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«Unblocking Bottlenecks to Effective Resource Revenue Management in Peru Oxfam expert meeting report November 2014 CONTENTS Executive Summary ...»

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29. Institutional mechanisms have led to a culture of corruption that penetrates all levels of Peru’s government. It is permitted because it benefits a part of society. The problem is not just personal leadership but also institutional leadership; in fact, quality leadership is missing at all levels, partly due to the political system. People wil not speak up about corruption for fear of political fallout.

30. Monitoring should be improved from top to bottom as well as within civil society; it should use tools including the judiciary, checks and balances, and the controller’s office.

31. Subnational implementation of the Extractive Industries Transparency Initiative (EITI) is an interesting step on the path to greater transparency.

Decentralizing EITI to the regions and promoting a process to generate and use information might spur discussion among regional leaders that leads to more effective use of canon revenue.

32. Significant transparency exists in Peru, both on the web and with EITI. The next step is determining how to use information to drive results. Combined with an active civil society, the potential exists to channel information as an effective tool for engagement on all levels.

7 Unblocking Bottlenecks to Effective Resource Revenue Management in Peru

33. The work of companies and CSOs has resulted in two regional governments’ greater transparency, which in turn demonstrates that such efforts yield tangible results.

PUBLIC ENGAGEMENT

34. When decentralization began, mechanisms were established to engage public opinion and support accountability. These mechanisms have weakened over time. They must be strengthened and redeployed through a bottom-up process.

35. Peruvians have the right to monitor their government. A national-level message asserting this right must be communicated; this would be an incentive to decrease corruption.

36. Local governments do provide some transparency. It is possible to go online and see how municipalities spend funds, however, few people are aware of this. The information and infrastructure are in place, but people must be informed that the tool exists and taught how to use it.

37. One enhancement to the government’s budget communication tool would be providing information on percentages of both budgetary execution and fulfillment of goals.

38. Educating citizens about transparency issues is admirable, but there is not enough capacity to disseminate the information effectively.

39. Peruvians think more transparency brings less corruption, which isn’t accurate. Despite considerable access to information, the corruption level is still high. Corruption in Peru is organized in a complex dynamic stemming from the democratic system; there must be checks and balances.

40. In El Salvador, some provinces with low participation in the budgetary process get their needs met, yet some places with high participation have many unmet needs. In districts where the public and civil society are better organized, there is less corruption. Institutional reforms from the top and organic reforms from civil society are both necessary.

Unblocking Bottlenecks to Effective Revenue Management 8

HUMAN CAPITAL AND INSTITUTIONAL CAPACITY

41. According to the Ministry of Economy and Finance, only 3 percent of civil servants have certified capacities. Regional mandates are ineffective, because the regions want to control hiring.

42. Brain drain is a problem. Skilled people have a strong incentive to move elsewhere for higher-paying jobs. This is a chicken-or-egg problem: Should salaries be increased first, to attract talented staff, or should capacity be built first?

43. Strategies to retain people after developing their capacity, such as incentives and higher compensation, must be explored in order to improve management of revenue and projects. Perhaps more local development initiatives will be an incentive for skilled people to stay in place.

44. Organizational reform is also key to building capacity. For example, 80 percent of local governments do not use certified professionals, because officials bring friends and relatives into key positions. Employing people with appropriate capacity should be mandatory.

45. Capacity building should address different concepts for public investment, focusing on how things are done and applying simple tools. People responsible for spending canon revenue require investment management capacity, from planning to execution and monitoring.

46. The International Finance Corporation program in Peru demonstrated the need to differentiate staff experience levels for capacity training. People at advanced levels of government have considerable experience, but the municipal-level problems are overwhelming. Significant money has been spent on capacity building with limited results.

47. National interest in capacity building is limited. Addressing revenue management bottlenecks is the short-term view; nobody wants to invest in the long term. Consensus for long-term investment in solving the capacity gap must be developed.

