Budget wars, not antipathy to the prospect of the full and final legalization of cannabis, will probably put Portugal behind on the recreational reform question within the European Union (EU). The country’s 2022 budget had included tax cuts and increased public investment to stimulate the economy post COVID. It was opposed by both hard Left- and Right-wing parties. In late October, such political opposition to the budget proposed by Prime Minister António Costa triggered a final meltdown of the coalition that has governed here since 2015. 

In a rare event for the country, indeed one that has not happened since Portugal transitioned to democracy in 1974, the government was dissolved two years early by the right-wing President Marcelo Rebelo de Sousa. National elections will be held on January 30 of next year.

What happens next, even on the cannabis discussion, is anyone’s guess. That said, it is also very unlikely that any new government here will oppose forward cannabis reform. The country has a vested interest in the development of the sector. And even though the licensing process on the medical side has been fraught with difficulties if not delays, it is clearly proceeding.

Why is Portugal Important in the European Cannabis Discussion?

Portugal is famous for its liberal approach to all drugs, although it is inaccurate to say that everything has been “decriminalized.” There have been various attempts to reform the country’s drug policy ever since the 1970s. In the present, cannabis is not technically legal here, although the medical cultivation sector has certainly taken off since 2017.

In early June, a bill to formalize the legalization of the personal use of cannabis was proposed by two parties, the Left Bloc and the Liberal Initiative and forwarded to the Health Commission for debate. This debate never happened due to repeated requests for postponement.

Now that the government has been dissolved, the legislation will have to be re-introduced by the new government.

Regardless, since 2017, when Tilray began construction on its cannabis facility, Portugal has begun to play a larger and larger role in the entire European cannabis discussion. This, so far at least, is less about the liberalization of policy domestically and more about the ability to obtain cultivation licenses (although this too is not as “easy” as many in the industry have infamously claimed). That said, the country has the most operating regulated cultivation facilities and licenses of any EU sovereign state outside of Holland. Of course, unlike the Dutch, these are all of the internationally regulated, GMP variety.

As it stands, the market is geared towards the production and, coming soon, extraction of the plant primarily for export (and even more specifically, targeted at and for the German medical market). Indeed, production and labor costs here put the country, along with Greece and evolving African cannabis cultivation economies, roughly on par in terms of cost per gram (both for flower and extracts).

What Would a Portuguese Rec Market Actually Impact?

The answer is, quite obviously, that a recreational market here would positively affect not only the broader economy but the tourist sector, in the process creating a booming market with a canna flair.

That said, it is also clear that this might in turn be a bit of a stretch for a region where the most forward cannabis reform country (Luxembourg) just punted on the question and took a slower path to the entire conversation with a home grow provision (along with supporting a regulated cannabis seed market).

However, after Europe emerges from what is likely to be another hard COVID winter, such sensitivities could well be overrun by politics and politicians who are looking for economic stimulation any way they can get it. This entire conversation, of course neatly fits that bill, no matter how contentious economic development with a cannabis flair still is outside of Greece (at least within the EU). Certainly, the medical sector has gotten more respectable over the last four years. Even the German government is now considering the same, in part because of the estimated tax revenue that is likely to come of the formal development of this market.

Bottom line? Portugal is no longer the outlier it once was on the topic. Indeed it may now fall behind full reform in other countries even within the EU, starting with both Luxembourg and Germany.

That said, the development of a fully legit market here will undoubtedly continue to impact the entire industry across the continent—starting with sourcing medical production bound for elsewhere, but undoubtedly, as the entire discussion progresses, recreational cannabis products too.

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Ever since Tilray decamped for Portugal during the early days of the German cannabis cultivation bid circa 2017, the country has been touted as “the place” within the European Union (EU) for the German distributors to source their product.

That said, the actual progress of the industry has been a little slower than that—in part because of the length of time it takes for legislative change to happen. Indeed, it was not until April 15 of this year that Ministerial Order No. 83/2021 was finally published. According to local legal practitioners, at least, this order also has clarified a great many practical aspects of the application process. This includes reference prices.

