Interest in The Colombian Cannabis Sector is growing daily and with no surprise. Those already operating in the sector have experienced commercial success and newcomers are looking to get involved and stake their claim in the market. With markets in North American opening up to cannabis, both legally and recreationally, the business opportunities for both local and foreign cannabis producers in Colombia continue to grow.
Additionally, other countries in the region are moving toward the legalization of Cannabis, one example of this is Mexico.
Given the amount of commercial interest in the sector and with the support of our legal team who manage our local and foreign Cannabis clients, Biz Latin Hub has put together an extensive technical piece, which examines the process to obtain the licenses required to operate in the sector.
Introduction to the Colombian Cannabis Sector
Where the use & legalization of drugs is concerned, the last half-century has seen the world go through some rather interesting cycles, to say the least. The period from the 60s to the 80s alone brought about radical changes worldwide with respect to drugs, clamping down on a wide range of drugs being used for recreational purposes. Although today’s continuously changing, progressive society seems to have a more open mind towards some drugs – both recreational and not. Take Cannabis for example; over half of adult Americans have tried it in their lives and over 50 million are regular users today. For the most part, this is recreational use and (depending on the amount) is virtually decriminalized in 9 states in the US (and Washington D.C.) as well as Uruguay, Amsterdam, Colombia and several other regions of the world.
Putting the still problematic topic of recreational use to one side, though, Medicinal Cannabis – proven on several fronts to excel in tackling chronic pain and diseases – has become a commodity of particular international interest. Taking brave strides against much of the world’s hesitancy, Colombia is putting itself in position to be a leader in the world export market; Colombian willingness to take advantage of the changes in legislation elsewhere combined with the apparent comparative advantage in production is helping the nation reach this substantial goal, and fast. With the former president signing the bill to give willing cultivators the go-ahead, Colombia is set to produce 44% of global medicinal marijuana in 2018. Considering that the Medicinal Cannabis industry is now worth around USD$31billion, that the industry is only at the infancy of its globalization and that struggling oil prices have lowered export revenues in recent times, this is a very significant position for Colombia to hold.
See below some interesting facts about the Medical Cannabis Sector in Colombia:
- Colombia is expected to provide 44% of the global demand for medical cannabis in 2018.
- Colombia is planning to produce 40.5 tons of cannabis per year, starting in 2019.
- Colombia offers local producers (4) types of licenses for the cultivation marijuana plants.
- Colombia’s climate makes it a desirable location to cultivate cannabis.
Becoming a Cannabis Producer/Exporter in Colombia
Given the large share of the international export market that Colombia enjoys, investment is very quickly flooding into the market. Despite the slight adjustments to the law allowing for legal cultivation, Colombia still maintains strict laws on the illegal production of Marijuana – attention to the law is crucial. Since signing the legislation in 2017, there have been refinements to the law that take into account safety and quality rules. Additionally, the Colombian government has established four types of licenses to be issued along with technical documentation. It is important to note that cannabis can only be cultivated for products to be sold in the form of oils and creams, and not the flower, which is part of the cannabis plant normally used for smoking.
The Process to Operate in the Colombian Cannabis Sector
See below a short summary of the general process to operate in this field:
- Determine the location where the project will be established: During the process of securing the licenses, the ownership or legal access to land will need to be proven.
- Define the product subject to licensing: Non-psychoactive cannabis and/or psychoactive cannabis plants.
- Elaboration of the required technical documents: A cultivation plan, exportation plan, and a security plan will need to be presented depending on the licenses you wish to apply for.
- Presentation of the required documentation before the competent authority: Ministerio de Salud or Ministerio de Justicia
- Approval of licenses by the competent authority.
- Commencement of operations in the sector.
Please note that when operating in this sector, operations can be conducted through either a legal or natural person (i.e a company or an individual). An individual can obtain the licenses or a company can obtain the licenses. Most foreign investors incorporate a local Colombian entity for their operations, normally a Colombian simplified shares company (‘SAS’).
All persons (whether natural or legal) who wish to undertake operations in this sector must have access to land in Colombia; either owned or rented. Additionally, it is important to keep in mind the ideal temperature for growing Cannabis is between 12 and 28 degrees celsius.
