LexLatin – CorralRosales Participates in The Purchase of Lumen in Latin America by Stonepeak Partners

LexLatin - CorralRosales Participates in The Purchase of Lumen in Latin America by Stonepeak Partners - CorralRosales - Lawyers Ecuador

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DATE: 26-08-2021

CORRALROSALES IN THE NEWS:

Xavier Rosales

Ana Samudio

Milton Carrera

MEDIA: LexLatin

In August, the US alternative investment company specialized in infrastructure, Stonepeak Partners, bought Lumen Technologies, a US fiber-optic provider and data operator.

The $ 2,700 million purchase was carried out with the participation of the AustralianSuper pension fund and with the help of CorralRosales in Ecuador. Our team of experts advised Level 3 Communications, Lumen’s Ecuadorian subsidiary, on Regulatory Law.

In addition to CorralRosales, the following firms also took part in the transaction:

  • Stonepeak Partners LP Advisors:
    • Simpson Thacher & Bartlett – United States (New York and Palo Alto)
    • Marval O’Farrell Mairal (Buenos Aires)
    • Gómez-Pinzón Abogados (Bogotá)
    • Consortium Legal – Costa Rica (San José de Costa Rica)
    • Rebaza, Alcázar & De las Casas Abogados (Lima)
    • Travieso Evans Arria Rengel & Paz (Caracas)
    • Creel, García-Cuéllar, Aiza y Enríquez, SC (Mexico City)
    • Pérez Bustamante & Ponce (Quito)
    • Mattos Filho, Veiga Filho, Marrey Jr. and Quiroga Advogados (São Paulo)
    • Barros & Errázuriz (Santiago de Chile)
    • Arias, Fábrega & Fábrega – ARIFA (Panama City
    • Guyer & Regules (Montevideo)
  • Advisors of Level 3 Communications, Inc .:
    • CorralRosales (Quito)
  • Advisors to AustralianSuper:
    • Skadden, Arps, Slate, Meagher & Flom – United States (Los Angeles, New York and Washington, DC)
  • Advisers to Lumen Technologies, Inc .:
    • Jones Walker LLP (New Orleans and Baton Rouge):

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Teleamazonas – The Government promotes a new mining policy to attract more investment

Teleamazonas - The Government promotes a new mining policy to attract more investment - CorralRosales - Lawyers Ecuador

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DATE: 24-08-2021

CORRALROSALES IN THE NEWS:

Rafael Serrano

MEDIA: Teleamazonas

Ecuador launched a new mining policy. From 2018 to 2020, this sector paid USD 1,300 million in taxes. So far, in 2021, it has paid USD 421 million, with a projection of up to USD 1,600 million. Teleamazonas invited our experienced senior associate Rafael Serrano, a specialist in Environmental Law, to discuss this new policy.

“A fundamental rule for the development of the sector demonstrates the will of the Government and that of the Ecuadorian State to promote this industry that, if administered correctly, can bring great benefits,” adds Serrano.

The National Government, through decree 151, ordered to issue “the Action Plan for the Mining Sector of Ecuador.” Article 2 adds that “the State will be the generator and coordinator of public policies that promote the development of the mining sector, national and foreign investment, and the increase in exports of mining products.” For experts in the topic, this is a big step within the mining sector.

Serrano adds that “the objective is the development of environmentally and socially responsible mining, which protects investment, both national and foreign.” And, to conclude, he adds that what is needed is “stability and clear rules of the game so that investors know where to invest. These are investments of hundreds of millions of dollars ”.

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Ecuador´s action plan for the mining sector

Ecuador´s action plan for the mining sector - CorralRosales - Lawyers Ecuador
Through Executive Decree 151, signed on August 5, 2021, the President of Ecuador issued an Action Plan for Ecuador’s Mining Sector (from now on “Action Plan”) that seeks promoting development through the positioning of mining as a relevant industry of the country’s economy.

The main objective of this Action Plan is to articulate the development of efficient and responsible mining and promoting national and foreign investment to achieve the exploitation of Ecuadorian mineral resources through the best practices in the industry.

In turn, through this Action Plan, Ecuador also seeks to reaffirm its commitment to guarantee legal security by complying with existing regulations and respecting pre-existing rights.

