Central America’s Emerging Medical Cannabis Markets: Costa Rica and Panama

By Esteban Rossi I., Ph.D., Analyst, New Frontier Data 

Over the past three years, several Central American communities and governments have strived to push for cannabis reform. Policy changes were enacted in Costa Rica and Panama, and spurred public discussion in neighbouring countries. New policy advances indicate that institutions and entrepreneurs learned from the experience of pioneer countries, and are focused on developing their own domestic markets.

Costa Rica

With a population about 1/42 of Brazil’s, but with a robust economy, solid institutions, and increasing draws of immigrants, Costa Rica plays a leadership role in Central America. In February — after more than three years of sound political discussions led by representative Zoila Volio, supported by thorough technical review — the government of President Carlos Alvarado Quesada (2018-2022) approved its law to regulate medical cannabis and hemp (Law 21.388).

It established the foundations for medicinal access, scientific research, and state monitoring. The ministries of agriculture and health will supervise licencing procedures, while the public insurance system (i.e., Caja Costaricense de Seguro Social) will monitor basic research, manufacture products, and authorize policy. In addition, the law sets strict but sensible control mechanisms and tax collection, while leaving little room for speculation and monopoly creation.

Surprisingly, the president’s office vetoed the provisions for personal use and home cultivation, arguing that the law sought only to improve health and foster economic growth. Somehow, the Costa Rican government failed to recognize the rights of users and the interesting markets that spun from seed commercialization, cultivation supplies, and ancillary services. Arguably, the exclusión of home cultivation was an oversight, but Costa Rica remains a conservative country, and the legislative period was ending. Publication of technical guidelines, including licensing procedures and monitoring mechanisms, is due from the new government (President Rodrigo Chavez took office on May 8).

Panama

Following a similarly delayed but less organized discussion process, the Panamanian assembly unanimously approved its cannabis bill in late 2021 (Law 242/Oct. 13, 2021). It focuses on medicinal uses, and establishes a licensing system with control mechanisms distributed through various government agencies. The law forbids the marketing, distribution, and delivery of cannabis products. Companies applying for a license must demonstrate technical and financial capabilities, and pay hefty licence fees (e.g., between $10,000 and $20,000 USD). Interestingly, though the Jamaican model proved successful, business opportunities associated with cannabis tourism were not included in policy discussions.

Unfortunately, Law 242 included a few problematic articles causing concern among investors and raising alarms among NGOs. Article 21 caps the number of licenses, while Article 24 imposes restrictions to the importation of medical products — but the government failed to define the technical or commercial criteria to justify the provisions. For some commentators and local industry leaders, those articles could easily become unfair advantages for the first licensees, and could spur the onset of a small monopoly.

In response, local associations and business leaders called for increased transparency and participation in the ongoing development of the technical guidelines. Similarly, commentators in the Panamanian press asked the ministry of health (Minsa) to conduct an open process to ensure that business groups, patient associations, and the public can share views to build an inclusive industry. The most pressing questions for regulators include how  to award government licenses, what forms of consumptions will be allowed, and how high-THC products will be monitored.

New Markets

Despite growing public interest in cannabis reforms, Central American countries have made little progress towards new legislation. In recent years the region struggled with domestic security issues, and an influx of undocumented immigrants. The political context further complicates discussions around policy reform. Central American countries also expect the U.S. to make small but much-needed changes in federal cannabis policy before attempting to regulate their domestic markets.

In Nicaragua, opinion leaders close to the Ortega government showed support for cannabis reform and invited public discussion. In Honduras, former Vice-President Salvador Nasralla proposed regulating cannabis cultivation to create economic opportunities for farmers, but the proposal has not led to action by the executive branch. Lastly, officials from Salvador and Guatemala supported excluding cannabis from the UN-controlled substances list, and supported updating the international policy regime, but domestic policies have remain unchanged.

In sum, cannabis reform has just begun in Central America, and it is likely that medicinal products manufactured in Colombia, Uruguay, and the U.S. will find their ways to the small markets. While legislation and policy move slowly, there remain clear signs of institutional learning, well-informed public discussions, and growing support across the ideological spectrum, even in traditionally conservative societies.

Lastly, as previously noted, the technical guidelines and resolutions are as important as the law itself. Therefore, all industry stakeholders — ranging from patient associations and business groups, to large international companies — must work together to ensure that the rules are fair and can be updated as the market evolves. Look forward to release of the guidelines in Costa Rica and Panama.