MEDICAL CANNABIS IN COLOMBIA

JOHANNA KUIPERS

VALENTINA CELIS MORENO

LINA VANESSA PINEDA NOVA

ANA MARIA SALGADO MUÑOZ

FEDERICO PRETELT GARCIA

INTERNATIONAL TRADE

2020-2S

PROFESSOR: ALEJANDRO RONDON PEÑA

UNIVERSIDAD DEL ROSARIO

BUSINESS SCHOOL

BOGOTA D.C.
TABLE OF CONTENTS

1. PRODUCT

1.1 Specific product developed from the medical cannabis plants.

1.2 Transformation process.

1.3 Why we choose that specific product.

1.4 Analysis of the costs that are necessary for the transformation process.

2. MARKET SELECTION

2.1. Country to export medical cannabis from Colombia.

2.2 The chosen country
2.3 Potential clients in the selected market
2.4 Market principal competitors.

3. LOGISTICS

3.1 Preferred transportation mode for the selected market.

3.2 Necessary documents.
3.3 General exporting procedure scheme (steps and time).
3.4 Preferred incoterm.

4. CONCLUSIONS

4.1 Major conclusions that could be highly appreciated for entrepreneurs

involved in the medical cannabis business in Colombia

4.2 General recommendations.

4.3 General information of the interior of the country.
4.4 General references of logistics.

5. REFERENCES
 MEDICAL CANNABIS IN COLOMBIA

Colombia has a relatively advanced regulation, beefed-up security, cheap production costs
and perfect weather conditions with many companies already anticipating growing exports of
medical cannabis beginning this year.

Unlike many countries in the region that only recently approved the clinical use of cannabis
(like Perú), Colombia is further along the track after approving its regulatory framework in
July 2016, which sets rules for the production, distribution, sale and export of seeds as well as
derivative cannabis products.

With the passage of Law 1787, Colombia joined the more than a dozen countries that have
put into practice different types of regulation to explore the advantages of this plant as an
alternative pharmaceutical, Rodrigo Arcila, president of the Colombian Cannabis Association
(Asocolcanna), said. (Delgado, 2020).

1. PRODUCT

1.1 Specific product developed from the medical cannabis plants.

The product that we want to export is not the

final product, ready to be consumed. We want to
become a big wholesale supplier for companies
all over the world. Which are the products? CBD
extract, packaged CBD powder and customized
solutions for different products suitable for
industries such as pharmaceuticals, consumer
products, cosmetics and veterinarians, among
others.
1.2 Transformation process.

Flower, first

To start with the basics, the cannabis flower contains cannabinoids and terpenes that
provide its psychoactive or beneficial health effects. These cannabinoids are found in
the trichomes of the plant, or more well known as the ‘crystals’ on the bud.

These trichomes are then extracted or removed from the flower, to create concentrates
like wax, shatter, distillate and more.

Beginning with the strain, the more complex terpene profile produces higher quality
concentrates. And more flavorful, considering the terpenes are the aromatic carriers in
cannabis plants.

This also includes avoiding any harsh chemicals or pesticides, and completing a full
flush in the last two weeks prior to harvest. Like growing any quality or top-shelf
flower, you’ll also want to start with a nutrient rich or complete soil to ensure the
health of your plant over time. Room Temperature and the addition of Co2, can also
help assist in increasing trichome production for cannabis concentrates. (Trim Daddy,
2017).

Trimming

Whether trimming wet or dry, the key to

maximizing concentrate production, is keeping as
many trichomes intact or left on the leaves or bud
of your plants. Unlike manicuring nugs for
boutique sale, you’ll just be removing any leaves
that don’t have trichomes or crystals present.

Without investing into expensive trimming

machines that can degrade the precious trichomes of the plant for processing. (Trim
Daddy, 2017).
Drying or Freezing

Your processor’s preference, or timeline for transportation, will determine whether

you’ll dry and cure or immediately freeze your flower. Ultimately, you’re again
looking to protect your trichomes from breaking down or decreasing which both
methods do.