With this in mind it is important to highlight the guidelines, included in the Action Plan, that the Ministry of Energy and Natural Resources (after this “the Ministry”) must follow. On this sense, the Ministry must:

1. Communicate clear and transparent information regarding the amount and destination of benefits and taxes received from the mining industry, and regarding public policy in this matter.

2. Design a comprehensive plan for the prevention, combat, and application of sanctions to the illicit exploitation of minerals.
3. Work with the Ministry of the Environment, Water and Ecological Transition so that the appropriate measures are adopted for environmental permits related to the mining industry to be resolved in a timely manner, so they do not interfere with investment commitments.

4. Instruct the National Mining Company ENAMI EP to facilitate associative agreements to attract and allow the participation of private investors.

5. Promote the adoption and compliance with international codes, protocols, agreements, declarations and instruments in each of the phases of the mining activity.

6. Encourage the adoption of socially and environmentally responsible practices and respect for labor rights and access to complaint mechanisms.

7. Develop a technological tool that facilitates and guarantees the correct exercise of current and future mining rights.

The Action Plan also instructs the Agency for the Regulation and Control of Energy and Non-Renewable Natural Resources to prepare a detailed report about mining rights conceded under the regimes of large mining, medium mining, small mining and artisanal mining that have been granted and are in force.

Finally, the Action Plan provides that the Ministry presents a project to create a Public-Private Mining Advisory Council that will promote civil society participation in the construction of public mining governance.

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Teleamazonas – CNT suffered a “highly sophisticated” cyberattack

Teleamazonas - CNT suffered a "highly sophisticated" cyberattack - CorralRosales - Lawyers Ecuador

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DATE: 16-08-2021

CORRALROSALES IN THE NEWS:

Rafael Serrano

MEDIA: Teleamazonas

In July, CNT (National Telecommunications Corporation) was the victim of a cyberattack, the intentions of which are still unknown. Nevertheless, the attack puts the cybersecurity policies that all companies and institutions must have under scrutiny, and the topic became a talking point in Ecuador.

Teleamazonas wanted to have the opinion of our senior associate, an expert in new technologies and information security, Rafael Serrano, to offer a vision of what changes should be made to avoid future attacks.

Serrano affirms that “CNT and all public institutions must begin to have cybersecurity policies” since no one is exempt from risk, and besides, there are ways to prevent it.

After the situation and the CNT having been declared in emergency, decisions will be made regarding the equipment, given that, according to Byron Zapata, CNT’s surrogate manager, there are resources available.

“The right thing to do is to have different systems that can secure and diversify the information,” says Serrano. He also adds that “in this way, if someone has an attack or finds a problem, they have a backup in other systems, and the entire State continues to function.”

To conclude the interview, Serrano affirms that “according to Ransomware, it is only an attack, an attempt. So, therefore, they can’t take the appropriate measures unless they identify what happened or what the attackers are asking for.”

All the information that has been violated is not yet known in detail.

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Regulations for the return to in person work activities in the private sector

Regulations for the return to in person work activities in the private sector - CorralRosales - Lawyers in Ecuador

The Ministry of Labor issued Ministerial Agreement MDT-2021-214, published in the Official Register No. 507 of August 02, 2021, that contains the “Guidelines to Return to In Person Work Activities”. Hereafter their main features:

With the exceptions detailed below, it is up to employers to determine if employees return to in person work, whether they are immunized or not.

Employers must comply with the “Guide and General Plan for the Progressive and Safe Return to In Person Work Activities” approved on June 29, 2021, by the Emergency Operations Committee – COE National.

Employees with aggravating conditions or who have under their care a person with an aggravating condition, who have been vaccinated and necessary time for immunization has lapsed, shall return to in person work.

Even if employees with aggravating conditions are immunized -or the individual with aggravating conditions under their care is immunized- if the occupational physician or a center accredited by the Ministry of Public Health, certifies that the employees may not perform in person work, he or she will remain under telework modality.

Employer´s failure to comply with the Ministerial Agreement may be sanctioned by the Ministry of Labor with a fine up to one (1) minimum statutory wage (currently US$400).

