The legalization of cannabis sativa for medicinal purposes is a controversial topic that has been debated for a long time in Brazil and in other countries. Despite criticism, some favorable points of the measure need to be considered, especially at this time when bills on the subject are pending before Congress and Anvisa (National Health Surveillance Agency) is spearheading public consultations on the regulation of controlled cultivation of the plant for medicinal use.

The Cannabis sativa market moves billions of dollars annually in countries where regulations are already in place. According to Beau Whitney, vice president and economist at New Frontier Data, an American data analysis firm specializing in this industry, Cannabis sativa trade has moved $ US10.4 billion and created at least 250,000 jobs in 2018.

-In addition, use of the plant for medicinal purposes has provided benefits to numerous patients, such as people suffering from diseases such as schizophrenia, multiple sclerosis, seizures, and not responding to conventional treatments.

Uruguay and Mexico, in Latin America, treat the issue more liberally, attracting the attention of companies in the field. Many have already expressed public interest in investing in these countries, although neither has a broad internal market.

Brazil, in turn, has 3.4 million potential consumers of this type of medicine. A market of this size could move about US$ 1.4 billion a year, which makes it very attractive.

In an economic scenario of low economic activity such as the present one, numbers like these are in favor of investments in the Cannabis sativa-based pharmaceutical industry, not only for the financial return, but also for the reduction of treatment costs and the generation of the jobs that it may provide.

To date, legislative and judicial delays placed some obstacles for investment plans. This, however, may change, among other factors, due to the existence of three bills pending before the National Congress and ongoing lawsuits.

We highlight bills No. 7,187/2014, No. 7,270/2014, and No. 10,549/2018, which aim to regulate the use of Cannabis sativa for medicinal or recreational purposes, and Direct Unconstitutionality Action (ADI) No. 5,708, pending before the Federal Supreme Court (STF) and filed by political parties that defend decriminalization of the plant for therapeutic uses.

On another front, pressure from patients to release Cannabis sativa-based medicines has led the Federal Council of Medicine to authorize neurologists and psychiatrists to prescribe them. Anvisa has implemented registration and control for access to these pharmaceuticals, which currently need to be imported, thus considerably increasing the cost of treatment.

Recent government initiatives to regulate the use of cannabis sativa for medicinal purposes show that the opportunities for opening this market in Brazil are real. In June of 2019, Anvisa's collegiate board approved two public consultations regarding the regulation of controlled cultivation of Cannabis sativa for medicinal and scientific use.

The purpose of the initiative is to make room for the population, other government agencies, the pharmaceutical industry, and society in general to give their opinions on two proposed resolutions.

Public Consultation No. 654, of June 13, 2019, aims to discuss the proposal for a specific procedure for the registration and monitoring of Cannabis sativa-based medicines, its derivatives, and synthetic analogues. Public Consultation No. 655, of the same date, deals with the technical and administrative requirements for cultivation of the plant for medicinal and scientific purposes.

Both are open to receive contributions until today (August 19th). It is an important opportunity for the public as a whole to contribute to the debate and to regulate the controlled cultivation of cannabis sativa for medicinal and scientific use to standards that protect public health and at the same time meet the needs of the market.

The Federal Government published on, August 7, Decree No. 9,957/19, which regulates the procedure for the rebidding of partnership contracts in the highway, railway, and airport sectors. The rules complement the provisions of Chapter III of Law No. 13,448/17, which already provided for the possibility of rebidding, but lacked specific regulations, a fact that had been causing concern for various market players, especially those linked to the highway and airport sectors.

The new decree details the requirements that need to be met by those interested in requesting the rebidding, which in practice is the return of the venture to the Government, which will undertake a new bidding procedure to maintain the regularity of the provision of services.

The request must be accompanied by a series of technical information and documents. The government’s objective is to collect justifications and elements that allow one to identify the real need for and viability of the rebidding procedure. Details to be provided by interested parties include:

  1. information regarding the property to be returned;
  2. financing instruments;
  3. contracts in force with third parties;
  4. ownership status of the areas affected by the venture; and
  5. any judicial, administrative, or arbitral disputes involving the contractor and the granting authority.

