Decree makes hemp ‘crop of national interest’ in Paraguay

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President Mario Abdo Benítez of Paraguay has issued a decree aimed at shaping the country’s industrial hemp sector through incentives and other government support, declaring hemp a “crop of national interest.” 

Signed Aug. 28, 2020, the national program will support development and commercialization of industrial hemp and advance research, with emphasis on helping the country’s many small farmers and cooperatives. 

“The decree is a major landmark in the advancement of hemp in Latin America, and probably in the world,” said Lorenzo Rolim da Silva, President of the Latin American Industrial Hemp Association. “By declaring hemp as a plant of national interest and assuring companies and farmers that hemp will be given priority and be incentivized, Paraguay is taking solid steps towards consolidating itself as a leader in the region,” Rolim da Silva said.

First exports readied

A seven-member association, the Paraguay Industrial Hemp Chamber (CCIP) has been recognized by the government, and three hemp operating licenses have already been granted, with partnerships established among small farmer cooperatives. A few large scale growers are reproducing seed for future cultivation.

Healthy Grains, a Paraguayan maker of superfoods that recently announced it will make a first export shipment of hemp-based products to the USA this month, also welcomed the decree. “Controlled cultivation and industrialization of hemp derivatives in all forms make it a very interesting alternative for agribusiness and for the development of the peasant family economy,” the company said in a statement.

Healthy Grains, which has a production facility in Nuestra Señora de la Asunción logistics park in the City of Luque, said it is also launching “Hemp Guarani,” a “social seal” that is part of an effort to establish a country brand for hemp from Paraguay.

Decree specifics

The country’s new rules limit farmers to growing hemp on 2-hectare (~5-acre) plots, but many may be able to raise two crops every 12 months for the production of food, oils, fiber and other raw materials. 

Specifically, the hemp decree declares the national program will:

  • Promote the benefits of hemp and facilitate diversification in production among cooperatives and associations.
  • Generate greater added value with appropriate technology.
  • Ensure quality control.
  • Coordinate supplementary regulations and recommendations for such things as phytosanitary and biosafety issues related to hemp cultivation.
  • Promote the introduction and registration of varieties of cannabis in the National Register of Commercial Cultivars (RNCC); commercialize and manage quality control of seeds.
  • Develop strategic alliances with companies, associations and others, establish cooperation agreements with national and international entities, and set strategies for national and international marketing for Paraguayan hemp producers.

Agriculture booming

A boom in agricultural commodity prices and sound macroeconomic policies have led Paraguay to an overall average growth rate of more than 4 percent in the past 15 years. While transitioning cannabis to a legitimate industry could have a further positive effect on Paraguay’s economy, the crop faces major challenges along the way.

Well known as the biggest producer of illegal marijuana in South America and a major supplier of weed to Brazil, Argentina, Chile and Uruguay, Paraguay’s cannabis economy has traditionally been in the grip of drug traffickers and corrupt politicians. Observers have said the issuing of first-ever medical cannabis licenses in February 2020 and recent approval of personal cannabis cultivation for therapeutic purposes mark positive steps toward legitimacy for the industry. The elevation of hemp is only the latest step forward by the government.

Incursion of soy

Meanwhile, large landholders in Paraguay, where one percent of the population owns about 75% of the land, are reported to be selling their landholdings to Brazilian and European companies to fuel a booming soy industry — which could compete with hemp for fields. 

Critics have said environmental diversity in Paraguay has been hurt by the country’s growing soy fields, which produce 32 percent of Paraguay’s exports. Forests once covered 85 percent of eastern Paraguay, but it is estimated that less than 8 percent of the forest remains after clearcutting for soy fields. Soy farming, which has led to deforestation in the Amazon, also has expanded rapidly in neighboring Brazil, where 10 million hectares were brought into soy production between 2000 and 2010; an estimated half of that land is believed to have been deforested. Brazil and Argentina account for almost half of global production of soybeans.

Cotton interests too

In Paraguay, hemp will also compete as a crop with cotton, which has been an important export throughout much of the country’s history, and which has attracted Brazilian and Italian investment in the country’s cotton factories. Cotton proponents say development has brought jobs along with income for farmers.

But cotton, an economic mainstay of low- and middle-income countries around the globe, is a notoriously unsustainable crop, requiring excessive amounts of water; more than half of global cotton production – 57 per cent – takes place in areas under high or extreme water stress, according to data compiled by the World Resources Institute. And cotton cultivation currently uses 4 percent of all world pesticides and 10 percent of insecticides, according to the Institute. 

While the soy and cotton sectors argue that their strategies offer the way forward for agriculture in Paraguay, critics have argued the development comes at too high a social cost. Nearly half of Paraguay’s population relies upon subsistence farming. Mechanized farming equipment puts many farmers out of work, say some critics, while others worry about the environmental and economic impact of mono-cropping soy and cotton. Proponents say hemp can be a sustainable replacement for both.

General investment picture

With a reputation for government corruption, private foreign investment is considered rare and risky in Paraguay. Until recently, poor infrastructure has hindered the growth of the industrial sector, but low labor costs have prompted some Brazilian companies to move their factories to Paraguay nonetheless. 

In 2016, a report by the European Union indicated that the trading bloc saw that the risk of entering business in Paraguay was both necessary and advantageous, and funds were issued for agriculture, food security and environmental projects. Much of the current EU funding to Paraguay focuses on improving the sustainability of cattle farming and beef exports.

The United States is one of the largest foreign direct investors in Paraguay. More than a dozen U.S. multinational firms in the computer, agro-industrial, telecom, banking, and other service industries have subsidiaries in the country. U.S. imports from Paraguay include sugar, food oils, animal products, and wood products. Paraguay and the United States also have a Trade and Investment Framework Agreement, a bilateral mechanism to discuss common investment and trade objectives.

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