Argentina Debates Controversial Cannabis Regulation: Industry Kept in Limbo

After a delay of more than 9 months since the legal deadline for regulating Law 27,669 (Regulatory Framework for the Development of the Medicinal Cannabis and Industrial Hemp Industry), the government in Argentina failed to achieve the internal coordination necessary to boost the sector.

We had been waiting a long time for the regulation that would make the Argentine cannabis sector operational and productive. Finally, on Monday, August 7, Decree 405/23 was published in the Official Bulletin with the regulation of Law 27,669 on the Regulatory Framework for Industrial Hemp and Medicinal Cannabis.

To the surprise of those who operate, or try to, in any link of the production chain of the cannabis sector in Argentina and who expected dynamic tools for the development of their activities, the most crucial points have not yet been addressed and they will continue to wait for the determination of internal administrative processes, both from the new regulatory agency (ARICCAME), and from the rest of the intervening agencies according to their specific competencies.

Argentina Draws Distinction Between Psychoactive Cannabis and Hemp

Perhaps the most notable point of the regulation is found in its Article 2, which distinguishes between “Psychoactive Cannabis” and “Hemp”, where it is established that the classification between the two is based on the percentage of tetrahydrocannabinol (THC), stipulating that varieties or products containing more than 1% THC will be considered psychoactive cannabis and those with up to a maximum of 1% of this molecule will be considered hemp.

This distinction was adopted by Uruguay, Switzerland, and the Czech Republic, setting 1% as the tolerance value for THC in hemp products. Although from a productive point of view this percentage is a good choice since the yield of the production of derived products, particularly for CBD extraction, is much more efficient, it should be taken into account that the main markets in the world, the United States, the European Union, as well as Colombia and many other countries have defined hemp as the varieties whose traces of THC do not exceed 0.3%.

Consequently, it should be noted that hemp products produced in Argentina with a 1% THC tolerance will enjoy this classification only in markets that have the same regulatory distinction, such as Uruguay and Switzerland. However, they will be considered psychoactive cannabis products in the United States or the European Union, for example. Thus, those who want to export their hemp products to these markets will have to comply with the regulations of the destination markets concerning the products or dried flowers in question.

Licensing and Authorization Classifications in Agentina

Another positive aspect highlighted is the incorporation, in a declarative manner and not limitedly, of a list of the different sectors covered by the cannabis and hemp regulation, with the novelty of its inclusion in veterinary use, nutrition, plant health, and fertility, in addition to those already mentioned in the law and complementary provisions on human medicinal use, cosmetics, and plant products for medicinal use.

Lastly, we can also highlight the positive classification and distinction of licenses and authorizations, although it only lists the classifications without providing further details on how to obtain them. Here we can see that Article 12 distinguishes between “licenses” for everything related to cannabis and an “authorization” system for everything included concerning hemp in Agentina.

Regarding Cannabis Licenses, There Are 6 Categories in Argentina:

1. Breeding, multiplication, and cultivation license.
2. Logistics services license.
3. Derivative production license.
4. A) Seed, seedling, and cutting sales license and B) Cannabis and its derivatives sales license.
5. Studies and analytical tests license.
6. Foreign Trade License.

In the Hemp Category, 4 Types of Authorizations Stand Out:

1. Authorization for the cultivation and sale of Hemp seeds or Hemp Plants, in whole or in part, for industrial and/or horticultural use.
2. Authorization for the processing of Industrial and/or horticultural Hemp and for the production of its derivatives.
3. Authorization for logistics services, transportation, distribution, storage, preservation, packaging, final disposal, and other logistics services that make up the production chain of Industrial and/or horticultural Hemp.
4. Authorization for foreign trade of seeds and plants of Industrial and/or horticultural Hemp, in whole or in part, their derivatives, and/or biomass.

Controversies in Regulation for Argentina

One of the recommendations for the productive development of hemp provided by the latest report from the United Nations Conference on Trade and Development (UNCTAD), as well as a widespread demand by business chambers from the most developed countries in the field, is the establishment of a single federal window system that allows efficient coordination of the intervening government agencies and agencies for the development of the sector.

