Lawyer, Santiago González has been working in extractive industries for over ten years. He is now leading Denton’s Cárdenas & Cárdenas’ cannabis interdisciplinary practice team, providing legal advisory services for international and local cannabis firms.
CCI: What do you think are the positive aspects of the regulation and what is it still missing?
SG: Compared internationally, the framework issued two years ago is quite comprehensive because it regulates the whole cycle. Obviously, as projects become more developed and more licenses are granted, certain obstacles and loopholes appear that will eventually need further regulation or clarification. Matters, such as seed registration, or exports and imports of seeds and derivatives, were not fully regulated from the beginning.
A lot of people thought you could just buy or rent a piece of land and license it, but it turns out there are more requirements.
CCI: What should be the most important concerns for investors?
SG: Investors should pay attention to land ownership and operation. The Plan of Territorial Classification (POT) places zoning restrictions on land uses which aren’t always clear or easy to understand. A lot of people thought you could just buy or rent a piece of land and license it, but it turns out there are more requirements. For example, when companies start the process of becoming a producer of selected seeds and agronomic evaluations, the ICA – Colombian Agricultural Institute – is going to require soil-use permits.
Environmental permits for the use of natural resources should not be forgotten. Investors will need to show the planning authorities permits for non-renewable natural resources in order to obtain construction licenses to build processing facilities.
CCI: What is the main barrier in exports? Do you think we’ll see dry flower exports in the near future?
SG: This is a sector that only stopped being illegal a few years ago, so there is a steep learning curve. The legislation does allow exports and imports, with restrictions to dry flower and plants, but it’s not that easy. For example, Canada is an attractive market with its recently legalized recreational cannabis and high demand. But if you decide to invest in the hope of exporting to Canada, you will need legal advice.
Colombian regulation is very clear in forbidding dry flower export. This was not an arbitrary decision: the government wants companies to export finished products as this could create added value for the Colombian market.
CCI: What do you think about social licenses in the cannabis industry?
SG: Social licensing is essential. All of the social and environmental considerations that have made extractive projects complicated in the past are also key for the cannabis industry. Community consultations and environmental permits apply to every industry, and investors have to understand they can’t arrive in a territory without taking the community into account.
CCI: Investors are concerned about compliance in this industry. What advice would you give about creating effective compliance protocols?
SG: The fact that this activity has been legalized so recently means there is an increased risk of connections to money laundering or financing terrorism. It is important for anyone in this sector to know who your clients, counterparts and service providers are and have clear systems to prevent criminal activity.
Unfortunately, there is also a risk of corruption, especially when you analyze local projects. So, it is crucial to have compliance officers and policies, as well as an LAFT prevention system.