Gone to Seed

Colombia’s cultivation companies have until the end of the year to register their seeds. The registration and the characterization process are one of the hidden costs of the Colombian cannabis sector.

By: Mat Youkee

Bogota’s El Dorado airport is no stranger to major drugs busts but there was a different feel to the one that took place on 30 October. Footage from national channel Caracol showed dozens of bags lined up in customs, many of them clearly marked “HEMP.” Half a ton of marijuana and hemp seeds originating from Europe were seized by authorities in Bogota as they waited for their connecting flight to Uruguay. The seeds had not received their sanitary license and a chemical that the police described as potentially dangerous to local agriculture was found in samples.

“This is the first instance of trafficking of marijuana seeds through Colombia,” Ivan Dario Santamaria, head of the port and airport division for the anti-drug police, told the press. The statement is telling for two reasons. Firstly, the clear markings on the bags and their final destination, Uruguay where marijuana cultivation has been legal for years, clearly suggest this is a botched customs form or logistical mistake rather than a new form of “trafficking.”

Santamaria’s statement highlights the disconnect between the legal marijuana industry in Colombia and president Ivan Duque’s tougher anti-drugs policy. More importantly, however, it highlights one of the key challenges facing the country’s verified cultivators in the final months of 2018: getting their paperwork in line for seed registration.

“This is one of the great unseen costs for the Colombian cannabis industry.”

DEADLINE DAY: When the government began the process of legalizing medicinal marijuana in mid 2016, the ministries of justice and health set about developing the licensing and regulatory framework necessary to oversee the industry. However, a third government body – often overlooked by investors – also had to revise its policy: the Colombian Agriculture and Livestock Institute (ICA).

This is the body responsible for sanitation and agro-food safety throughout Colombia as well as the registration and verification of all seeds used for commercial growing in the country. At the time of legalization the government’s intention was that local seeds would from the basis for the local industry and an initial deadline for seed registration was set for the end of 2017. But instead, many of the first mover firms tended to stick to tried and tested strains from North America and Europe for their cultivation. One can assume that a number of pockets bulging with seeds passed through immigration at El Dorado.

In April the government issued a decree extending the registration deadline until 31 December, 2018 and creating the Fuente Semillera (seed source). Made up of seeds registered in Colombia, the Fuente will be destined exclusively to the production of seeds for the cannabis industry. By January 2019, therefore, producers will have to work with that stock of seeds because Colombia only has one bilateral phytosanitary agreement in place, with Bulgaria.

STAY IN CHARACTER: The seed license issued by Colombia’s Ministry of Justice essentially allows holders to trade in seeds as an intermediary. For cultivators of marijuana who wish to produce their own seeds, a seed characterization process must be undertaken. This can be done through an established agronomic evaluator of firms but most firms will take the option of establishing their own evaluator unit. For marijuana the Colombian territory is divided into eleven regions, meaning seeds successfully characterized for one area must repeat the process before they can be introduced to new regions. The process should identify how plants behave over the course of the cultivation cycle in different climates and soils.

This is one of the great unseen costs for the Colombian cannabis industry. One insider with detailed knowledge of the ICA registration process told CCI, “In the last two years there has been a lot of false information spread about the Colombian cannabis industry that led many investors to think they could do what they wanted here. Marijuana is still classified as a narcotic, it’s a highly regulated industry because the government don’t want to see the narcos becoming businessmen.” The main challenge is economic. Registering seeds and undertaking characterization processes are costly and time consuming and some firms may not have factored this into their projections. At present there are just four firms (to CCI’s knowledge) that have embarked on characterization: Medcann, Khiron, PharmaCielo and FMC. On 12 October, Medcann, which has a project in the plains of Meta department, tweeted that it had become the first firm to submit flowers from a characterization crop in Colombia.

TICK TOCK: However, for other firms, many of whom have struggled to access the necessary finance, time is quickly running out. In recent months there have been rumors of another extension to the seed registration deadline. However, that is unlikely to come to pass. The first extension was given due to confusion over the wording of existing regulations. If a second extension were granted to allow firms to gather their financial resources, it would have little legal basis.

As with other cannabis licensing processes, the surge in demand, combined with limited capacity and political change is leading to a bureaucratic bottleneck. “Towards the end of the Santos government there was little movement of files, none of the outgoing guys wanted to push through licenses given the new government’s tone,” one private sector source told CCI. “The new guys have taken over, but they don’t seem to be in any rush to approve projects.”

When the door slams shut, those without registered seeds will be restricted to working with products registered, characterized and developed by their competitors. While overtures have been made to countries including Canada and Israel, the technical and political complexities of negotiating phytosanitary treaties means that easy imports of foreign seeds looks some way off unless significant lobbying efforts can be brought to bear.

During the boom in gold exploration between 2008 and 2014, Colombia’s hitherto small and untroubled geological association, the body responsible for issuing mining titles, found itself overwhelmed by demand. To make matters worse, its best staff were picked up by Canadian firms looking for an inside track on the licensing process, further diminishing bureaucratic capacity. This process has already begun at ICA, an institution which so far has a good reputation with companies.

In 2012 the Colombian mining sector was forced to redesign its institutions and impose an 18 month moratorium on new licenses. Cannabis investors will hope such drastic measures are not required in their sector.