Aggravating conditions are considered:

  • Individuals over 65 years old.
  • Individuals with chronic non-transmissible diseases.
  • Individuals with cardio-vascular diseases.
  • Individuals with cerebrovascular diseases.
  • Individuals whit disability of 50% or more.
  • Pregnant and breastfeeding women.
  • All types of congenital malformations of the heart and all types of heart valve diseases.
  • Oncological and oncohematological patients with recent diagnosis or active disease.
  • Individuals with brain tumor in any state and any type.
  • Chronic renal insufficiency.
  • Cirrhosis.
  • Individuals who have received an organ transplant or are waiting for a transplant.
  • Individuals with sequels of severe burns.
  • Individuals with Klippel Trenaunay syndrome.
  • Individuals with thoracic-abdominal aneurysm.
  • Individuals with HIV.

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CORRALROSALES

Joint Ventures in Ecuador

Joint Ventures in Ecuador - CorralRosales - Lawyers in Ecuador

The term Joint Venture appeared in the United States of America and has been widely accepted worldwide. It is a concept with a very broad meaning, which, in essence refers to agreements executed between individuals or companies in order to undertake a joint project, in which the rules that will be applied to its operation are determined.

The main characteristic of the Joint Venture is its contractual nature. This figure is used to designate different forms of cooperation between individuals or legal entities in order to achieve a common objective through the contribution of resources, without the parties losing their legal autonomy. The application of this type of contract is wide; contracts for marketing, manufacturing, supply, sales, technology, exploitation of natural resources, among others.

The doctrine mainly distinguishes between two types of Joint Ventures: i) Joint Venture Corporation and ii) Joint Venture Agreement. The difference between these figures is that the former has the purpose of incorporating a company different from its members, while the latter excludes any type of corporate relationship.

Notwithstanding the type of Joint Venture chosen, an essential element is its duration. This means that it must necessarily be a contract of a consecutive nature – not of instantaneous enforcement – since this duration is the one that allows the parties to venture jointly.

In Ecuador, the Joint Venture is regulated by the “EIGHTH TITLE of BUSINESS COLLABORATION” of the new Commercial Code (“Cc”) that came into force in 2019. It provides for two figures: the “Joint Venture” (Articles 585 to 600) and the “Commercial Consortium” (Articles 601 to 607).

Article 585 of the Cc defines the Joint Venture as:

A contract of associative nature, by means of which two or more persons, whether natural or legal, agree to operate a business in common for a specified period of time, agreeing to participate in the profits resulting from it, as well as to be liable for the obligations undertaken and for the losses incurred.”

 The following elements are worth highlighting:

  1. Contractual nature
  2. Associative nature
  3. Two or more individuals or legal entities
  4. Common business
  5. Determined period of time
  6. The parties participate in the profits and are liable for the obligations and losses.

It should be noted that the Cc only regulates the Joint Venture Agreement and does not refer to the Joint Venture Corporation or other types of Joint Venture. According to the provisions of the Cc the contract must be executed in writing, without the need for a public deed. Its termination must be carried out in the same way its constitution was executed. The instrument evidencing the termination decision shall detail the outstanding obligations and pending credits and the way in which the parties will be liable for them.

The contract must mainly establish:

  1. The business purpose and the term of duration.
  2. The internal rules regarding control and management, establishing the way in which the members will manage their interests.
  3. The form of profit sharing.
  4. The rules concerning the representation of the Joint Venture (i.e. whether a special attorney-in-fact will be appointed or whether the associates will represent it directly).
  5. The way in which the parties will respond vis-à-vis third parties, for example, if the liability is joint and several or proportional to the contributions, or certain quotas.
  6. How relationships between participants will be managed.
  7. The rules concerning dispute resolution.

If the parties do not provide for or do not agree on any of the elements mentioned above, the contract will be governed by the provisions established in Cc. For example, in the event of failure to indicate the party’s liability vis-à-vis- third parties, they will be jointly and severally liable or, as the case may be, will act as joint and several co-creditors.

The specific difference between a company and a Joint Venture is that the latter is not a legal person. Since it is not a company with limited liability, but an association, the liability  towards third parties is not limited to their capital contributions, but depends on what its members agree. In addition, the completion of the Joint Venture occurs with the consent of the parties in a written document and is not subject to any additional formality, nor to the control of the Superintendence of Companies.

