inclusion).
• Weaknesses in rule of law and corruption
• Corporate governance of PEMEX
• Transparency & competition for licensing and contracts
• Adopt good governance practices for Sovereign Oil Fund
Contracts
Contracting – some considerations
In awarding contracts:
1.Picking the “right” company – includes fiscal terms,
work qualifications, and social commitments
2.Transparency not just around the final contract, but
the process
3.Beware of “the winner’s curse” and post-bid
negotiations
Global information asymmetries
around contracts are shrinking
All or most contracts/licenses are available
Some contracts/licenses are available
Source: Resource Governance Index, 2013
State-owned Enterprises
National oil companies (NOC) – benefits
and success stories
• Development of national skills
• Long-term financial returns
• State control over the pace and development of the industry
• Stimulator of local content and positive economic spillovers
NOC challenges: inefficient project development and
revenue collection
NOCs IOCs Majors
Average revenue per employee, 2004
NOCs $962,000
IOCs $1.8 million
Source, Victor 2007
Number of Employees
Rev
en
ue/E
mp
loy
ee (
$1,0
00)
NOC challenges: access to capital
50
55
60
65
70
75
80
2009 2010 2011 2012
Petronras dividend payout as % of net revenue
Source: Petronas 2012 Annual ReportSource: http://www.reuters.com/article/2012/07/02/us-malaysia-petronas-idUSBRE86105420120702
…but too much autonomy over revenue flows
risk creating parallel treasuries
NOC Exports as a share of total government revenue, 2010
Source: http://www.resourcegovernance.org/sites/default/files/OilSales-Transparency.pdf
…or parallel development ministries
PDVSA Spending, $ billions, 2012
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
Social Programs "Operating Assets"
Source: Latin American Herald Tribune
Recommendation 1: Develop a workable
model for State-NOC fiscal flows
All revenues to consolidated fund/special funds, NOC to
receive allocation from parliament
NOC can retain a predefined part of revenues from the
petroleum sector
NOC retains all revenues from production share/equity and pays taxes and dividends to
the state
Explanation Degree of State
control
1
2
3
High
Low
• All revenues transferred to the consolidated fund
• NOC needs budget approval before receiving funding
• Part of petroleum revenues that can be retained are set by law
• All revenues in excess are transferred to the consolidated fund
• NOC operated as a 'normal' commercial entity with the state as majority (or sole) shareholder
• NOC pays royalties, taxes and dividends to the state
Rec. #2: Public listing of NOC shares
0
20
40
60
80
100
Stat
oil
Pe
me
x
Pe
tro
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ON
GC
Ro
snef
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Eco
pet
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PD
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Kaz
Mu
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Gaz
Pe
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CO
DEL
CO
CN
PC
O.C
.P.
Son
ango
l
Pe
tro
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ZCC
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H
SOC
AR
Pe
tro
trin
KP
C
Pe
tro
ecu
ado
r
Pe
tro
nas
YPFB
Son
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ch
NN
PC
Min
istr
y o
f O
il
YOG
C
PM
DC
AR
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Pe
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H
Qat
ar P
etro
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STA
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Pe
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es
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ZMD
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Nat
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il C
orp
ora
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PC
O
GEP
etr
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No
rth
ern
Co
al E
nte
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se
MO
GE
Turk
men
gas
SOE is partially privatized.
Rec. #3: limit state shareholders
Clear definition of who in government constitutes
shareholders of NOC, with emphasis on a single
shareholder or small group.
Examples:
MalaysiaPrime Minister is sole
shareholder
KazakhstanState wealth fund is sole
shareholder
Rec. # 4: Transparent reporting of key data
• Volume and price data for oil sales – how much is
the NOC selling, and at what price?
• Revenue streams – including revenues received by
the company, transfers between the company and
the treasury
• Spending and earnings projections
• E&P activities of NOC and private oil companies
• Reserve and production data, and future estimates
Natural Resource Funds
Some have helped
countries escape the
“resource curse.”
• Chile
• Norway
• Some Persian Gulf states
• Several U.S. states
Others have been
mismanaged, not met
objectives or become
slush funds.
