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Medical Marijuana In Costa Rica: Government To Charge Up to US$2.5 Million For Concession

The bill that would legalize the production of cannabis for medicinal, industrial and food purposes would allow the Government to for a concession to plant, research and develop marijuana products.

The legislative proposal, that began its process in Congress in August 2014, made considerable progress last week in the Legislative Assembly, would restrict the business to 228 concessions for a cost of between US$5,000 and US$2.5 million dollars, depending on the type of activity.

Among the changes included in the substitute text of the original proposal are the elimination of a public institute on cannabis, and control over medical marijuana by the Ministry of Health and an increase in the price of concessions.

Legislator Marvin Atencio, of the Partido Acción Ciudadana (PAC) and main promoter of the bill, explained that part of the intention is to increase the benefits that the State could receive through the sale of concessions and issue of licenses.

The proposal is to allow six types of licesnses: A, B and C; D, E and F, as well as licenses for pharmacies where medicinal cannabis based products can be sold legally.

Concession Type A, the most expensive, at US$2.5 million dollars for each of the maximum of 8 licenses, allows not only cultivating cannabis and hemp, but also the developing of laboratories for plant breeding, reproduction or research, as well as setting up pharmacies and the exportation of cannabis products.

Among the requirements for a Type A concession, are the verification of the criminal records of applicants and their employees; demonstrate technical and financial capacity; presenting an investment plan for infrastructurel and the development schedule of the concession.

Type A concessionaires would have control of 50% the national cannabis production, but like all other concessionaires, they would have to sell the product to the Caja Costarricense de Seguro Social (CCSS) – Costa Rican Social Security Fund – in response to the demand.

Type B and C concessions would allow license holders to set up research laboratories and would only be allowed to sell to the Ministry of Health.

There is a maximum of 13 B licenses, each costing US$150,000 and with control of up to 35% national production, while C licenses would be limited to 21, each at a cost each of US$75,000 and limited to 15% of national production.

Type D, E and F concessions, would only permit the planting and marketing hemp for industrial or food purposes. A total of 34 type D licenses would be allowed, each cost US$30,000; a limit of 55 type E licenses, each at US$15,000; and 89 type F licenses for US$5,000 each.

Type A concessionaries would also have to pay an additional US$50,000 for a pharmacy license of a period of 2 years and renewable for 2 years periods after, only one license is given to a person or legal entity (corporation).

According to Atencion, the initiative has the support of the Partido Liberación Nacional (PLN), Partido Unidad Social Cristiana (PUSC), Movimiento Libertario (ML) and the Accesibilidad Sin Exclusión (PASE).

Although in principle the Frente Amplio (FA) party does not present opposition to the bill, Edgardo Araya, explained the position of his party: “We are not opposed to the use of medical cannabis, we oppose this particular bill in that it would give legal protection to a cartel of eight companies, which are those that could pay the US$2.5 million that each license would cost. Whom will they be setting up business for?

The main objective of the bill (file 19.256), is to regulate planting, cultivation, harvesting, as well as production, processing, storage, distribution, industrialization, marketing, export, transportation, sale, use and cannabis use, whether of the cannabis indica, sativa and ruderalis, or hemp.

The bill would establish measures for control and regulation of cannabis or derivates, and “prohibit giving away or onerous distribution of the seeds, reproduction without authorization, cultivating male cannabis plants for purposes other than seed reproduction, cultivating, using, reproducing or marketing seeds without legal authorization, mixing cannabis and hemp substances or products with synthetic substances, advertising that misleads or uses false information and marketing products without a license.”

Proponents of the initiative say that by endorsing this form of medicinal consumption would help reduce drug consumption, illegal trade, drug trafficking and organized crime.

Taxes On Cannabis

In addition, changes were made in the destination of the taxes that would be charged on cannabis marketed in the country and exported.

The tax on national cannabis would be 7% of the profits of companies and individuals who develop commercial activities related to the concessions and licenses, and distributed as follows:

  • 28% would go to the CCSS for the purchase of equipment, medicines and construction of new infrastructure
  • 12% to the Ministry of Health related to the cannabis law, of which at 20% must be used for training, research, production records and control
  • 20% to the Instituto Costarricense del Deporte y la Recreación (Icoder) – Costa Rica Institute for Sports and Recreation
  • 8% to the Alcoholismo y Farmacodependencia (IAFA) – the Alcoholism and Drug Dependence agency
  • 20% to municipalities where there are licenses and concessions, the revenue to be used for the improvement of local roads
  • 10% for development associations of the localities where there are licenses and concessions
  • 2% to the Instituto Costarricense de Turismo (ICT) – Costa Rican Tourism Institute, to promote health tourism

As to the tax on the export of Costa Rican cannabis products, it would be 3% of the total value of exports made by concessionaires A and would be distributed as follows:

  • 25% for the Disability, Old-Age and Death Pension of the CCSS
  • 25% for Minae (ministry of Enviroment and Energy) to buy land for environmental protection purposes
  • 25% for all education boards in cantons where there are licenses or concessions
  • 25% for the municipalities of the canton where there are licenses or concessions, so that it is invested in the regulatory plan