To dry and cure cannabis flowers properly for concentrate extraction, you’ll hang
your plants in proper temperatures and humidity, then cure slowly in jars. At first,
you’ll ‘Burp’ the jars or open the lids, to let your flower breathe and for moisture to
escape. (Trim Daddy, 2017).

Extraction matters

Once your flower has made it to processing, the real magic begins. Different
extraction processes, and techniques make the different consistencies of concentrates
you see on the shelves today. The most popular methods are:

● Alcohol or ethanol.
● Co2.
● Butane / Propane.

When these solvents are applied to the flower through the extraction process, it
separates the terpenes and trichomes away from the plant material for clarifying, and
then concentrate production. (Trim Daddy, 2017).

Our products will have a concentration of 14% CBD and 0.4% THC.

1.3 Why we choose that specific product.

Based on our investigation in some countries like Germany it is not legal to export the
flower or seeds, and most of the companies that are already established in the market,
for instance: Cleaver Leaves and Cannap are consumer brands distributing final
products around the world.
We want to follow the success of the company Pideka Ikänik Farms, is a company
that little by little has become known for having enviable growing conditions, very
different from those usually found in a conventional greenhouse.

The company located in Cundinamarca invests around 30 million dollars in its

cultivation and in its laboratory. To enter them, a meticulous sanitation process must
be followed in which bacteria are eliminated from cell phones, clothing and
everything that visitors bring with them (similar to that of pharmaceutical plants).

But not only its aseptic processes are key to the quality of its products, but also the
origin of these. (Diaz, 2020)

Each liter - of a golden hue - has a market value of US $ 30,000, or almost $ 100
million. That is why Pideka built a high security vault in this same location. There
they will keep tens of liters of the precious liquid.

The company has plans to produce about 6,000 liters of this oil per year, which
translates into an export of US $ 180 million. Not to mention that they are finishing
the works for new covered areas destined to grow thousands of more plants.
(EMPRESAS , 2020)

1.4 Analysis of the costs that are necessary for the transformation process.

Table 3.8 details the estimated labour cost of planting, maintenance, harvesting
and trimming for each cultivation method.

Labour costs across the cultivation options were quite similar. This is
predominantly due to trimming costs which account for the majority of labour
costs and are expected to be the same across all three methods.
 For all cultivation regimes, the main labour cost is associated with trimming. Based
on a trimming rate of 42 grams per hour35 and 11 tonnes of dried cannabis flowers
per annum, the total trimming cost was estimated at $5.8 million per annum. The
trimming rate is a key assumption for labour costs. Other sources indicated a
trimming range from 38 grams per hour to 62 grams per hour, and using a high
estimate of 62 grams per hour decreased trimming costs by around 30%. (Department
of Health – Office of Drug Control, 2016)

In addition to trimming, labour costs also include the following assumptions:

- The average wage rate was set at $25 per hour, reflecting a wage higher than a basic
farm wage (Horticulture Award) to reflect a higher skill level required. The impact of
changes in the wage rates is included in Section 5.
- Planting costs are assumed to take 46 hours of labour per hectare.36
- Agricultural workers included 0.8 hours per sqm for greenhouse and 0.5 hours per
sqm for indoor cultivation. Broadacre assumed additional agricultural labour of
around $10,000, or 450 hours per hectare.
- Management costs at 0.1 per sqm, or around $95,000 per annum.
- One days training for each employee costs at one day’s wages (8 hour work day).
- Employee suitability checks of $50 per employee (assume police background check).

The main components of labour costs are detailed below:

 We based this analysis in the Modelling the cost of Medicinal Cannabis made by
Department of Health – Office of Drug Control in 23 September, 2016.

2. MARKET SELECTION

2.1. Country to export medical cannabis from Colombia.

Based on the chosen product, we will now look at which country we will choose to
export medical cannabis from Colombia to. Therefore, we will look at which country
will be the most likely to buy this product.

2.2. The chosen country

In order to pick a country to
export to, we researched
which country is the largest
importer of medical
cannabis. We found that
even though in January
2020, Israel has received its
first-ever import of medical
marijuana, the results show that since July 2020, Israel has already overtaken
Germany’s spot as the largest importer of this product (Pascual, 2020).