Some in :
• Central Asia (e.g., Russia)
• Latin America (e.g., Venezuela)
• MENA (e.g., Libya)
• SE Asia (e.g., Brunei)
• Africa (e.g., Equatorial Guinea)
What has made the difference are the rules,
institutions and broad-based consensus.
SWF successes and failures
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
Norway
Government revenue growth(kroners)
Government expenditure growth(kroners)
Volatility
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
1991
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
2007
200
8
200
9
201
0
201
1
201
2
201
3
Mexico
General government revenue growth(pesos)
General government totalexpenditure growth (pesos)
Building consensus around the
macroeconomic framework
• Ghana
• Mongolia (starting
discussion)
• Norway
• Sao Tome and
Principe
• Timor-Leste
Independent oversight
• PIAC in Ghana
• Supervisory Council in
Norway
Transparency
• Alaska
• Timor-Leste
transparency portal
and reports
• Global: Santiago
Principles; RGI;
Truman SWF
Scoreboard
The EITI Standard
Legal framework & fiscal regime
(§3.2 )
Exploration activities (§3.3)
Taxes & Primary
Revenues(§4.2(a))
SOE level of beneficial ownership (§3.6(c))
Direct payments/
receipts (§4.2(d))
Employment §3.4(d)
Revenues in & not recorded
in budget (§3.7)
License award/transfer
process & deviations(§3.
10)
Production volumes &
values (§3.5(a) & §3.4(e))
In-kind revenues(§4.1(c))
Government transfers by
SOEs(§4.2(c))
Mandated national/
subnational transfers(§4.2(e))
Social payments(§4.1(e))
Earmarked revenues & description
of budget/audit
process (§3.8)
Register of licenses(§3.9)
Export volumes &
values (§3.5(b))
Infrastructure
/barter provisions(§4.1(d))
SOE quasi-fiscal
expenditures(§3.6(b))
Beneficial ownership (§3.11)
Economiccontribution(§3.4(a)-(c))
Transport Revenues(§4.1(f)
Contract/license disclosure
(§3.12)
Revenue disaggre-
gation§5.2(e)
Allocation of Rights Production
DataRevenue Collection
SOERevenue Management
Sub-National
Social Impact
Opportunities in
the EITI Standard
• Improve natural resource transparency,
especially downstream
• Platform for multi-stakeholder engagement
• Creates a “one-stop-shop” for extractives
information
• Promotes informed public debate about
natural resource governance and reform
• Network for international best practice
How would EITI add value?
www.resourcegovernance.org/eitiguide
A tool in reform efforts
Sub-National
Social Impact
What the EITI requires:Mandated revenue transfers from central to subnational government(§4.2(e))
What the EITI requires:Employment §3.4(d) Mandated social payments (§4.1(e))
What the EITI requires:Revenues recorded & not recorded in national budget (§3.7) *Earmarked revenues & budget/audit processes (§3.8)
Revenue Management
Looking downstream
Where do benefits go?
DOMESTIC
FOUNDATIONS
FOR RESOURCE
GOVERNANCE
PRECEPT 1Strategy,
consultation and
institutions
PRECEPT 2Accountability and
transparency
PRECEPT 11Roles of
multinational
companies
PRECEPT 12Role of international
community
INTERNATIONAL
FOUNDATIONS
FOR RESOURCE
GOVERNANCE
PRECEPT 3Exploration and
license allocation
PRECEPT 4Taxation
PRECEPT 5Local effects
PRECEPT 6Nationally owned
resource
companies
PRECEPT 7Revenue
distribution
PRECEPT 8Revenue volatility
PRECEPT 9Government
spending
PRECEPT 10Private sector
development
Investing for
sustainable
development
Managing
revenues
Getting a
good deal
Discovery and
deciding to
extract
Natural Resource Charter
Concluding
1. Latin America & Mexico: Some Achievements, Pending
Challenges & Opportunities in NR Governance
2. Contracts: Striking balance between incentives and state
benefits/control, & structuring licensing to avoid common risks.
3. State-owned enterprises: To develop a model for State-NOC
fiscal flows, & create incentives for efficiency and accountability.
4. Natural Resource Funds: Need to focus on having the right
rules, institutions and broad-based consensus.
5. EITI: Progress already on transparency in Mexico; EITI would add
value.