The World Bank Implementation of the Extractives Industry Transparency Initiative (EITI) in Ecuador Project Information Document/ Identification/Concept Stage (PID) Public Disclosure Copy Concept Stage | Date Prepared/Updated: 21-Oct-2021 | Report No: PIDC242094 Oct 21, 2021 Page 1 of 6 The World Bank Implementation of the Extractives Industry Transparency Initiative (EITI) in Ecuador BASIC INFORMATION A. Basic Project Data Environmental and Project ID Parent Project ID (if any) Social Risk Project Name Classification Moderate Implementation of the Extractives Industry P176221 Transparency Initiative (EITI) in Ecuador Region Country Date PID Prepared Estimated Date of Approval LATIN AMERICA AND Ecuador 21-Oct-2021 CARIBBEAN Public Disclosure Copy Financing Instrument Borrower(s) Implementing Agency Ministry of Energy and Non- Investment Project Renewable Natural Vice Ministry of Mines Financing Resources. PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 0.60 Total Financing 0.60 Financing Gap 0.00 DETAILS -NewFinEnh1 Non-World Bank Group Financing Trust Funds 0.60 Extractive Industries Transparency Initiative 0.60 B. Introduction and Context Country Context Ecuador was admitted as the 55th implementing country of EITI this past October 15th, 2020. The proposed development objective of this project is to assist the Government of Ecuador in increasing transparency and accountability in the extractives sector by using government information systems for disclosing data and promoting a better understanding of the extractive industries value chain. With this objective, the proposed Oct 21, 2021 Page 2 of 6 The World Bank Implementation of the Extractives Industry Transparency Initiative (EITI) in Ecuador project is aligned with the commitment of the Ecuadorian Government and its Constitution, which provides for transparency in processes and public management as a fundamental principle of its public administration. The use of the profits of non-renewable natural resources is an opportunity to contribute to the country's economy as it can promote economic, social, and environmental development at the same time. Considering that mining has the potential to become a key driver of private sector–led growth and a significant source of foreign exchange of fiscal revenues, and that the hydrocarbons industry is still one the main sources of income for the country, the Ministry of Energy and non-renewable natural resources has worked with civil society organizations and extractive companies in order to follow the process of joining the EITI. The EITI has been identified as a key instrument for demonstrating Ecuador’s determination to adopt international standards and good practices in its management of extractive industries. A request letter from the Government of Ecuador for support of its implementation of the EITI was received on October 5th, 2020 by the World Bank. Public Disclosure Copy Sectoral and Institutional Context Over the years, Ecuador's political economy has been shaped by its oil -resources revenues because they play a significant role in the national and local economy. Since 2008, with the new Constitution, the State of Ecuador became the only administrator of these resources, as well as the central receiver and redistributor of extractive industry rents in its territory. Ecuador is the fifth largest oil producer in Latin America. While oil-related activities account for a relatively small fraction of the GDP (10 percent), oil exports represented half of the export basket during the boom years (2003- 2013). Oil-related resources, meanwhile, helped finance up to 35 percent of government spending during the same period. Ecuador’s dependence indicators are relatively low compared to its regional and structural peers. GDP growth is strongly correlated with changes in oil prices, even more than in peer countries. The mining sector has gained momentum in recent years because of its geological potential, low operating costs and regulatory changes. According to the Minister of Energy and Non-Renewable Natural Resources, for this year mining (year 2021) it is expected to generate, in a pessimistic scenario, at least USD 500 million in benefits for the State. In an optimistic scenario, that figure can reach almost 900 million. Relationship to CPF The current Country Partnership Framework (CPF, 2019-2023) includes a request by GoE for technical assistance to support in the implementation of the EITI and to strengthen the institutional capacity of ARCOM, the Mining Regulation and Control Agency. The WB has already provided technical assistance to improve the mining cadaster, which is expected to increase efficiency in the process of granting mining titles and to attract investors to large-scale mining projects. EITI implementation is part of the prior actions (action #8) in the Third Inclusive and Sustainable Growth Development Policy Loan (November 20, 2020). Oct 21, 2021 Page 3 of 6 The World Bank Implementation of the Extractives Industry Transparency Initiative (EITI) in Ecuador C. Project Development Objective(s) Proposed Development Objective(s) To assist the Government of Ecuador in increasing operational capacity of the Technical Secretariat and the Multi- Stakeholder Group (MSG) on implementing EITI. This will increase transparency and accountability in the extractives sector by using government information systems for disclosing data and promoting a better understanding of the extractive industries value chain. Key Results  Draft framework for systematic reporting, including mapping of data sources and systems, and procedures for systematic reporting.  