3 Steps to Begin Operations in the Colombian Cannabis Sector
Step 1: Incorporate Local Company
The first step of establishing a Colombian Medical Marijuana business involves establishing a local legal entity (if you plan to obtain the licenses through a legal entity as opposed to an individual) – the most common and best type of legal structure for this sector in Colombia is a Simplified Stock Corporation (SAS). The company incorporation process is as follows:
- Prepare articles of incorporation
- Register the company with the local authorities
- Obtain the company tax ID
- Open the company bank account
- Nationalization of initial company capital
Step 2: Legal Compliance
All legal entities in Colombia must meet some minimum statutory requirements:
- Appoint a company legal representative (who must be a Colombian national or be a foreigner residing in Colombia).
- Register a legal/fiscal address (in Colombia).
- File monthly and annual tax declarations with the national tax authority (‘DIAN’).
Step 3: Secure Cannabis Permits/Licences
Your business plan and objectives will determine which of the licenses you need to apply for.
Colombia Cannabis Licencing
There are (3) uses of medicinal cannabis in Colombia, which are as follows:
- National Use – For commercial use nationally.
- Use of Scientific Research – For scientific research and investigation.
- Exportation – Should the product be exported abroad.
In Colombia, there are four (4) licenses associated with the Cannabis sector, which are detailed below:
License 1: Licencia de fabricación de derivados de cannabis (Ministerio de Salud)
This license is required to manufacture cannabis derivatives.
License 2: Licencia de uso de semillas para siembra (Ministerio de Justicia)
This license is required to have cannabis seeds.
License 3: Licencia de cultivo de plantas de cannabis psicoactivo (Ministerio de Justicia)
This license is required to cultivate psychoactive plants and includes the following:
- Seed production for sowing
- Grain production
- Manufacture of derivatives (you must previously have a manufacturing license for derivatives or proof that is in the process)
- Scientific purposes
License 4: Licencia de cultivo de plantas de cannabis no psicoactivo (Ministerio de Justicia)
This license is required to cultivate non-psychoactive plants and includes the following:
- Seed production for sowing
- Manufacture of derivative
- Industrial purposes
- Scientific purposes
The process to secure these permits, including the requires plans, is between 6 to 8 months once all documentation has been submitted to the respective authority, and the licenses can be obtained simultaneously.
Compulsory Technical Plans
As mentioned previously, and as part of the licensing applications, there are (3) compulsory technical plans needed to be submitted in order to complete the licensing process. The licenses cannot be secured (depending on which licenses you apply for) without the submission of the following plans:
- Security plan – this plan will detail how you plan to secure your production.
- Cultivation plan – this plan will detail the project investment and will include information on the production and project infrastructure.
- Exploration plan – this is required if you plan to export the product. It is important to note, that if you plan to export the product, you will need to have a ‘carta de intencion‘, which is a letter of intent from a buyer abroad expressing their desire to purchase the product. If you wish to export a product that will be for human consumption, you will also need to register with INIVMA – Instituto Nacional de Vigilancia de Medicamentos y Alimentos.
A local legal team with ample experience in this sector will be able to assist with preparing the following plans; which will be submitted to the respective authority on the application for the respective cannabis licenses.
Please note there are additional government fees. These fees vary depending on the specific use of the cannabis product. For more information on this, please see the following link, which contains the official government fees – http://tramites.minsalud.gov.co/tramitesservicios/cannabis/Default.aspx
Being home to such a plentiful, temperate climate truly makes Colombia one of the most perfect places for agricultural business in this world. The opportunities in the global market are already abundant and will grow to be even more so through time as the social attitudes towards Medicinal Marijuana become even more favorable.
Without a doubt, the scope of the Medicinal Cannabis sector in Colombia is grand and awaiting potential entrants. Entering this type of market holds huge gains for those who do so correctly but entering in this way relies on effective knowledge of local laws and a sound formation strategy. The process of setting-up isn’t always the easiest to understand and implement in Colombia, so it’s advisable to receive assistance from a local law firm with a good understanding of the local legislation.
If you have any questions or inquiries about how to build a business in the medical marijuana industry, please don’t hesitate to contact our Co-Founder and CEO, Craig at [email protected] for personalized support.
For more on why Colombia is a great place for more than just your cannabis investment, please watch our video below!