Looking at the progress of cultivation licenses, however, and the proof is in the pudding. To date, there have been 114 applications for the cultivation of cannabis to the National Medicines Agency (Infarmed). Of these, just 23 are “under analysis,” 11 are awaiting a response from the cultivators, and 61 are waiting to be inspected (a major issue facing almost every budding cannabis cultivator thanks to COVID.)

Here are a few more dampening statistics. Of the 19 currently operational cannabis cultivation facilities, only three can manufacture medical grade extracts and products. One of these is in business solely for the purposes of providing “quality control.” The remaining facilities are in business to cultivate the plant as a “raw material,” or, of great interest of course to every German distributor looking for new sources of EU cultivated product, “active substances.”

What, exactly, is going on?

EU GMP Is Not an Easy Certification

Despite its reputation to the contrary, including the now pending legislative move to formally legalize adult-use cannabis, the medical authorities here are very strict. They must be. They are the country’s version of the Federal Drug Administration (or FDA).

Indeed, it was only this February that Tilray announced that it had received the first and only market authorization for medical cannabis products in Portugal. This means that everyone else is cultivating for export to other countries (notably Germany). Many German distributors (for starters) are currently importing raw flower (or flos) as “Active Pharmaceutical Ingredients” or APIs. There is clearly a market for the same.

Getting a medical license also takes capital. And it is also very clear that Portugal is also not the only game in town. Greek, Macedonian and, as of this year, African cannabis is also starting to enter the room.

Further, while there is a great deal of enthusiasm, generally, about the coming cannabis revolution on the recreational side, the medical game remains, as always, a difficult nut to crack, even after the capital has been raised. This is not always a popular task to take, but it is clear that when the dust clears, Infarmed is not interested in being just a pass-through agency.

According to Rob Smallman, a highly experienced Canadian cultivator who has been involved in multiple European projects, including in Portugal, “experience and a focus on the actual business in the room is a far better strategy than just satisfying investors.”

Michael Sassano, CEO and founder of SOMAI Pharmaceuticals as well as the recent recipient of an innovative product grant by the Portugal 2020 committee, concurs. “Cannabis entrepreneurs need to know exactly what they are doing to succeed and receive full certification,” he said. “Medical cannabis growing, and manufacturing requires more than just a lot of capital. It requires deep knowledge of regulations and GMP standards plus serious knowledge of the cannabis plant to surpass timely building, operational, and international sales goals.”

Portugal 2020 is a partnership agreement between Portugal and the European Commission to fund policy goals of interest to both member states and the EU as a whole.

Domestically, however, there is another catch. In a land known rather infamously if not accurately as “anything goes,” on the “illicit drug” front, cannabis as medicine is just as foreign here as it is everywhere else. Not to mention, just like everywhere else, medical cannabis is very expensive. The monthly price tag of about $600 is out of reach to most, if not many.

What Impact Does Pending Recreational Reform Mean for Portugal?

There are several answers to this question. The first and most obvious one is “nothing” since Infarmed only regulates a medical market, not a broader consumer one (more like BfArM in Germany than the FDA in the United States).

However, this is also not the only answer. Forward reform of Portugal’s legislative approach to recreational reform has repeatedly stalled, even as both Switzerland (outside of the EU) and Luxembourg (within it) have progressed.

There is of course this twist. Just like the Czech Republic (and Switzerland) have now started to discuss (and Holland has been in the midst of the same since 2017 when Dutch insurers stopped covering the drug the same month the German Bundestag or Parliament, voted to cover it under Deutsch public health insurance), the entire discussion of “medical” cannabis is coming under scrutiny. Particularly for domestic use, rather than foreign export.

This is a simmering issue. But it is bound to stay in the room, particularly given the advance of overall cannabis reform across Europe.

In the meantime, it is clear that Portugal is proving to be a stringent port of call for all things medically cannabis related—and far from just a pass-through cultivation or extraction state.

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