The Colombian government is poised to alter its cannabis regulatory landscape again. And the changes could both benefit and vex already-licensed companies, as well as those looking to join the industry.
Nearly four years ago, Colombia enacted robust medical cannabis legislation. This, combined with its prime cultivation conditions and a pool of laborers who, on the global stage, earn comparatively lower wages, ignited the interest of investors at home and abroad. Since then, cannabis business interest in the country has only increased.
But that, in turn, led to more licensing applicants and delays, resulting in allegations that the new administration is deliberately sabotaging the medical cannabis industry. President Iván Duque Márquez, for example, promulgated a decree, later deemed unconstitutional and struck down by the Supreme Court, that sought to enable the police to confiscate any amount of cannabis carried in public, even though Colombians are allowed to possess up to twenty grams by law.
In May, the Ministry of Health and Social Protection posted online a draft decree with proposed changes to its medical cannabis laws, leaving public comment open through mid-June. The decree, which would amplify government control over cannabis manufacturing and cultivation, has since been sent to the president, and awaits his approval.
Though it calls for a tighter grip on the industry in some areas, the decree could also pave the way for increased business opportunities.
First, the opportunity side. Colombia’s lawmakers made it a point to protect the country’s role in the global market by crafting medical cannabis legislation that expressly prohibits the export of cannabis plants, dried cannabis flower, or unprocessed cannabis. In this way, said Juan Diego Álvarez, a former senior legal advisor to the country’s Ministry of Health and Social Protection, lawmakers ensured that Colombia would not be reduced to solely exporting raw material— forcing foreign companies to build their facilities, and to manufacture and innovate, within its borders. In fact, it is even forbidden to introduce raw material into the country’s free trade zones.
The decree would change some of that. If implemented, manufacturers in free trade zones would be allowed to bring in raw material from elsewhere in Colombia, so long as it is used for the production of cannabis derivatives.
This opens up the industry to several perks. First, in free trade zones, investors do not pay customs duties for goods that are introduced from abroad. Also, because much of the equipment to manufacture cannabis in Colombia has to be imported, the ability to construct facilities inside free trade zones gives investors a competitive edge. Perhaps most significant, exports of finished cannabis products produced in Colombia’s free trade zones could make use of the country’s international free trade agreements.
The decree would also increase some government rules and control. For one thing—just as cultivation license applicants are currently required to submit a property plan with coordinates, along with a signed statement indicating that the place where the activities are intended to be carried out is not located within the National System of Protected Areas (this includes the National Natural Parks System and other geographic spaces “whose natural and cultural values are made available to human beings for their preservation, restoration, knowledge and enjoyment”)—the draft decree would require applicants to certify that no “ethnic communities” are present where they plan to operate. If so, applicants must reach an agreement with such communities, to be coordinated by the Interior Ministry, as a means to guarantee that they will not be adversely impacted by cannabis cultivation.
The bill also seeks to further “protect and strengthen” small and medium-sized cultivators, manufacturers, and marketers founded in Colombia—an effort it identifies as the “duty” of the national government. Currently, large-scale manufacturers are obligated to acquire and transform at least ten percent of their allocated cannabis quotas from a small or medium-sized grower each year, as well as to provide them with technical assistance. To ensure that this requirement is met, large manufacturing licensees must be included as recipients of the crop in the cultivation license of at least one small or medium-sized grower. In the event that a small or medium-sized grower is unable to supply the required ten percent, the bill requires that the affiliated large-scale manufacturer supply a sworn statement indicating that such was the case and that the small or medium-sized grower nevertheless received “technological transfer and/or technical assistance.”
Just who qualifies as “small and medium-sized” is not laid out in the bill, which only stipulates that these terms will be defined by the Ministry of Justice and Law, the Ministry of Health and Social Protection, and the Ministry of Agriculture and Rural Development. (Currently, “small and medium-sized” cultivators are defined as individuals whose total plant cultivation area does not exceed 0.5 hectares, or 5,000 square meters.)
Aside from the potential access to the country’s free trade zones, investors have not been too enthusiastic about the draft decree. Of all the suggested modifications, some investors have been especially vocal about their opposition to two other proposed changes: First, if the draft decree becomes law, applicants would be required to identify shareholders who own twenty percent or more of a company in order to obtain a manufacturing or cultivation license. These disclosures, in turn, would have to be signed by a fiscal auditor or accredited public accountant.
And because individuals who have been charged with drug trafficking cannot partake in the cannabis industry, the Colombian government would then have the information necessary to withhold a license from a company that has an investor with a criminal record. Licenses will also be denied to companies whose investors have had a license revoked, so as to prevent those who are deemed bad actors from merely forming new companies to circumvent the law.
In an interview with W Radio, Iván Darío González Ortiz, Viceminister of Public Health, addressed concerns regarding the proposed changes, in addition to the cultivation and manufacturing license application delays and allegations that the Duque Administration is deliberately undermining the industry.
The draft decree, said González Ortiz, contains input from more than 200 industry stakeholders and aims to “close those things that were left weak” in the country’s medical cannabis policy. It is to correct such a weakness, he said, that the administration deemed it necessary to require the disclosure of investors with twenty percent or more stake in a company. According to the Viceminister, the current regulation needs “a little squeeze” to better understand who is behind license applications. There are entities, he said, that “have specialized in asking for those licenses only to turn around and sell them to other people,” and “we had no way of tracking this issue.”
González Ortiz also acknowledged that there have been delays in application processing, but roundly rejected the notion that the administration opposes the medical cannabis industry and is acting to slow it down.
President Duque, González Ortiz stressed, “has said that his government is of three mainstays: legality, entrepreneurship, and equality.” Medical cannabis, he added, “is an entrepreneurial project” with “great potential for Colombia.”
The Viceminister then explained that the manufacturing and cultivation licensing delays are due to an increase in the number of applications. “Up until August of last year,” he said, “we used to receive ten applications per month, and now we’re getting thirty-three.” The last administration, González Ortiz added, issued fifty-five licences in fifteen months, and “we, in eleven months, have issued forty-five.”
Nevertheless, he concluded, the Ministry of Health and Social Protection is looking for ways to resolve the issue. To this end, it is in the process of hiring five more pharmaceutical chemists and five more attorneys. The agency has also considered transferring the responsibility of issuing licenses to the National Institute for Food and Drug Surveillance, which, according to the Viceminister, is better equipped to handle the process.
Earlier this month, Juan Pablo Uribe Restrepo, Minister of Health and Social Protection, confirmed the aforementioned at the first forum hosted by the Colombian Association of Cannabis Industries (Asocolcanna) in Bogotá. He also announced that the United Nations’ International Narcotics Control Board, which monitors the implementation of international drug conventions, expanded the annual quota for Colombia’s internal consumption of medical cannabis from 1.2 to 14 tons.
“This is good news,” said Uribe Restrepo. “We need to continue our efforts to consolidate this industry—with legality, with high quality, with a lot of security—so that we can fully exploit its potential.”
