Portugal is gearing up to become a medical marijuana production powerhouse serving growing European markets.

But as access to capital tightens in the global cannabis industry, companies wanting to set up operations in Portugal could have challenges to secure the necessary funds for their ambitious plans.

Only a handful of firms are currently fully operational and licensed to grow cannabis in Portugal. Most are in the process of obtaining a license.

According to companies operating there, Portugal enjoys some of the lowest production costs in the world thanks in part to its temperate climate and natural light conditions.

Export powerhouse?

Industry officials point to a number of factors that give Portugal an inside edge over rival MMJ exporters.

The country’s temperate climate is conducive to outdoor cultivation and reduces the need for heating in greenhouses. Also, Portugal’s cannabis industry is governed by Infarmed, a health agency that requires companies to adhere to strict production standards.

“It will be hard for countries such as Colombia or Lesotho to produce at the same standards and lower costs than what we foresee in Portugal,” Miguel Silva, CEO of Sabores Púrpura, one of the four licensed companies to grow cannabis in Portugal, told Marijuana Business Daily.

Silva expects his company to fulfill its first export to Germany during the first quarter of 2020.

Other companies also are lining up.

Sean Griffin, vice president of communications for Canadian firm Flowr, another licensee, told MJBizDaily the company anticipates being able to export in the first quarter.

Last August, Canadian licensed producer Tilray – through its Portuguese subsidiary – announced a supply agreement with German importer Cannamedical to ship 3 million euros ($3.3 million) worth of wholesale cannabis from Portugal to Germany.

It was the first commercial export of medical marijuana from Portugal to Germany and was delivered in September. According to German TV network ProSieben, the shipment totaled 500 kilograms (1,102 pounds) of flower valued at 5 million euros.

According to Infarmed, four companies in Portugal were licensed to grow cannabis as of early November:

RPK Biopharma, located in the Lisbon district and owned by Holigen, a subsidiary of Flowr.

Terra Verde, in the Setúbal district and a subsidiary of London-based Emmac Life Sciences.

Tilray Portugal, in the Coimbra district and a subsidiary of Tilray.

Sabores Púrpura, a private Portuguese company in the Coimbra district.

A public list of license applicants is not available.

Tilray already has invested 20 million euros in its Portuguese facilities and plans to increase the investment to 100 million, Forbes Portugal reported. By the end of the year, the company expects to employ 150 people in Portugal.

Forbes also reported that 500 million euros are expected to be invested in the industry in the next five years, generating 1,500 jobs.

How licensing works

Only four companies are licensed producers, but several businesses claim to have a “pre-license,” or approval.

They point to a letter received from Infarmed saying that the paperwork the company submitted is “documentarily fit” to obtain a license. But it would be better described as a letter of documentary conformity.

The letter typically gives companies six months to become operational before they can ask Infarmed for an inspection. Only after passing that inspection can a company secure a license.

Local industry sources said calling such a letter a “pre-license” could confuse investors.

“A license or a permit means I can now do something that was until then forbidden. The letter of Infarmed doesn’t fulfill that criteria because you don’t need such letter to build your facilities,” a local source, who requested anonymity, told MJBizDaily.

José Maraver, CEO and founder of license applicant Fundão-based Kannabeira, said obtaining the letter was “a significant step because it authorized the company to have the first plants to show Infarmed we can grow according to the agency’s quality requirements, heading to the final inspection.”

The time it could take to get the letter of documentary conformity varies by project. But, according to several sources, one year is a reasonable timeline.

Another year could go by from the moment the company obtains the letter until it becomes fully operational and licensed.

It’s during the second part when the investment requirements become significantly higher.

That’s why obtaining the letter from Infarmed is important.

“It’s almost impossible to raise capital without having something from the regulator signaling that the company is in the path to becoming licensed,” said another applicant who requested anonymity.

‘The paperwork country’

Local industry sources agreed that obtaining a license requires considerable paperwork.

“We are the paperwork country and Infarmed doesn’t care about the green rush,” Silva said. “It’s a health agency that doesn’t take any unnecessary risks.

“That’s why everything needs to be very well documented to get a license.”

Sometimes, obtaining local permits to build a greenhouse can delay a project more than expected.

Hanna Hlushchenko, business development director of Lisbon-based license applicant Cannexpor Pharma, told MJBizDaily one of the biggest challenges is ironing out all the details with potential buyers.

“Figuring out all of the specific details of the product they intend to purchase and submit it in an acceptable way for Infarmed took more time than we initially expected,” Hlushchenko said.

And the way Infarmed evaluates applications is evolving.

Aidan Lethem, business development manager of London-based license applicant Alta Flora, told MJBizDaily that “there is increased emphasis on secure distribution to end patient markets and deeper technical knowledge as per GACP/GMP, now detailed online through a medical cannabis portal.”

Alfredo Pascual can be reached at [email protected]