EXCLUSIVE: This Puerto Rican Cannabis Company Breaks The Mold And Is Ready To Take On The World

US cannabis companies have their fair share of problems, one of which is that they cannot deduct expenses or losses on their tax forms under section 280-E of the tax code. 

However, this is not the case in Puerto Rico, which is just “steps” from the largest cannabis market in the world. For federal tax purposes, cannabis companies operating in Puerto Rico are classified as foreign corporations and are not required to pay federal tax on their income. Medical marijuana companies in Puerto Rico, which has a developed pharmaceutical complex, do not pay any federal taxes.

Located in a 420,000-square-foot former pharmaceutical property, PRICH Biotech Corp. is the most important cannabis company in Puerto Rico. What started as a real estate investment in the city of Humacao became the most important vertically integrated cannabis business in Central America and the Caribbean.

“Nothing better than a pharmaceutical to enter this world, we have state-of-the-art technology facilities. It would have been possible to build it from scratch,” says company chairman Munir Kabche in an exclusive interview with Benzinga. “12 of the 20 best-selling medicines in the US are manufactured in Puerto Rico. We have different tax laws than the other 50 US states. We have 353 employees, and 22 dispensaries and we represent 40% of the market today.”

From Real Estate And Finance To Cannabis

Sometimes we forget that cannabis is also a real estate investment. We often think of cultivation, but there is another way to tap into the industry. Whether by converting laboratories or acquiring strategic positions, real estate stands out as a gateway to the cannabis economy. And indeed, PRICH can attest to that.

“We made our investment with that criteria,” says Kabche. “We are in several industries, and from each one, we have learned lessons that we apply to cannabis. You take the best of each experience because cannabis is multidimensional, it is agriculture, but it is also manufacturing and retail. This holistic view of the industry leads us to cannabis 2.0, which is what we focus on.” 

Cannabis 2.0?

“We see cannabis as much more than just a commodity. We go further in technological aspects, such as the delivery system and patient care so that cannabis is accessible and consistent like any other product. Being the largest company, we are the only ones that guarantee delivery to all patients, to all dispensaries on a weekly basis,” Kabche explained, adding that the company's scale and high standards give it a "competitive advantage" by allowing them to supply 300 dispensaries and segment its brands "for different types of patients."

A Leading Case For The Region

Given the social stigma attached to cannabis in Latin America and around the world, it's a bit surprising that PRICH supplies more than 300 cannabis dispensaries. What can we learn from the Puerto Rican experience?

According to Kabche, the secret lies in the quality of information used to measure public opinion regarding cannabis and how it is communicated.

“We come from a very traditional family. When I said I'm going to dabble in cannabis, they asked me how a traditional family from finance, hospitality, and insurance was going to get into it. It was taboo in 2016. I commissioned national surveys and we found that 65% of the population in Puerto Rico approved of medical cannabis. Today the dispensaries are normalized. When people are educated with good information, anything is possible," Kabche said.

“People already understand that it is more dangerous to take a selfie than to use cannabis. Selfies cause 45 deaths a year. How many deaths does medical cannabis cause? Zero. Cannabis generates stable employment, the state collects taxes and people's quality of life improves.” 

How Do Dispensaries Work In Puerto Rico?

One of the main challenges for legal dispensaries is how to ensure the traceability of cannabis. That is, how to guarantee that the cannabis sold comes from a legal circuit.

In Puerto Rico, the government uses the BioTrack system to track legal cannabis. At the same time, PRICH licenses the MJ Freeway system that connects all stages of production, from cultivation to retail.

"We have integrated our systems, we have more than 900 cameras, and a department dedicated exclusively to complying with the regulations," explained Federico Bais, a software developer working for PRICH's technical team.

“Products have tracking codes generated by the system itself, from the vegetative state, each plant belongs to a lot. When they are harvested, they become part of a manufacturing lot. The plants are weighed before and after drying. Each product has a label that corresponds to a lot." 

Puerto Rico And Beyond

Kabche explained that, although the company is focused on Puerto Rico, they are always evaluating business opportunities.

“We are increasing production here in Puerto Rico. Why? Because federal legalization in the US is a matter of time and here we have competitive advantages, such as our human resources, and the industrial scale that allows us to reach margins that other growers can hardly reach, in addition to our strategic anticipation of market needs," he said.

“We are increasing our cultivation area by 50%. Despite the fact that we have 40% of the market, we continue to invest. Prices continue to drop and we are prepared to be a 'big player' in the US, Argentina, and Panama. The Argentine market is huge and we understand that we can invest in R&D. That is what interests us the most."

Kabche understands that to survive in cannabis, it's not enough to lower costs; it's essential to innovate products and services. "Those who do not innovate will remain in the past," warns the executive. “That is why I talk about cannabis 2.0. We are not seeing what people do, we want to go beyond the conventional. Diversify the offer and be different,”  Kabche concluded.

Photo Credits: Prich Biotech Corp. (Janon Stock on Shutterstock and logo on Facebook).