Although the Cc does not regulate other types of Joint Venture, this does not imply that other types of Joint Venture are not allowed in Ecuador, such as:

  • Joint Venture Corporation through a new company: Two (or more) parties participate as shareholders with specific roles. In this case, with the creation of a new company, the liability via-a-vis third parties depends on the type of company adopted for this purpose, but in general the liability is limited to capital contributions.
  • Joint Venture Corporation through an existing company: The company of one of the parties is used to develop the business and internal accounting is kept per business unit for internal control. The liability to third parties follows the rules expressed in point i) above.
  • International Joint Venture: A figure characterized by individuals or companies from different countries. The legal figure that they adopt will depend on the agreements between the parties.

From a tax standpoint, even if the Joint Venture does not have a legal personality, it must comply with its tax obligations in accordance with the scope of its contract. Thus, article 98 of the Internal Tax Regime Law (Ley Orgánica de Régimen Tributario Interno) stipulates that -for tax purposes- the Joint Venture Agreement is considered as a company, so it must be registered in the Single Taxpayer Registry (Registro Único de Contribuyentes (RUC)). In the case of a Joint Venture Corporation, tax obligations go hand in hand with the type of company adopted.

In the antitrust field, it shall be noted that the Joint Venture is subject to antitrust legislation, since its creation may require prior authorization by the antitrust authority or be sanctioned pursuant to the provisions of the Organic Law for the Control of Market Power (Ley Orgánica de Control de Poder de Mercado) and its Regulation.

In conclusion, the Joint Venture should be conceived as a useful legal figure that can provide solutions at a time when it is necessary to be practical, dynamic, and creative with resources. Although its practicality is high, it is essential to carry out a legal analysis, case by case, in order to determine if it is the best legal instrument for the business. In any case, careful planning and communication, reflected in a contract that adequately captures the parties’ will, is key.

María Isabel Torres
Asocciate at CorralRosales
mtorres@corralrosales.com

WTR World Trademark Review – Foreign Companies as Intellectual Property Holders in Ecuador

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DATE: 14-07-2021

PROFESSIONALS IN THE NEWS:

Andrea Miño Moncayo

On July 14, 2021, World Trademark Review (WTR), the media specialized in Intellectual Property, published an article written by Andrea Miño Moncayo.  In her article, our associate comments on a pervasive problem in Ecuador regarding the appropriation of internationally recognized brands by third parties.

The appropriation is usually done through registration applications with the relevant authority and even by marketing products under these brands without proper authorization.

The arguments of the offenders are varied, and they particularly emphasize that the foreign companies in question are not domiciled in the country. Therefore, they could not carry out activities or defend their intellectual property rights in this particular case.

Miño Moncayo emphasizes in the article that, “to try to justify this (blatantly illegal) conduct, some lawyers have resorted to wrongly allege before the courts that the doctrine of the Superintendency of Companies will be applied, according to which a company established outside the country must be domiciled in Ecuador to be able to carry out activities in the country. “

Miño Moncayo then goes through international and local regulations applicable in this case, including the hierarchy of each of them, to demonstrate that the appropriation and use of these marks are illegal and are not justified within the Ecuadorian legal system.

She concludes by highlighting that “it is essential that the preliminary decisions issued by the Court of Justice of the Andean Community in these cases are specific and clear, to avoid erroneous arguments causing damage to the rights of foreign companies not domiciled in Ecuador.”

To see the full article (under registration), click here.

Latin Lawyer – Multiple Firms Help Dutch Paint Company Expand in Latin America.

DETAILS

DATE: 16-07-2021

PROFESSIONALS IN THE NEWS:

Partners: Xavier Rosales and Andrea Moya

Associates in Quito: Milton Carrera, Ana Samudio, Marta Villagómez, Rafael Serrano, Maria Isabel Torres, Jimmy Rodríguez, Darío Escobar and Sofía Rosales

Associates in Guayaquil: Ramón Paz y Miño and Edgar Bustamante 

MEDIA: Latin Lawyer

On July 16, 2021, Latin Lawyer, the international media dedicated to the legal sector, shared the transaction involving the Dutch company AkzoNobel; this company specializes in decorative and industrial paint and chemical products. CorralRosales acted as a legal advisor in Ecuador.

