The Extractive Industries Transparency Initiative (EITI) and corruption in Latin America: Evidence from Colombia, Guatemala, Honduras, Peru, and Trinidad and Tobago

Ibeth López-Cazar,Elissaios Papyrakis,Lorenzo Pellegrini

doi:10.1016/j.resourpol.2020.101907

Ibeth López-Cazar, Elissaios Papyrakis + Show 1 more

Open Access

https://doi.org/10.1016/j.resourpol.2020.101907

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Journal: Resources Policy	Publication Date: Dec 5, 2020
Citations: 12	License type: cc-by

Affiliation: Erasmus University Rotterdam

Abstract

The Extractive Industries Transparency Initiative (EITI), launched in 2002, has been promoted as an international anti-corruption tool. Several empirical evaluations on the effectiveness of the EITI scheme provide average estimates based on cross-country analysis. However, little empirical work has been conducted on individual case studies, especially in the context of Latin America. Our study uses a Synthetic Control Methodology (SCM) to measure the EITI's impact on several measures of corruption in the first five Latin American countries to join the initiative: Colombia, Guatemala, Honduras, Peru, and Trinidad and Tobago. The method allows us to assess the magnitude and statistical significance of the EITI's effect on perceived corruption at each stage of implementation. Our results cast doubt on how decisive the scheme has been in combatting corruption. In the vast majority of cases, participation in the scheme either had no statistically significant effect or even coincided with marginally increased corruption levels (only in very few cases it was associated with temporary minor improvements). Taken together, the results indicate that joining EITI did not lead to a substantial decrease of corruption in any of the countries under scrutiny.

Highlights

Charles Darwin famously noted in his travel journal on South America that ‘nearly every public officer can be bribed’ (Darwin 1990 [1839])
Most of the current empirical evaluations on the effectiveness of the Extractive Industries Transparency Initiative (EITI) scheme provide average estimates based on cross-country analysis and the evidence is mixed, with some papers failing to report statistically-significant impacts (e.g. Corrigan 2017; Kasekende et al, 2016), while others pointing to a beneficial effect (e.g. Corrigan 2014; Papyrakis et al, 2016)
2 We only focus on the five Latin American countries that joined the scheme before 2015; Peru committed to the scheme in 2005, Guatemala and Trinidad and Tobago in 2010, Honduras in 2012, and Colombia in 2013 (EITI 2016)

Summary

Introduction

Charles Darwin famously noted in his travel journal on South America that ‘nearly every public officer can be bribed’ (Darwin 1990 [1839]). Corruption is still pervasive in Latin America and manifests itself in multiple socio-economic domains, ranging from high-profile embezzlement of public funds to petty cor ruption by street-level bureaucrats. Corruption tends to be especially prevalent in the extractive value chain due to the high volume of financial transactions and opportunities for enrichment (OECD 2016; IDB 2015). Because of the coincidence of high levels of corruption and large extractive sectors, several development agencies and international organizations (e.g. the Inter-American Development Bank (2015), the World Bank (2017) and the German Corporation for International Cooperation (2016) amongst others) have emphasised the need for improving transparency in Latin America’s extractive sector. Transparency is embodied in the provision of accessible, detailed, credible and verifiable information on financial transactions (and the broader governance) of the extractive sector, wide dissemination of re ports to inform public debate and the active engagement of all major stakeholders

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