Going Green: Legal Considerations for Hemp Investors in Ecuador

The reforms introduced to the Ecuadorian Organic Criminal Code (COIP) on December 24, 2019, decriminalized the production of hemp with less than 1% THC content. These reforms opened the door for the development of a new industry in Ecuador which has shown great results worldwide. This post explores important legal considerations for those interested in investing in the hemp industry.

  1. On December 24, 2019, the reforms introduced to the Ecuadorian Organic Criminal Code (COIP) on December 24, 2019, decriminalized the production of hemp. These reforms were published in the Official Registry and will be in force in June 21, 2020.

  2. The reforms allow the possession of drugs that contain the active ingredient of cannabis or derivatives for therapeutic, palliative or medicinal purposes.

  3. Similarly, a provision was included to the Drug Prevention Law that excluded non-psychoactive cannabis or hemp from the prohibited substances. In sum, the cultivation and manufacture of hemp products with less than 1% THC content is now legal.

  4. The COIP allows two different kinds of cannabis: i) hemp and ii) cannabis for industrial use.

  5. Hemp for industrial use is found in plants with less than 1% THC content but will low CBD. The production cost is reasonable ($80/ha) and the cultivation is ideal, particularly in the coast of the country. The common industrial use of the plant is for creating high-strength textile fibers, biofuels, seeds and oils and plastic parts for automobiles, used by brands such as BMW.

  6. In the highlands (sierra) the production cycle of the plants takes longer, but higher CBD content is found. Conversely, in the coast (costa) the production cycle of the plants is shorter than in the highlands, but the CBD content is lower.

  7. In comparison with other regulations, Ecuadorian laws offers advantages as follows:

    • There will be only one single authority (Ministry of Agriculture) allowed to issue the import and export licenses for companies, the seed production authorization, the export of biomass or crude oil.
    • In Ecuador, the export of biomass will be allowed.
    • The cost of the license will be calculated according to the number of hectares, unlike other countries where the costs can exceed USD $30.000.
    • The process for the issuance of a license will be fast.
    • The validity of the license will last longer than in other countries (max. 12 months)

  8. In terms of opportunities:

    • Plantations of materials with low economic rentability might be easily readapted for hemp production.
    • There are local companies with lots of experience in the field (rose plantations and rose plant breeders).
    • 4 annual production cycles. There are many places in the country ideal for the industry.
    • The Institute of Public Administration INIAP has expertise in genetic improvement which is available to small companies.
    • Great business opportunity in an industry that has generated profits in other countries.

  9. Currently, the issuance of the regulation is still pending. Authorities have informed that the regulations will be available as soon as June 2020.

Disclaimer: This document is informative and does not, and is not intended to, constitute legal advice.