48. Civil society can work with local government to build capacity, but in the electoral phase, reforms and changes are not made, because power groups in local governments resist change and transfers of power.





49. Combining the roles of advocacy and capacity building is difficult and can lead to government distrust.

9 Unblocking Bottlenecks to Effective Resource Revenue Management in Peru

50. Many labor opportunities have gone to men, despite the fact that many women hold leadership positions in some regions. Any capacity training should include a gender focus.

NONGOVERNMENTAL PARTICIPATION

51. Universities are autonomous and should work on developing tools to support better EI revenue management. A mechanism is required to ensure that universities can access sufficient funds or partner with other universities to improve the quality of research.

52. University officials feel that incorporating the canon into salaries does not support clear evaluation of who is doing the work and who is not. EI revenues should fund research, not salaries.

53. Universities in Lima have limited capacity for high-quality research, and institutions outside of Lima have even less. High expectations for research do not reflect reality. In addition, mid-level organizations should be considered for training.

54. The role of monitoring and evaluation to support better EI revenue management commonly go to private consultants but could be transferred to other institutions. This presents an opportunity for universities and technical institutions.

55. Establishing mechanisms to encourage cooperation among different groups may be useful. Ideas include an “observatory” where companies, NGOs, and communities can collectively review and evaluate development progress, and a center that brings together the academic, government, and private sectors to address unanswered questions, such as sustainability after a mining company exits an area.

56. Engaging different sectors is necessary, but not to absolve the state of its responsibility to the community. Looking to companies as the solution is a problem; the inclination to privatize public spending is risky.

Unblocking Bottlenecks to Effective Revenue Management 10

OPPORTUNITIES AND

POTENTIAL SOLUTIONS

 Promote results-based policy-making and budgeting  Provide stabilization funds to encourage greater medium- and long-term spending  Conduct systematic evaluations of intergovernmental transfers  Build local capacity to improve use and management of funds  Clarify roles and responsibilities of all parties in revenue management and development planning and require accountability  Create development plans aligned with a broader national plan and coordinated across actors  Define national and regional development objectives  Identify lessons from positive cases (e.g., San Martin, Arequipa)  Consider the role of development roundtables for greater coordination across actors in planning, execution, and monitoring  Encourage greater investment at a national level in science and technology  Educate public on information available and how to use it strategically 11 Unblocking Bottlenecks to Effective Resource Revenue Management in Peru ANNEX 1: MEETING

PARTICIPANTS

Javier Aguilar Extractive Industries Practice Leader, Latin America and the Caribbean World Bank Rocio Avila South America Extractive Industries Program Coordinator Oxfam America Epifanio Baca Economist Grupo Propuesta Ciudadana Judy Brown Chief Adviser, External Affairs Rio Tinto Fernando Castillo Director, General Office of Social Management Ministry of Energy and Mines Gerardo Castillo Director Societas Consultoras Nick Cotts Group Executive for Environment and Social Responsibility Newmont Mining Jonathan Fox Professor, School of International Service American University Ian Gary Senior Policy Manager Oxfam America Emily Greenspan Senior Policy Advisor Oxfam America Unblocking Bottlenecks to Effective Revenue Management 12 Paul O’Brien Vice President for Campaigns and Policy Oxfam America Kimberly Pfeifer Research Director Oxfam America Keith Slack Extractive Industries Global Program Manager Oxfam America Lisa Viscidi Director, Energy, Climate Change and Extractive Industries Inter-American Dialogue 13 Unblocking Bottlenecks to Effective Resource Revenue Management in Peru Forty percent of the people on our planet—more than 2.5 billion—now live in poverty, struggling to survive on less than $2 a day. Oxfam America is an international relief and development organization working to change that.

Together with individuals and local groups in more than 90 countries, Oxfam saves lives, helps people overcome poverty, and fights for social justice.

To join our efforts or learn more, go to www.oxfamamerica.org.

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