Puerto Rico has taken an important step on the road to economic recovery, with the approval by a federal judge of “the largest municipal debt restructuring in U.S. history.” As the island looks for a fresh start, it should adopt a forward-thinking legal framework that allows it to harness the vast economic opportunities presented by cannabis.
Background on the debt crisis
In 2015, Puerto Rico declared “it could not afford to pay its more than $70 billion public debt load it had accumulated through decades of mismanagement, corruption and excessive borrowing.” With “no legal basis” in place “for a U.S. territory’s formal bankruptcy,” Congress passed the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) in 2016. Puerto Rico then entered a process that’s been described as “bankruptcy-like,” overseen by a federal judge in New York.
That process has now concluded, with Judge Laura Taylor Swain’s signoff on a plan “that slashes the U.S. territory’s public debt load as part of a restructuring and allows the government to start repaying creditors.” According to the island’s governor, this “represents a great step” for Puerto Rico’s economic recovery. The plan includes guardrails “to prevent a repeat” of the debt crisis.
How cannabis can help Puerto Rico recover
The debt restructuring’s approval is without doubt an important step for Puerto Rico, as it seeks renewed access to capital markets, as well as to instill renewed confidence in the island’s economy. However, growth will not materialize out of thin air. Puerto Rico must develop economic strategies that are in line with its own realities, as well as those of the U.S. and global markets. In this sense, going all-in on cannabis is a no-brainer, particularly with a view to expected liberalization at the federal level.
Cannabis opportunities for Puerto Rico’s agricultural sector
According to the Puerto Rico Department of Agriculture:
“due to the island’s privileged geographical position in a tropical region [cannabis] could be grown and harvested in Puerto Rico up to three (3) times a year, unlike the world’s largest producers that can currently only grow and harvest outdoors once or twice in a year.”
A robust program to incentivize cannabis cultivation would not only allow Puerto Rico to take advantage of its geographical location: It would also create opportunities in the island’s rural areas, where they are perhaps most sorely needed. Keep in mind that the per capita income in the island’s wealthiest (and urban) municipality is four times higher than in its (rural) poorest.
With suitable conditions for cultivation, Puerto Rico’s cannabis industry could be largely self-sufficient in terms of raw materials. At the same time, surplus cannabis could be exported, not least to the U.S. market, to which Puerto Rican products enjoy unfettered access.
A cannabis boost for Puerto Rico’s manufacturing industry
Puerto Rico is one of the most important biopharmaceutical manufacturing centers in the world, with pharma exports reaching $47 billion in 2019, according to the Department of Economic Development and Commerce (don’t miss our conversation with Secretary Manuel Cidre, who heads the department). With such infrastructure at hand, the island is well placed to become not just a manufacturing hotbed for medical cannabis products, but also an R&D hub for the industry.
While activities in this sector have traditionally been led by companies from outside Puerto Rico, the fluid nature of the cannabis space presents opportunities for the development of local cannabis businesses – in tandem with activities by businesses from elsewhere. One lamentable aspect of Puerto Rico’s economic history has been the failure to develop homegrown actors in some of its key industries. A dynamic cannabis strategy can help reverse that trend, helping create opportunities that go beyond direct involvement in the development and manufacture of cannabis products. Investments by international companies would be great, but the creation of new businesses headquartered in Puerto Rico would be even better.
And it’s not just the pharma sector that can blossom. In the U.S. states that have opened the door to legal cannabis, we have seen the development of a broad range of products, such as drinks, candies, cosmetics, patches, and more. Puerto Rico can make those as well, and in fact we’re seeing local companies entering the hemp and CBD marketplaces for such products.
The services sector in Puerto Rico can also benefit from cannabis
One of Puerto Rico’s main economic drivers is tourism. In addition to everything the island offers visitors (including year-round beach weather and the oldest city in U.S. territory), the availability of legal adult-use cannabis would surely be a selling point for some travelers. And it’s not just about sampling locally grown wares (though, yes, that too). The Bacardí distillery is popular with tourists: why not a cannabis farm or a pre-roll factory?
Legal cannabis could also help extract more value from the cannabis use that is already taking place by locals. If Puerto Ricans can enjoy their cannabis in a social setting, similar to where they enjoy their coffee or beer, that will translate into opportunities for entrepreneurs, who can set up cafes and boutiques. And all of this being aboveboard, the government could come in for its cut; cannabis tax revenues would be a good way to help the Commonwealth meet its pensions obligations (estimated at $55 billion).
Seriously, cannabis is a no-brainer for Puerto Rico
Going all-in on cannabis basically means two things. First, legalization of adult-use cannabis, to complement existing legal frameworks for hemp and medical cannabis. Second, rolling out a smart plan for developing the cannabis industry at-large. While adult-use legalization is a necessary step to fully leverage cannabis’ potential, it is also important to provide the proper framework for the success of the industry. The business community needs predictability and budding entrepreneurs (especially in rural areas) need a helping hand.
Considering the economic activity that a cannabis evolution would unleash in Puerto Rico, the slow speed at which cannabis reform has taken place is baffling. Back when Puerto Rico took its first steps with cannabis legalization, there was little in the way of precedents that it could study. By now, however, legal cannabis is an established reality in many U.S. states. There is no excuse for inaction. For an island whose citizens acutely need economic opportunities, keeping the door closed to a vibrant cannabis industry is unconscionable.