Although the regulation highlights the creation of a single window for harmonizing license and authorization application procedures, from analyzing the regulatory text, a greater degree of complexity is evident in administrative acts. They have not managed to reduce the system of interventions by agencies with specific competencies, avoiding these in a clear and concise way, granting these oversight competencies inherent to their function in favor of a specific regulatory agency as attempted with ARICCAME (the Regulatory Agency for the Hemp and Medicinal Cannabis Industry in Argentina).

In practice, nothing is simplified because nobody gave up their opinion, intervention, or right to collect fees. Instead, a bureaucratic apparatus was added to the already existing one. The “front desk” was centralized for communication with the State concerning cannabis or hemp.

Complexities in Agency Involvement and Cost Implications

Therefore, while ARICCAME will serve as a coordination area for the various agencies involved in licenses and authorizations for Argentina, each agency retains the power to apply its regulations and internal regulations. So, if there is any inaction by some of the agencies, it is not clear whether the administrative recourse should be made before ARICCAME or before the defaulting agency, for example.

Similarly, there is a double imposition of costs and controls by public entities since the various intervening agencies (Anamt, Senasa, INASE, INTA, INTI, AFIP, ANLAP, BCRA, CNV, SSN, IGJ, UIF, etc.) according to Article 13 and Article 6 reserve for themselves the control and monitoring competencies of the authorizations and licenses granted. In addition, they provide ARICCAME with the same oversight competencies they already have. So, license and authorization holders in Argentina will have to answer to the audit and inspection of any or all of them.

Regarding costs, paragraph 3 of article 6 specifies that the perceptions established based on the granting of licenses and authorizations, penalties, and fines, or fees and audits will be collected by ARICCAME, “without prejudice to the fees” that correspond to each intervening agency.

Operator Responsibilities and Barriers in Argentina

In Article 14, regarding the obligations of license and/or authorization holders in Argentina, although the complexity of the sector requires maximum effort in terms of financial organization, the responsibilities of the sector’s participants are extensive and demanding. They require, among other things, a minimum monthly turnover, an excessive number of employees, minimum amounts of working capital, liquidity, solvency, fixed assets, and minimum insurance policies, among others. This makes the entrance barrier very high for those who want to operate in the sector, going against the need for massive investment and participation in the market to activate a sustainable and solid production chain.

Thus, the regulatory framework for Argentina is bureaucratic, strict and does not simplify or streamline the process for entrepreneurs, professionals, researchers, and workers interested in developing this field. It represents an excessive burden on operators, especially the obligation to comply with double controls, fees, and perceptions, both by the new cannabis agency and by the various intervening agencies.

Possible Solutions and Recommendations

In order to overcome the obstacles presented by the regulation in Argentina, it would be beneficial for the Argentine government to reconsider its approach. The sector requires:

• Streamlined and simplified licensing procedures without compromising safety and quality.
• A unified authority for Argentina that can expedite processes rather than multiple agencies with overlapping responsibilities.
• Incentives for investments, especially for small and medium-sized businesses, which can drive innovation and job creation in the sector.
• International coordination and harmonization of standards, especially with the major markets like the United States and the European Union, to ensure export opportunities.
• A shift in perspective from strict control to collaboration with the sector, understanding the potential economic and health benefits that cannabis and hemp can offer.

Conclusion

Cannabis regulation in Argentina represents a significant step towards recognizing the potential of the industry. However, the complexity of the framework and the multiple hurdles placed before operators make it challenging for the sector to thrive.

There’s a fine line between ensuring control and stifling innovation and development. For Argentina to truly harness the potential of the cannabis industry, both for economic growth and health benefits, there needs to be a balance between regulation and facilitation. Only time will tell if this balance can be struck and if the country can navigate the intricate world of cannabis regulation successfully.

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(Featured image courtesy of Angelica Reyes via Unsplash)

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First published in El Economista, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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