Oren Lebovitch, from Israeli Cannabis Magazine, stated that Israel has imported more
than 6,000 kilograms of this product while the latest German numbers show that they
‘only’ imported around 3,000 ton of the product. Furthermore, Germany has 10 times
more habitants than Israel, making these figures extra staggering (New Frontier Data,
2020).

Thus, since Israel buys the most amount of medical cannabis from other countries,
this country will be our focus of the medical cannabis market expansion.

The increase in interest in medical cannabis can be explained due to the scientific
research on the plant, which has shown that it contains compounds which have
beneficial medical effects on different kinds of symptoms and conditions. In the early
1990’s, the country instituted a medical cannabis program in order to treat patients
with pain related issues, concentrating on cancer patients (CannaTech Team, 2016).

At the moment, cannabis is not registered as medicine and it is still considered a

‘narcotic drug’, but more and more governments, such as the Ministry of Health of
Israel, believe that it can be beneficial for treating certain symptoms (Price, 2020). To
be precise, in Israel medicinal cannabis and CBD products are legal, while
recreational cannabis is illegal. CBD products can be purchased as local pharmacies,
under the condition that the pharmacists have had training before they are able to
distribute the plant (Sensi Seeds, 2020).

Furthermore, the State of Israel is actually one of the leading countries in the world
regarding the medical use of cannabis. For example, in 2016, the government
included a definition of ‘cannabis for medical and research purposes’. This resulted in
granted access and supply of the plant while the product can still be defined as
‘narcotic drugs’ (Sensi Seeds, 2020).

Thereby, Israel was actually one of the first countries to experiment on cannabis
plants and to have a worldwide breakthrough. Thus, they have a long history with the
product. This resulted in a relatively more open-minded thought process about this
product among Israelis. Thus, the proactive approach to cannabis that the government
adopted, which is supported by regulation is an interesting aspect of exporting this
product (CannaTech Team, 2016).

Moreover, this means that there is a lot of R&D on this product and combined with
the fact that Israel is only one of the countries where R&D on medical cannabis is
actually allowed, the local company can benefit from spillovers by selling their
product abroad. They can learn about new farming techniques for example. This in
turn can lead to an even more high-quality product (CannaTech Team, 2016).

2.3 Potential clients in the selected market

Based on the data given by the Israeli Medical Cannabis Centre, the average medical
cannabis consumption in this country is around 35 grams, with the most customers
being on the younger side of the curve. Most consumers are between 11 and 40 years
old.

Furthermore, according to a survey in 2017,

27% of the habitants of Israel between the ages
16-65 had consumed the drug in the previous 12
months. This number is one of the highest rates
of marijuana usage in the world (Sensi Seeds,
2020).

In order to gain access to medical

marijuana, a patient is eligible for
the product if they suffer from
Crohn’s disease, chronic pain,
multiple sclerosis, PTDS, certain
types of cancer or/and an infectious
disease such as AIDS. If a patient
has one of these diseases, then
he/she can request that their doctor
will apply for a license on their own behalf. The specialist must submit the request to
one of the current 36 Senior Doctors at the Medical Cannabis Unit ‘deputized’ by the
Israeli Ministry of Health, who will review the application and then approve/deny the
request. If the request is approved, the patient will get medical cannabis from one of
the governments sanctioned cannabis grow operations (CannaTech Team, 2016).

Because of this difficult and time-consuming process, the potential client will be the
government, since they are the only one who can choose who is able to sell marijuana.
Since the regulatory reform of allowing medical marijuana to be sold, it included the
fact that the weed should be of high-quality before it can be sold. However, due to the
insufficient domestic process of the high THC-flower, many of the 60,000 eligible
medical patients could not get their medications. Therefore, Israel chose to open its
doors to imported goods. In order to sell the product, the companies must make sure
that their farms meet the basic Good Agricultural Practices (GAP) standard and the
raw material must meet a cleaning test (New Frontier Data, 2020).

Furthermore, since the local company sells products with CBD in them, it is important
to note that these products can indeed be imported regardless of the GAP standards, as
long as the importer has a dietary supplement approval (New Frontier Data, 2020).