In addition to this information, interested parties should demonstrate in a justified manner the conditions proposed in order to ensure continuity and security in the services until the completion of the rebidding procedure and transfer of the venture to the new contractor.

The detailed description of the information and documents that will support the application is not repeated in the articles that address how the information will be evaluated by the granting authority and its bodies. Section II of the decree is limited to addressing the powers of each of the bodies, leaving a certain degree of subjectivity regarding the process of granting or denying the application.

For example, a request for rebidding will be examined in advance by the regulatory agency responsible for the sector, which will be responsible for ascertaining the technical and legal feasibility of the request. Following the response of the regulatory agency, the request will be sent to the Ministry of Infrastructure, tasked with analyzing the compatibility between the request for rebidding and the scope of the public policy formulated for the corresponding sector. It is specifically in this passage that the wording makes room for different interpretations, because it is missing clear identification of criteria to be observed by the Government to deliver its decisions, whether granting or denying the right to rebid.

Following the response by the Ministry of Infrastructure, the proceeding will be forwarded for deliberation by the Investment Partnership Committee of the Federal Executive, which will be charged with opining, before the President's decision, on the appropriateness and advisability of the rebidding, in a clear exercise of the discretionary power conferred on the Government.

Once the rebidding is found to be viable, the granting authority will suspend any forfeiture proceedings and enter into an addendum with the rebidder that will regulate all its activities until the completion of the rebidding process and the execution of a new contract.

The addendum will contain a series of requirements that must be complied with by the rebidder, under penalty of disqualification of the venture, a fact that would entail the immediate initiation or resumption of the forfeiture proceeding and restoration of the existing charges and obligations before the execution of the addendum. Mandatory requirements of the addendum include:

  1. not reduce capital stock;
  2. offer no new guarantees on behalf of third parties except those proven to be essential and after approval by the regulatory agency;
  3. not alienate, assign, transfer, dispose of, or create any encumbrances on the assets and rights linked to the venture, except those that are justified, and after approval by the regulatory agency; and
  4. not apply for bankruptcy or judicial or extrajudicial reorganization of the special purpose entity.

It is undeniable that the decree represents a significant change and will have practical consequences, especially in the discussions regarding the judicial reorganization process for the Aeroportos Brasil Viracopos concessionaire and others in the highway sector that have already expressed their intention to return ventures. The consequences are still uncertain, but the market players in the highway, railway, and airport sectors will certainly find a new legal and, especially, economic scenario over the next few years.

The financing of infrastructure projects in Brazil has been undergoing important changes in recent years, caused, among other factors, by redefinition of the role of the National Bank for Economic and Social Development (BNDES) in this type of transaction.

On the one hand, Law No. 12,431/11 boosted the financing of large infrastructure projects and restructured the payment of large construction projects by issuing debt securities (incentivized debentures). The greatest attraction with this type of financing is the tax exemption it provides when it is intended for priority projects, that is, those regulated by Decree No. 8,874/16.

BNDES, on the other hand, has taken up less space in infrastructure investments: around 1% of GDP, much less than in 2008-2017, when this share reached 5% of GDP.

Brazil's political and economic crisis and the restrictions imposed on BNDES in granting new financing led to a shrinking of the bank's operations and made more room for the capital markets to issue incentivized debentures.

According to Anbima’s bulletin (the Brazilian Association of Financial and Capital Markets Entities), the total fundraising of Brazilian companies via the capital markets reached R$ 144.5 billion in the first half of this year, exceeding the average of R$ 122.5 billion for the same period in the last seven years. Another highlight was the large jump in issuances of infrastructure debentures: from R$ 4.6 billion in 2016 to R$ 21.6 billion in 2018.

At the moment, there are prospects for further changes in Law No. 12,431/11 and transactions with a certain degree of innovation. Long-term issues related to Law No. 12,431 are beginning to emerge in the market, some of them even for the purpose of prepaying long-term bank debts that did not compete with the capital markets.

There are reports that a draft bill that would positively amend the text of Law No. 12,431/11 is practically ready to, among other modifications, increase from 24 to 60 months the time limit for reimbursement of expenses that may be covered by the issuance of incentivized debentures.

