Reputation, revenue at stake as Brazil weighs legalization of cannabis cultivation

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Brazil has fast-tracked a draft law that would legalize the cultivation of medicinal cannabis and industrial hemp, and the stakes are high.

South America’s largest economy leads the world in several commodities markets, and some politicians say its farmers are keen to expand into hemp. Several other Latin American countries – Uruguay and Paraguay in particular – have scrambled ahead on cannabis legislation and exports, and hemp industry players feel Brazil risks losing market share if it doesn’t move forward with hemp cultivation and processing soon.

The project

The endeavor to revise Brazil’s cannabis laws began in 2015 with a proposed law that focused on the commercialization of cannabis-based drugs.

Last month, Deputy Paulo Teixeira submitted a new version of the bill to the head of the lower chamber.

The replacement text expands the so-called legislative project by proposing that the cultivation, processing, research, storage, transportation, production, industrialization, commercialization, import and export of medicinal cannabis and industrial hemp be allowed in Brazil.

Last year, Brazil’s National Sanitary Surveillance Agency (ANVISA) rejected a proposal that would have allowed the large-scale domestic cultivation of medical marijuana but created transitional rules to facilitate the commercialization of cannabis products. Up until that point, individual import authorizations were the only way to access medical cannabis products, including CBD oil.

Over-the-counter CBD food products or supplements are currently illegal on the Brazilian market.

What’s at stake

Brazil has a reputation as a commodites giant with agricultural knowhow – it led the world in soybean, sugar, coffee and beef exports in 2018 – and some say the country risks falling behind if it doesn’t press forward with medicinal cannabis and industrial hemp.

The implications of domestic cannabis cultivation for Brazil’s reputation, however, are arguably secondary to those for the healthcare system and economy.

Brazil’s economy contracted 9.7% in the second quarter, government statistics agency IBGE said earlier this month, and 11.4% compared with the same period last year.

The outlook for annual output this year is equally dismal due to uncertainty on how the the Covid-19 pandemic will progress in the coming months.

But the co-sponsors of the bill have been adamant that main driver for the bill is not the economy, but rather increased access to cannabis for patients who need it.

“The first issue that was raised as being urgent was not the economic one, but the medical one,” Deputy Luciano Ducci told Hemp Industry Daily.

Brazil offers patients three three ways to obtain medical cannabis legally:

  • by purchasing registered products.
  • by purchasing products with “sanitary authorization.”
  • by asking permission to import on an individual basis.

Most cannabis-based medications are currently sold via special authorizations that allow individual patients to import products for personal medical use. The individual imports scheme has given thousands of patients access to cannabis-based therapies since 2014 – more than 8,000 patients were authorized to import in 2019, and nearly 3,000 authorizations were added during the first quarter of 2020 – but import authorization is bureaucratic and the products are expensive, Ducci said.

“Another option today are the already authorized drugs that have very high prices, and they also end up being inaccessible,” Ducci said.

Brazilian pharmaceutical giant Prati-Donaduzzi, which obtained the first sanitary authorization for a THC-free CBD product in April 2020, sells an oral solution that contains 200 milligrams of CBD per milliliter for roughly $450 a bottle of 30 milliliters.

Last week, Brazil’s Health Ministry said the country could decide to add CBD to its list of registered medications by February 2021.

Hélio Angotti Neto, a secretary at the ministry, told reporters that a technical report and public hearing on CBD will come in December, with a vote on CBD’s inclusion on the registered list in early February.

Political landscape

Support for the legalization of cannabis cultivation and production exists across Brazil’s political spectrum, with Teixeira reportedly saying that members of nine political parties support the draft legislation.

“This is the first time I see left- and right-wingers holding hands,” said Carolina Nocetti, a nutraceutical and technical consultant in the cannabis space who has worked with companies representing Charlotte’s Web and Elixinol.

But bill is not without critics. The draft law has been a source of agitation and controversy in one of the most powerful factions in Brazilian politics: the bancada ruralista, or ruralist caucus, which acts in the interest of rural landowners and agribusiness.

The head of Brazil’s agribusiness lobby, the Parliamentary Agricultural Front (FPA), has also said the legalization of cannabis cultivation represented a business opportunity for the country’s farmers.

“If this crop is absolutely profitable for those who produce and absolutely legal and safe, I have no doubt that we will have rural producers wanting to produce both hemp and cannabis for medicines,” Alceu Moreira, FPA president, was quoted by Valor Econômico as saying. “The parliamentary [agricultural] front will not approve any legislation that does not give absolute certainty that the production is specifically for medicinal products.”

But Deputy Osmar Terra criticized the new draft law at an FPA board meeting this month, O Globo reported. After that meeting, the lobby decided not to take a stance on the cannabis draft law.

“There is no consensus within the FPA,” Deputy Hildo Rocha said, according to the O Globo report. “The debate has to mature more.”

Brazilian President Jair Bolsonaro has so far made no public statements about the cannabis cultivation legislation.

“If President Bolsonaro is against it, we would know it,” Nocetti said. “I think this says a lot, that he’s not saying anything.”

The competition

According to Lorenzo Rolim, who heads the Latin American Industrial Hemp Association (LAIHA), Paraguay action on hemp production is nudging Brazil to get going.

Paraguay, he said, “is really focused on large-scale production because they are looking at hemp as the Europeans do – they look at hemp for the potential with grains, seeds and fiber,” Rolim said. “I believe that’s what Brazil noticed and it spurred them to start moving.”

Pablo Moreira, who heads the Paraguay Industrial Hemp Chamber, said he’s seen first-hand the interest that Brazilians have in cultivating hemp.

“Brazilian farmers who own land in Paraguay are eager to work with this new commodity and help with the technology developments necessary to make hemp an important crop in our country,” Moreira said.

Next steps

The latest bill drafters organized a virtual hearing earlier this month.

“The expectation is that the project will move forward and any decisions will be made after debates at the Congress sessions,” Rolim, the LAIHA president, said.

Following a debate and vote in the House of Deputies — which will likely result in changes to the current proposal — the draft law will head to the Senate. If it passes both houses of Congress, the law will then head to Bolsonaro’s desk, where it can be approved or vetoed, either in part or in full.

As the law currently stands, the responsible entites – namely the Ministry of Agriculture and the national health agency ANVISA – have 90 days to develop and implement the necessary regulations.

“I think it’s a complex challenge,” Rolim said. “We’re going from 0 to 100 – we’ve never talked about hemp before.”

Industry perspective

Several U.S. companies—including Isodiol, Charlotte’s Web and Elixinol—export CBD oils to patients in Brazil.

But Tom Siciliano, CEO Americas for Elixinol, said the country’s draft law on cannabis cultivation has spurred the company to prepare for an expansion on the Brazilian market.

“We are spending an enormous amount of time and energy in Latin America,” Siciliano said. “A good portion of our revenue – 5-10% of our revenue on a monthly basis — is coming from South America, and we see an opportunity to expand.”

Elixinol is working right now to increase its marketing efforts in Brazil.

“We see Brazil to be a several-million-dollar opportunity on a year’s basis, without question, for our company,” Siciliano said. “As the regulations start to relax a little bit, we want a piece of that action.”

To read more about hemp and marijuana laws in Brazil and other Latin American nations, click here.

Monica Raymunt can be reached at [email protected]

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