Thereby, the product also contains a small

amount of THC. In 2016, a bill was put
forward which proposed to exclude some
industrial strains of cannabis from the
dangerous drugs list. Since the local
Colombian company sells a product with
only 0.4%, the product is eligible for
selling in Israel. On the right side of this
page, there are some examples of accepted
weed plants in Israel (Sensi Seeds, 2020.

Thus, the local company is able to sell its

product to the government, as long as it
holds these requirements.

2.4 Market principal competitors.

 In order to gain access to the market, the company must hold itself against
competitors. In the figure on the right, the main competitors in the medical marijuana
business in Israel can be found.

The largest competitor is Seach Sarid Ltd, which has been

active in Israel since the beginning of the 200s. This
company holds about 17% of the entire Israeli market. The
reason this company is so large is because it develops
genetics of the marijuana plant so they can be used for
medical indications of the MOH. Moreover, it produces cannabis for patients, extracts
the oils of the plant and produces end products. Therefore, the company is quite
efficient and tries to use everything and not throw anything away. Furthermore, since
Israel is a religious culture, the company also offers kosher cannabis products to its
customers. This company was the first company to get a license and start producing
medical cannabis under the current regulations. That is the reason why it is such a
large corporation (Ministry of Economy and Industry, 2020).

There are many other small competitors, but this is by far the largest competitor.
Therefore, this is the company to most look out for.

A side note is that many medical cannabis producers work together with hospitals and
pharmacies in order to make the best product as they possibly can. This is something
that the local company should keep in mind when exporting to this country; check
with local pharmacies and hospitals if they would like to use the product. This will
happen after the product has been approved by the government of course.

3. LOGISTICS

For the transport of seeds for the planting of cannabis plants, crop harvest or
derivatives of cannabis and non-psychoactive cannabis, the authorities responsible for
monitoring them respectively will require the provision of current and legible
documents, or the information that allows them to corroborate the lawful origin and
destination of these. In addition, through the Directorate of Medicines and Health
Technologies, licenses for the manufacture of cannabis derivatives will be granted by
the Ministry of Health and Social Protection.

The national distribution of this product will be through a medical prescription of

master preparations of cannabis for patients who require it and this masterful
preparation must comply with all applicable standards for this type of pharmaceutical
products. Pharmaceutical and IPS establishments that prepare these preparations must
be certified to comply with good Invima processing practices. For imports of seed for
seed planting, cannabis plants, cannabis derivatives and products containing them,
they will be subject to the pre-licensed import regime through the Single Window of
Foreign Trade that runs that portfolio. By contrast, exports, the rule only allows it to
be processed for scientific purposes before the Ministry of Justice in the case of seed
seeds and cannabis plants, and before the National Narcotics Fund for cannabis, its
derivatives and the products containing them. Countries with export potential for
medicinal cannabis from Colombia are; Canada, Chile, Denmark and Israel. Colombia
could become one of the leading producers of medical cannabis for Latin America.

As for the international marketing logistics this product is shipped in its original form
after flowering, it has to have proper handling in its cold chain once the cut is made
and after this the plant must go through a drying process, for this reason it is
important to take into account the luminosity and temperature of the product to be
shipped. The best means of transport for this product is by air as it is a lightweight and
perishable product that requires a mandatory cold chain. As a trading term it is best to
opt for the Incoterm EXW, where it undertakes to make the goods available to the
customer at the company's premises and the buyer will be in charge of collecting the
goods and taking it to the destination. As for the documents required for the entry of
goods into other countries, depending on the country three commercial invoices are
required, three invoices issued by customs fully diligence and signed by it, and
additional security deposit is required. There are also phytosanitary regulations which
is why they require compliance with this international standard of phytosanitary
protection, because this measure reduces the risk of pest introduction or dispersion.
 For the export of this product the most used material currently are cardboard boxes,
these boxes will be stored and grouped in a larger box, with the care of taking into
account the cooling and passage of air between each and in this way is ready to be
shipped.