With these changes, it is expected that these long-term securities will increasingly be used to finance large infrastructure projects in Brazil.

Law No. 13,848/19, enacted in June, established the new framework for regulatory agencies in Brazil. Originating from Bill No. 52/13, the text signed into law differs very little from what was initially approved by the Senate, in spite of a few presidential vetoes and specific changes introduced by congressmen.

With regard to the vetoes, the Presidency rejected the application of a public pre-selection process for candidates to the boards of commissioners and the commissions of regulatory agencies, as well as extended the rule that members of these bodies (with very few exceptions) may not be reappointed for terms of office that started before the law entered into force. It also excluded the prohibition on having a person linked to a company that carries out activities regulated by the agency be appointed to its top position.

Among the pointed changes to the original bill introduced in Congress, the following stand out:

  • The inclusion of the National Mining Agency (ANM), which was created to replace the former DNPM, in December of 2017;

    The assimilation of the Administrative Council for Economic Defense (Cade) to a regulatory agency for certain purposes, such as recognition of its functional, decision-making, administrative, and financial autonomy; the subjection to external control by the National Congress, with the assistance of the Federal Audit Court; the obligation to prepare strategic plan, annual management plan, and regulatory agenda; and

  • In line with the State-Enterprises Law is the obligation for regulatory agencies to implement their own internal compliance and corporate governance programs.

During the legislative process, the Chamber of Deputies had attempted to remove the prohibition on appointing party leaders and relatives of politicians to both the governing posts of regulatory agencies and to the management and boards of state-owned enterprises. The amendment even affected the State-Enterprises Law in this sense. The Senate, in approving the final text, rejected the amendment, so that the prohibitions on appointment under the State-Enterprises Law were unchanged and were repeated and even extended to regulatory agencies.

Congress also added reinforcement to the rule against simultaneous terms of office of agency leaders, stating that those who fail to be filled in the same year as their vacancy will be shortened. The congressmen also extended the list of scenarios for loss of office for the leaders of agencies, increasing the number of situations that objectively constitute a conflict of interests, compliance obligations, and professional duties.

As may be seen, the main foundations of the original bill, characterized by a commitment to modernization, standardization, and professionalization of regulatory techniques, were preserved in the Regulatory Agencies Law. Some pending issues have not yet been resolved, but the enactment of this important new law will provide encouragement to investors and financiers of companies operating in regulated sectors.

The financing of infrastructure projects in Brazil has been undergoing important changes in recent years, caused, among other factors, by redefinition of the role of the National Bank for Economic and Social Development (BNDES) in this type of transaction.

On the one hand, Law No. 12,431/11 boosted the financing of large infrastructure projects and restructured the payment of large construction projects by issuing debt securities (incentivized debentures). The greatest attraction with this type of financing is the tax exemption it provides when it is intended for priority projects, that is, those regulated by Decree No. 8,874/16.

BNDES, on the other hand, has taken up less space in infrastructure investments: around 1% of GDP, much less than in 2008-2017, when this share reached 5% of GDP.

Brazil's political and economic crisis and the restrictions imposed on BNDES in granting new financing led to a shrinking of the bank's operations and made more room for the capital markets to issue incentivized debentures.

According to Anbima’s bulletin (the Brazilian Association of Financial and Capital Markets Entities), the total fundraising of Brazilian companies via the capital markets reached R$ 144.5 billion in the first half of this year, exceeding the average of R$ 122.5 billion for the same period in the last seven years. Another highlight was the large jump in issuances of infrastructure debentures: from R$ 4.6 billion in 2016 to R$ 21.6 billion in 2018.

At the moment, there are prospects for further changes in Law No. 12,431/11 and transactions with a certain degree of innovation. Long-term issues related to Law No. 12,431 are beginning to emerge in the market, some of them even for the purpose of prepaying long-term bank debts that did not compete with the capital markets.

There are reports that a draft bill that would positively amend the text of Law No. 12,431/11 is practically ready to, among other modifications, increase from 24 to 60 months the time limit for reimbursement of expenses that may be covered by the issuance of incentivized debentures.

With these changes, it is expected that these long-term securities will increasingly be used to finance large infrastructure projects in Brazil.