The last few months have undoubtedly been significant in terms of cannabis legalisation and regulation in Latin America. Brazil approved its first cannabis product for manufacturing and marketing; Colombia is moving forward with its plan to export cannabis extracts; and Uruguay approved a new Bill to regulate the access of medical cannabis. In times of COVID-19, this unexpected news shows the growing economic interests in the region. However, uncertainty still reigns, raising questions as to whether it is a tangible future or a mere mirage. If you are thinking of making your next big move in Latin America, here is what you need to know about its cannabis market.
In December of 2013, Uruguay became the first country to pass a Bill for cannabis legislation to end drug trafficking. The state body responsible for all cannabis activities, including issuing licenses, regulation of imports activities, production, storage, marketing and distribution of marijuana or its derivatives, is The Institute for the Regulation and Control of Cannabis (IRCCA), who reports directly to The Ministry of Public Health. [I]
Non-psychoactive cannabis cultivation must be authorised by the Ministry of Livestock, Agriculture, and Fisheries and registered in the (IRCCA), and the National Institute of Seeds (INASE) looks into everything related to seed production.
Uruguay considers cannabis plants or its parts that do not contain more than 1% tetrahydrocannabinol (THC) as non-psychoactive, alongside seeds that do not exceed 0.5% THC.
Currently, there are three ways to access cannabis for adult-use:
- Self-cultivation (up to 6 plants per home).
- Cannabis clubs (maximum of 99 plants for 15-45 members)
- Sale in pharmacies (users can buy containers of 5 grams and buy up to 40 grams per month).
It is essential to highlight that only national citizens or residents of Uruguay older than 18 years can access marijuana. Tourists are not permitted to have access to recreational cannabis.
When it comes to medical marijuana, the process hasn’t been smooth; although there are a few products in pharmacies, the prices are beyond patients’ buying power. In December of last year[II], Uruguay’s Senate passed a new Bill for the promotion and access to medical and therapeutic cannabis. The Bill aims to regulate access to cannabis medical products, establish a system of certification and quality control, present guidelines for compound products, and create a program to include cannabis treatments within the National Health System.
In 2015, ANVISA (Brazilian Health Surveillance Agency) removed cannabidiol (CBD) from the list of prohibited substances, recognising its therapeutic effects. In May 2015 [III], the first form of legislation was approved for the importation of cannabidiol-based products. However, patients were only able to import these products through the strict authorisation process of ANVISA, experienced long delays (up to 70+days), and products were highly priced.
On December 3, 2019,[IV] ANVISA approved the guidelines for the manufacturing and import procedures for medicinal cannabis products available on prescription. The new legislation permits the manufacture of products to be marketed in pharmacies directly, speeding up access.
Things to take into account regarding the new legislation:
- The regulation identifies two types of prescriptions, Type A, for compounds with more than 0.2% THC and Type B for less than 0.2% THC.
- Authorised cannabis products can only be oral or nasal. Products developed for sublingual administration are not standardised under the new Bill.
- Full plant imports are not allowed.
- Cannabis cultivation is not approved. However, there is one NGO with permission to cultivate hemp and around 70 judicial authorisations for self-cultivation.
- Cannabis cosmetics such as moisturisers are not considered as medicinal products and are not currently allowed.
- Cannabis is not considered a medicine under the Law: Brazil created a separate category for cannabis products under the newly approved Bill. It is necessary to present a minimum of three years-worth of clinical studies to be considered a drug/medicine. The only registered and accepted medicinal cannabis product is SATIVEX (Mevatyl in Brazil). Mevatyl fulfilled all the relevant clinical studies to be categorised a medicine under Brazilian law.
- ANVISA is one of the most tightly controlled health bodies in Latin America (if not the world). To be considered a registered product in Brazil, every product has to go through the ANVISA strict regulatory process, and will only pass as such after its publication in the Official Gazette of Uniao (DOU).
- The first marketing and manufacture of a Brazilian cannabis product with less than 0.2% THC content, was published in the Official Gazette (DOU) on April 22 of 2020 By ANVISA. [V]
- The first authorised product is from the Brazilian pharmaceutical company Prati-Donaduzzi.
- The import of cannabidiol products allowed under the Bill of 2015 is still in effect.
Colombia enacted its draft Law 1787 on July 6, 2016[VI], to give access to medical cannabis. However, the government saw the benefits beyond simple medical access and created a legal framework for the cultivation, extraction, manufacture of final products, and export of cannabis-based products through Decree 613 of 2017[VII]. Colombia is focused on exporting to large existing markets such as Canada and certain countries in Europe.
Things to take into account:
- Colombia has the most developed legislative framework for regulating cannabis in Latin America.
- Twenty plants are permitted for self-cultivation
- Dried flowers are not allowed for export.
- The bureaucratic and governmental processes can be longer than expected.
- Commercial exports have just started.
- Colombia offers optimal outdoor growing conditions, low labour costs and access to foreign markets.
- Stable year-round temperatures due to lack of seasons
- There are four licenses granted by the government:
- Use of Seeds for Sowing
- Cultivation of Psychoactive Cannabis Plants
- Cultivation of Non-Psychoactive Cannabis Plants
- Manufacture of Cannabis Derivatives
- Psychoactive cannabis (+ 1% THC)
- Non-psychoactive (-1% THC)
What’s New in Cannabis Legislation in Colombia:
With the new Resolution 00315[VIII], The Ministry of Health included medical cannabis in the list of psychotropic narcotic drugs and reinforces the use of cannabis in compounded medicinal preparations. For many, this will mean that the national market could start soon and access for medical patients could be easier.