Through this multinational transaction closed on June 29, AkzoNobel acquired the Orbis Group, a Colombian business conglomerate with several subsidiary companies dedicated to manufacturing paint and derived chemical products. This conglomerate operates in 16 Latin American countries.

The transaction is still pending regulatory approval in several countries and is expected to be finalized by the end of this year.

In addition to having the advice of CorralRosales in Ecuador, the following firms also contributed to the transaction:

AkzoNobel advisers: Baker McKenzie in Colombia, Arias in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama.

Grupo Orbis Advisors: Posse Herrera Ruiz in Colombia, BLP in Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, and Robalino Law in Ecuador.

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Changes in Border Measures and Criminalization of IP.

Intellectual Property regulatory corrections; border measures and penalization - CorralRosales - Lawyers Ecuador

The Congress gave way to the partial objection issued by the Executive Branch, thus approving the “Law that Reforms Various laws to Reinforce the Prevention and Combat of Illicit Commerce in order to Strengthen the National Industry and Promote Electronic Commerce.” In addition, the law foresees reforms in intellectual property matters.

In particular, this reform includes provisions regarding (i) intellectual property crimes, their punishment and handling, expanding the punishable acts, and (ii) the border measures proceedingds

I. Intellectual Property Crimes

The Executive Branch veto sought to correct certain inconsistencies and drafting errors in the text approved by the Assembly. As a result, it details criminal conducts in a much better way, the conditions that must be taken into account to assess the existence of the crime and how these crimes are to be treated and judged.

The reform of the criminal law establishes that, for these behaviors to be considered crimes, they must include several elements that would differentiate it from a “simple” infringement of intellectual property rights as it conditions its sanction to the infringement happening in knowledge, that it has a lucrative purpose, and that it is on a commercial scale.

These conditions include criminal offense and penalizing whoever manufactures, commercializes, or stores labels, stamps, or containers containing trademarks or denominations of origin registered in the country.

It also sanctions whoever separates, starts, replaces, or uses labels, stamps, or containers that contain registered trademarks in the country to use them in goods of different origin, fills containers identified with trademarks belonging to a third party with spurious goods; stores, manufactures, uses, offers for sale, sells, imports or exports goods covered by apatent, utility model, industrial design, a plant variety (including its material for reproduction, propagation or multiplication) or a layout design.

It also includes possible infringements -which from our experience, will make up the vast majority of intellectual property criminal actions- against whoever stores, manufactures, uses, offers for sale, sells, imports or exports a product or service that uses an unregistered trademark identical or similar to one registered in the country; the competitive connection between the infringing goods or services and those identified by the registered trademarks must be clear.

In addition, the law eliminates the condition of a minimum amount to constitute a crime, clarifying that to consider the offending conduct a crime (on a commercial scale), the magnitude, economic value, quantity, and impact on the market must be considered. It also specifies that in foreign trade cases, it is regarded as a crime when the goods are valued at more than 50 unified basic salaries (SBU) – US $ 20,000 to date – stating that the cost of the original product must be taken into account for this appraisal.

Regarding the sanctions, the law establishes an incarceration sentence of 6 months to 1 year, confiscation (of the seized goods), and a fine of 8 to 300 SBU (US $ 3,200 to US $ 120,000 to date). In addition, the following are reinstated as an aggravating factor for the criminal offense: (i) having received a warning of the offense; (ii) that health-related goods cause damage to health; and (iii) that the crime is committed concerning unpublished works.

Regarding copyright, the same conditions described before apply. In addition, the following actions are sanctioned with the penalty mentioned in the previous paragraph: alteration or mutilation of a piece of work; the registration, publication, distribution, communication, or reproduction of a foreign work as one’s own; unauthorized reproduction or in a number greater than the authorized number of the work, provided that the damage is greater than 50 SBU (US $ 20,000 to date); public communication of works or phonograms; introduction to the country, storage, offering for sale, sale, lease or circulation of illicit reproductions of works, by any means; unauthorized retransmission of radio broadcasting, television and in general any signal that is transmitted through the radioelectric spectrum; manufacture, import, export, sale or lease of devices, systems or software that allow deciphering an encrypted satellite signal carrying programs or telecommunications in general.

The reform makes an essential clarification about certain conditions on the crime, such as the precise meaning of the term “commercial scale” and how to assess the appraisal of the goods.