Ecuador’s first EITI report published and disseminated.  Outreach/ training events held for the MSG and staff of the Technical EITI Secretariat. Public Disclosure Copy D. Preliminary Description Activities/Components The project will be implemented starting June 2021 and the main objective during the initial phase will be to draft the first EITI report according to the EITI standard, supporting the government of Ecuador in the strengthening of the Ecuador EITI Technical Secretariat and building operational capacity within the Ministry, the related government institutions and the Multi Stakeholder Group (MSG). First validation is initially planned for second semester of 2023.c Ecuador has acknowledged that EITI implementation will enable Ecuadorian citizens to understand how the country's natural resources are managed, how much income they generate and it will improve the international perception of Ecuador’s risk indicators, Fraser index and competitiveness, thereby attracting more investment to the country. Activity 1. Development of a framework for systemic reporting that will involve conducting activities such as: mapping of data sources; putting systems and procedures in place for systematic reporting; reviewing the mining cadaster data; and conducting training on EITI reporting. Activity 2. Elaboration and dissemination of the first EITI Report to support all activities essential to EITI implementation and meeting Ecuador’s obligations as an EITI candidate country. Activity 3. Capacity building for the MSG and staff of the national EITI Secretariat support to sub-committees and MSG meetings. Oct 21, 2021 Page 4 of 6 The World Bank Implementation of the Extractives Industry Transparency Initiative (EITI) in Ecuador Environmental and Social Standards Relevance E. Relevant Standards ESS Standards Relevance Assessment and Management of Environmental and Social ESS 1 Relevant Risks and Impacts ESS 10 Stakeholder Engagement and Information Disclosure Relevant ESS 2 Labor and Working Conditions Relevant Resource Efficiency and Pollution Prevention and ESS 3 Not Currently Relevant Management ESS 4 Community Health and Safety Not Currently Relevant Land Acquisition, Restrictions on Land Use and Involuntary ESS 5 Not Currently Relevant Resettlement Public Disclosure Copy Biodiversity Conservation and Sustainable Management of ESS 6 Not Currently Relevant Living Natural Resources Indigenous Peoples/Sub-Saharan African Historically ESS 7 Relevant Underserved Traditional Local Communities ESS 8 Cultural Heritage Not Currently Relevant ESS 9 Financial Intermediaries Not Currently Relevant Legal Operational Policies Safeguard Policies Triggered Explanation (Optional) Projects on International Waterways OP No 7.50 Projects in Disputed Areas OP 7.60 No Summary of Screening of Environmental and Social Risks and Impacts The environmental risk of this trust funded project is rated Low, as it does not involve any specific physical location, any physical investments having on-the-ground impacts, any impacts on natural habitats or biodiversity, or any direct generation of GHG or pollution. Potential risks are minimal. The social risk rating is Moderate, mainly because of a series of persisting issues having to do with the engagement of key stakeholders in the MSG as indigenous peoples, communities affected by extractive projects, local authorities, or artisanal miners. Otherwise, due to its nature, this operation is not expected to have an adverse impact on livelihoods, nor will it limit community-level access to natural resources or require the acquisition of land leading to physical and/or economic displacement. On the contrary, it will consist developing a framework for sharing and communicating information in a systematic way; preparing Ecuador?s first EITI report; and training the staff of the Technical EITI Secretariat and the members of the Multi-Stakeholder Group. The potential risks of these activities, in and of themselves, are both minimal and manageable. Given that the objective of the grant is to increase transparency and accountability in the extractives sector of the country, it is expected to translate into positive effects for stakeholders in civil society, including vulnerable and marginalized groups such as indigenous peoples (IP), Montubios and Afro- Oct 21, 2021 Page 5 of 6 The World Bank Implementation of the Extractives Industry Transparency Initiative (EITI) in Ecuador Ecuadorians, which could in turn establish positive new patterns for their engagement in oil and mining projects, and lower the risks of complaints or social conflicts in connection with such projects. However, access to EITI Reports and other attempts at engagement could be affected by the digital divide, especially for indigenous peoples and other rural populations without internet access. CONTACT POINT World Bank Contact : Javier Aguilar Title : Senior Mining Specialist Telephone No : 473-0020 Email : Public Disclosure Copy Borrower/Client/Recipient Borrower : Ministry of Energy and Non-Renewable Natural Resources. Implementing Agencies Implementing Vice Ministry of Mines Agency : Contact : Cesar Vasquez Title : Vice Minister of Mines Telephone No : 0059323976000 Email : cesar.vasquez@recursosyenergia.gob.ec Contact : Veronica Giler Title : Director of International Affairs Telephone No : 00593-99-134-7548 Email : veronica.giler@recursosyenergia.gob.ec FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects Oct 21, 2021 Page 6 of 6