4. CONCLUSIONS

4.1 To begin at the time of entering the market it is important to know the products
that can be offered based on medical cannabis plants within which they are CBD
extract, packaged CBD powder and on the other hand starting from the plants like the
cannabis flower with which it is possible to create wax and distillates. Nevertheless to
arrive at the final product it is necessary to pass by all a process of transformation of
the plant. In the beginning it is necessary to know that within the main components
that will offer the benefits of Cannabis are the cannabinoids and terpenes, which
provide their psychoactive or beneficial effects for the health, these are located in the
trichomes of the plant specifically in the bud. Already having clear these concepts it is
necessary to mention that the process of transformation in summary begins with the
cut, which is made either by wetting the plant or in dry of manual form this way the
concentration of the trichome will be maximized so that only the leaves that do not
have trichomes should be eliminated. The next step is the drying or freezing, this
depends on the time of transport in which the flower will be, it can be dried, cured or
frozen in any case the health of the plant must always be taken care of looking for
protecting the trichomes of the same one avoiding that they are diminished or even
that they are broken. Finally we proceed to the extraction of matter through
techniques involving some solvents such as alcohol or ethanol, Co2 or butane /
propane. When applied to the flower, terpenes and trichomes are separated from xthe
plant material for clarification, and then the production of concentrates. (Trim Daddy,
2017).
Related to the previous thing it is fundamental for the correct direction of an
enterprise dedicated to the medicinal Cannabis to make an analysis of the necessary
costs for the transformation process within which are the manual labor for the
plantation, the maintenance, the harvest and the cut of each culture method. In
addition, the work hours of the labor force and the amount of material to be used in a
given time must be included and estimated.

On the other hand, it is indispensable to understand the market that you are going to
face, starting with the objective segment to which you are going to sell the product.
The focus would be to export to countries that frequently import medical cannabis and
that are interested in acquiring it from Colombia, a region that stands out for its rich
soil in nutrients and completeness that ensure the cultivation and transformation of the
plant.
Within these countries Germany and Israel are leading the list with more than 6,000
kilograms of this product, double that of Germany. In addition, medical cannabis and
CBD products are legal as long as they are used for medical use and research. It is
important to emphasize that the Ministry of Health of Israel, affirmed that these two
can be beneficial for the treatment of certain symptoms of some pathologies (Price,
2020).
This would establish Israel as the desired segment for market incursion and
expansion. Another advantage offered by the Arab country is that CBD items are
marketed in can be purchased in local pharmacies and the plant supply under some
restrictions. Nevertheless the population already handles an open thought in front of
the subject and in general the Israelis already are very familiarized with all this
industry and the government several years ago have begun to make different studies
and investigations that go in favor of the development of the medical cannabis.
Besides it is advisable to enter to study, to understand and to analyze the potential
clients in the market selected on this occasion would be the government of this
country since the direct consumers do not have the permission to decide if it is
consumed or not starting off from the diseases that it has this decision made in first
instance the sector of the health reviews if the disease that suffers is within which it
could be treated with the cannabis later the specialist doctor analyzes the situation and
in third instance the Ministry of Health comes that examines the situation and has the
final verdict to approve or not the license to the patient who requests the consumption
of the plant. This way the potential client is the government since it is the agent that
has the power to handle, to administer and to offer to the consumers the cannabis. So
always a previous investigation must be made to verify who will be the individual
with the power of decision with respect to the purchase.
Additionally, it is necessary to have clear and studied the competitors who already are
operating within the industry, in this case in Israel. By now the greater competitor is
Seach Sarid Ltd has around 17% of all the Israeli market its differential factor is that
the company develops the genetics of the plant so that they can be used for the
medical indications of the Ministry of Health distributes other articles like oils which
are extracted from the cannabis. There are more competitors but they do not have the
same magnitude as this company however it is valuable to pay attention to all of them
especially the one that is leading in order to be aware of all those who are part of the
universal business.