The law also includes provisions on the destination of the seized goods, which may be considered donations to cover social needs by the State or destroyed. An expert report issued by an expert duly accredited by the Judicial Council is needed. The expert has to establish whether the goods must be destroyed or render useless.

Finally, the law includes conciliation as a dispute resolution mechanism.

In conclusion, the reform is positive because it seeks greater agility in processing and prosecuting intellectual property crimes.

II. Border Measures

After almost five years of a legal vacuum in this matter, the Executive Branch veto, also corrected the inadequate text approved by the Legislature returning the “mixed” system to the country for the execution of border measures. It allows the National Customs Service of Ecuador (SENAE) to be the first filter of infringing goods entering or exiting the country, suspending the customs process provisionally, which has to be confirmed by the local intellectual property office.

The reform empowers SENAE to: (i) suspend the customs procedure for goods that, in any way, violate intellectual property rights, (ii) alert the holders of these rights, and (iii) provide adequate information to act in these cases.

The suspension of the customs process will initially be five days. During these five days, this suspension must be communicated to the importer, the right holder, and the local intellectual property office. After that, it will have three days to decide on a resolution.

The law maintains the obligation to provide sufficient information to the intellectual property authority about the infringing goods and the conditions of the infringement, and the possibility of inspecting the goods involved.

The authority may sanction the offender with a cash penalty ranging between 1.5 and 142 SBU (US $ 600 to 56,800 to date).

Per the regulations of the Andean Community, the reform provides that the right holder may bring either an administrative, civil, or criminal action when the adoption of the border measure has been confirmed. Although there is a contradiction with the Andean supranational norm regarding the term to bring it (10 days), the Andean Law prevails. The holders of intellectual property rights will have a predominant performance in these cases since they must participate actively, both in the criminal proceedings and in the cases of border measures, accompanying the authorities through all the steps.

The law maintains the possibility of requiring the person requesting the adoption of a border measure to provide a guarantee that will be proportional to the possible economic and commercial impact generated by the suspension to protect the importer or exporter from a possible case of abuse of rights.

This reform corrects elements that have caused a notable increase in intellectual property infringements in Ecuador and led to actions against retailers or small merchants. Unfortunately, these elements were leaving importers or wholesalers who are the primary beneficiaries of the illicit trade unpunished.

The reforms will come into force after its publication in the Official Registry.*

*This reform is in force since August 27, 2021.

Eduardo Ríos
Asocciate at CorralRosales
eduardo@corralrosales.com

Industria Legal – The Cannabis and Hemp Industry Generates Expectations in Ecuador

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DATE: 02-07-2021

CORRALROSALES IN THE NEWS:

Felipe Samaniego

December 2019 was a month of legal changes in Ecuador. First, the Organic Law Reforming the Comprehensive Organic Criminal Code was published. Still, it was not until June 2020 that it came into force, reforming the Organic Law for the Comprehensive Prevention of the Socioeconomic Phenomenon of Drugs and the Regulation and Control of the Use of Listed Substances Subject to Control. The magazine Industria Legal dedicates a page to the information offered about this matter by our expert partner in Regulatory Law, Felipe Samaniego since this reform gave way to Ecuador’s new cannabis and hemp industry.

The exclusion of substances subject to control to cannabis and hemp with less than 1% THC in dry weight and a term of 120 days for the Ministry of Agriculture and Livestock to issue the corresponding regulation are among the new reforms.

Not only that, but also, through this agreement, new guidelines are established applicable to the regime of seven licenses, different for each activity allowed in the non-psychoactive cannabis industry, hemp and hemp for industrial use, “from the import and production of seeds to the production and export of derivatives, biomass and/or flowers,” according to Samaniego.

Our expert ends his article stating that “the rapid development of the regulatory framework that regulates the activities of agroindustrial activities, by the Ministry of Agriculture and Livestock, caused that both the Ministry of Health and the National Agency for Regulation, Control, and Sanitary Surveillance (ARCSA) as well as the Agency for the Regulation and Control of Phytosanitary and Zoosanitary (AGROCALIDAD) issue the normative bodies that regulate finished products destined for human and veterinary use and consumption that have derivatives of non-psychoactive cannabis or hemp in their composition ”.

If you want to see the article, click here