Monica Sanchez Garita is a Costa Rican attorney who joined S Burns Legal PLLC after receiving her Masters of Law (LL.M) from University of St. Thomas School of Law in 2022.
Her current practice focuses on transactional business and cannabis law. Before coming to the US, she practiced corporate and insurance law in Costa Rica.
Monica is Vice-Chair of the Food, Agriculture & Cannabis Committee of the American Bar Association International Law Section and a Member of the Steering Committee for the Latin America and Caribbean Committee
After several months of discussion between the legislative and executive powers, partial vetoes by the president, and expressions of public opinion, on March 2, 2022, the government of Costa Rica approved Law N. 10113, which (1) allowed use of cannabis and its derivates for medical and therapeutical purposes and (2) authorized the production, industrialization, and commercialization of hemp and its derivates for industrial and alimentary use. The law seeks to promote the economic and social development of Costa Rica, particularly in rural areas, by encouraging companies and individuals to produce, industrialize, and market hemp and medicinal cannabis. This law is the entry point for pending regulations in the country that will dictate the future of this new industry in Costa Rica.
To understand some of the incentives Costa Rica has in place to attract investors, farmers, manufacturers, and businesses in general, it is necessary to first explain how the country differentiates hemp or “non-psychoactive cannabis,” as the law call it, from medical marijuana, or “psychoactive cannabis.” The concept in differentiation is essentially the same as in the United States, in that it is the same plant, i.e., cannabis, but the percentage of tetrahydrocannabinol (THC) content is the differentiating factor. In Costa Rica, if the cannabis plant and any part of it (including seeds, derivates and extracts) contains 1% or less of THC (which the law explicitly includes Delta 9, Delta 8, and Delta 10) on a dry weight basis, it is hemp. If it contains more than 1%, it is what is commonly known as “marijuana.”
This number is higher than in the United States and other jurisdictions. In the U.S, for example, the 2018 Farm Bill removed hemp from the definition of marijuana in the Controlled Substances Act (CSA) and defined it as the plant Cannabis sativa L. and any part of that plant with a delta-9 THC concentration of not more than 0.3 percent on a dry weight basis. What this means is that businesses in Costa Rica have more flexibility to produce and use the plant in a broader way, as well as clarity on the types of cannabinoids that are included.
The remaining piece, before Costa Rica is fully open for cannabis business, however, is the issuance of regulations by the executive power to specify matters such as any permits or licenses that might be required, requirements for use in food and beverages, marketing and labeling, and mechanisms for enforcement of these laws. These regulations are expected to be issued before the end of 2022 and will help inform business owners decisions about investing in the Costa Rican cannabis market.
A particularly attractive feature of Costa Rican investment is their free zone regimes, provided to incentivize businesses to invest in a specific area if they meet qualifications. The most important benefit is the ability to import containers, inputs, or raw materials for production without paying taxes. A company operating under a free zone regime in Costa Rica, is exempt from sales and consumption tax on the purchase of local goods and services and from paying income tax, depending on the category of the business and its geographical location.
With respect to use of the free zone regime for cannabis, according to Giancarlo Andreoli, a cannabis lawyer from the law firm BLP, in San Jose, Costa Rica, the use of the free zone regime was initially prohibited for the cultivation and production of cannabis. Mr. Andreoli further explained, “The Bill was modified, prior to being approved by Congress, to include the possibility of using the free zone regime. Therefore, this incentive is expected to be used by big producers to take advantage of the benefits that the law establishes, which could be a significant opportunity for our country in comparison to other Latin American countries that allow the production of cannabis because costs and taxes would be potentially lower in Costa Rica”
These incentives open a broad world of possibilities for cannabis and hemp companies that want to invest in Costa Rica in accordance with the new law and coming regulations. Andreoli stated that his firm has been contacted “by several big players in the Cannabis arena” who are eager to start operations and hope for licensing, permitting, and banking flexibility, while smaller businesses look toward a regulatory regime that levels the playing field and allows them to compete with bigger companies.
Even though the landscape remains undefined, the potential for cannabis businesses in Costa Rica is huge. We, along with other foreign investors, look forward to continuing to work with our clients when the regulations are promulgated to fruitful opportunities for both the clients and many families and businesses in the country as well as the LatAm region.