4.3 In the interior of Colombia there are internal wars against the legalization of
medical marijuana, which projects us that the country is very indecisive in the face of
the legality of the drug, which places investors who want to invest in a possible export
in trouble. of marijuana, since they cannot be crops or companies outside the legality.
However, Colombia has advanced bills for the commercial export of medical
marijuana, in 2016 Law 1787 was approved on the medical and scientific use of
cannabis, the market for medical marijuana is growing and it is estimated that by the
end of 2025 the market global legal marijuana will reach 66.3 billion dollars.
Colombia has been a reflection of this increase between 2017 and 2018, licenses
issued by the ministry increased by 395%, from 45 in 2017 to 223 in 2018. Colombia
is a producing country but under illegality, it has perfect climates for crops . In
Colombia there are already foreign companies that want to enter the market to
commercialize medicinal cannabis, PharmaCielo, a Canadian company, has the
production permit in more than 12 hectares. Colombia has great knowledge in crops,
we are the second world exporter of flowers, it provides extensive knowledge in
cannabis crops. The Colombian government supports and supports the consolidation
of the legal cannabis business, they seek greater agility in procedures and permits to
be able to have a solid demand from the market.
 4.4 At the moment there is not the capacity for the production and commercialization
of cannabis, however it is very important to have all the necessary papers for its
distribution, both in the ministry and for the authorities, a cold storage chain is needed
for its export a Once the grass is cut, you must have a place with good light for drying
the product. Cannabis as a seed or plant is quite delicate since the product is
perishable, it is recommended to transport it by plane since it does not occupy much
volume and weight. Once the product arrives it must have all the papers required by
customs, international standards must be in order, it is recommended to use cardboard
boxes as they help to maintain a cold temperature and the passage of air.

5. REFERENCES

CannaTech Team. (2016, July 17). CannaTech Team. Canna Tech. https://www.canna-
tech.co/canna-questionsfaqs/faq-cannabis-questions-is-cannabis-legal-in-israel/

Delgado, D. (13 de Febrero de 2020). CANNABIS BUSINESS TIMES. Obtenido de Medical

Cannabis Exports in Colombia Promise Massive Market Potential:
https://www.cannabisbusinesstimes.com/article/colombia-medical-cannabis-eixports-
rising/

Trim Daddy. (7 de Octubre de 2017). Trim Daddy. Obtenido de Concentrate processing

101...From Flower to Oil: https://www.trim-daddy.com/blogs/news/concentrate-
processing-101-from-flower-to-oil

Diaz, L. (31 de Enero de 2020). ¿Aceite cannábico de oro?: 30.000 dólares por litro.
Obtenido de NACIÓN CANNABIS: https://nacioncannabis.com/aceite-cannabico-de-
oro-30-000-dolares-por-litro/

EMPRESAS . (23 de Enero de 2020). Conozca la empresa que hace un aceite de cannabis de
$100 millones el litro. Obtenido de Dinero:
https://www.dinero.com/empresas/articulo/cannabis-cual-es-la-empresa-que-promete-
un-aceite-que-vale-oro/281013

Department of Health – Office of Drug Control. (2016). Modelling the cost of Medicinal
Cannabis. Deloitte Access Economics.

Ministry of Economy and Industry. (2020). Israel’s Medical Cannabis Innovation. Invest in
Israel, 1, 43–48. https://investinisrael.gov.il/Documents/RoundTable/medical-
cannabis-doc250919.pdf
New Frontier Data. (2020, July 20). Israels Approach to Importing Cannabis Stirs Growth
Uncertainty. https://newfrontierdata.com/cannabis-insights/israels-approach-to-
importing-cannabis-stirs-growth-uncertainty/

Pascual, A. (2020, July 10). Israel passes Germany as world’s largest importer of medical
cannabis flower. Marijuana Business Daily. https://mjbizdaily.com/israel-passes-
germany-as-worlds-largest-importer-of-medical-cannabis-flower/

Price, S. (2020, July 13). Medical cannabis research and policy in Israel. Health Europa.
https://www.healtheuropa.eu/medical-cannabis-research-and-policy-in-israel/101441/

Sensi Seeds. (2020, May 28). Cannabis in Israel – Laws, Uses, Politics, and More Info.
https://sensiseeds.com/en/blog/countries/cannabis-in-israel-laws-use-history/