Many foreign companies have invested in developing the cannabis industry in Colombia, mainly due to the rumours circulated in 2018 that the INCB granted Colombia 40.5 tons of the 91.9 approved worldwide. All eyes were in Colombia with the alleged 44% quota granted, inflating the speculative bubble.
Consequently, many companies went public, mainly on the Toronto Exchange Market, with the promise of excellent results from this potential market, further fuelling the speculation. As a matter of fact, 70% of the investments in the Colombian cannabis market comes from foreign capital, and figures show that between January 2018 and June 2019, the investments of these companies exceeded 600 million dollars. [XIX]
Many thought that by now exportations should have been a fact and that income should have started to be generated. Yet, promises have fallen short in terms of production, capacity and the possibility of export. The expectations set two years ago have shifted, and only a few are currently receiving dividends on investments.
However, the reality is that the industry’s worst enemy is the government itself and regulatory issues play a critical role in how different investments in the sector can be developed. Unfortunately, public entities do not have sufficient capacity for the requested processes, and still, specific guidelines are needed to continue developing the industry. This is making progress somewhat slower than expected.
Mexico’s first legal ruling for cannabis occurred in 2015 for 8-year-old Grace Elizalde who suffers from Lennox-Gastaut syndrome[X]. That same year, COFEPRIS (The Ministry of Health and the Federal Commission for the Protection against Health Risks) authorised four people to cultivate, possess and prepare cannabis for self-consumption for recreational use. But, the decision did not establish mandatory statute for other courts.
With these precedents, it was evident that Mexico’s legislation regarding cannabis had too many loopholes and needed more detailed guidelines regarding the medical and recreational use of cannabis.
In June 2017, a new reform to the General Health Law and Federal Penal Code was passed recognising the therapeutic qualities of THC, and permission of cultivation for medical purposes and scientific research was included.[XI]
On October 30th of 2018, a new regulation was established for cannabis and its derivatives, authorising products with less than 1% of THC and industrial uses for marketing, importation and exportation. Nevertheless, in a contradictory but much welcomed act, the Supreme Court declared the same year that the prohibition of personal cultivation and possession was unconstitutional as it violated the ‘fundamental right to the free development of the personality’. At this point, considerable progress was made, yet legislators needed to come back and present a better comprehensive legal framework. [XII]
Current Mexican Cannabis Law status:
On March 26th of 2019, the new government of AMLO (Andrés Manuel López Obrador) revoked the regulation established on October 30th of 2018[XIII]. In addition, Mexico’s Supreme Court ruled the recreational use of cannabis for adults over 18 years old legal, but not in the presence of a minor or a public place. Up to this date, there is no statute for this law or clear guidelines regarding the recreational and medical use of cannabis. In October 2019 the Mexican Supreme Court forced the Ministry of Health to comply and requested that the Senate present a Bill to enact the policy change. Yet, negotiations are taking longer than expected, and the Senate failed to reach consensus.
After an exceptional extension, The Senate presented a legislation Bill in March 2020.[XIV] Still, it needs to be approved by the full Senate and the lower house before it can be signed by the president AMLO. Due to the current COVID-19 pandemic, lawmaking activities are on hold, the deadline of April 30 got postponed, and another extension was granted. The new deadline is December 15 2020.
Currently, companies that market products mainly from hemp do so under judicial processes in the Mexican courts, which are slow and burdensome but are necessary to help patients who require these treatments. Rulings are done case-by-case.
If legislators comply with the new deadline and the proposed Bill is approved, the proposal will allow[XV]:
- Adult possession and cultivation of marijuana for personal use.
- Cultivation of up to 20 registered plants, yielding up to 480 grams per year.
- Personal possession up to 28 grams
- Possession of up to 200 grams decriminalised.
- A new cannabis decentralised state body responsible for regulating and issuing licenses.
- 12% tax on cannabis sales
- Hemp and CBD will be exempt from regulations applied to THC products. (Even though hemp products were permitted under the previous law, and can be currently imported case-by-case, new exact guidelines for non-psychoactive products haven’t been presented yet).
- Limit foreign investment to 49%.
- Vertical integration won’t be allowed. Businesses could only have one type of licensing.
The cannabis industry in Mexico could generate formal jobs, help the economy and fight against illegal markets. However, due to lack of regulation, Mexico’s place in the Latin American cannabis space remains in limbo.
Latin America promises a bright future due to its development capacity and its low cost of production. Nevertheless, legislation and government play a crucial role in how everything will unfold in the future. Without a doubt, the countries of the region are still navigating to reach the regulatory frameworks that will facilitate entry as main players; however, their fast-paced improvements show that they are ready to enter the game.
A lot of work still remains to be done in terms of quality procedures and compliance with other international parameters, but with their domestic market capacity and high-quality production, they might redefine the new cannabis industry game worldwide. For example, the Colombian government supports the potential of cannabis as a commodity, betting on Colombian cannabis products to become the new Colombian coffee; Brazil, Mexico, Colombia and Uruguay possess free trade agreements adding further benefits to development in the region; and finally, these countries have learned from other countries and are ready to expand the industry, end the stigma surrounding the plant’s illegality, and make the first steps to ending the war on drugs.