Thursday, June 30, 2016

The City Paper Bogotá

The City Paper Bogotá

Colombia approves first medicinal marijuana license

Posted: 30 Jun 2016 08:05 AM PDT

Colombia legalized medicinal marijuana last December, and this week it officially awarded its first license to manufacture cannabis products. For now, PharmaCielo becomes the nation's lone approved company, but President Juan Manuel Santos’ administration sees this as a growth segment in a nation that is looking to diversify its economy away from oil and coal.

"Colombia may be the winner of this emerging market of medicinal marijuana," said Alejandro Gaviria Uribe, Colombia's health minister, in a press conference. "This will result in more jobs in our country and greater prosperity for the communities and municipalities where this industry is situated."

Gaviria expects PharmaCielo Colombia Holdings, the Rionegro-based subsidiary of Canada's PharmaCielo Ltd, to be one of several producers to be granted licenses in the coming weeks, according to a Wall Street Journal report. More cultivation licenses will follow later in 2016, he says, and by next year select medicinal marijuana products — including cannabis extracts, resins, and oils — will be sold within Colombia. There is currently no set limit to the number of companies that can receive licenses.

In a nation that was a pioneer in growing and shipping illegal marijuana to the United States decades ago, not to mention the more infamous narcotics produced in Colombia, the government is highly sensitive to the perception of legal weed. President Santos has stressed his ongoing commitment to fighting illegal drugs, and the minister maintained that the approval process and regulatory oversight for the medicinal industry will remain stringent.

"It is a controlled substance," said Gaviria. "One cannot ask for a cultivation license if it has not previously specified what they are going to do with the plants that are going to be cultivated."

Santos established a legal framework for the regulation of medicinal marijuana on December 22 when he signed Decree 2467. According to the PharmaCielo, on February 2, it was the first company to apply for a license to grow and process medicinal marijuana extracts through the Ministry of Health and Social Protection.

Logistically, there is still more red tape ahead for the company. The manufacturing license approval paves the way for the firm to apply for a cultivation license with the National Council on Narcotics. But the hurdles cleared already bring “the company one step closer to becoming a fully integrated licensed grower and manufacturer of cannabis oil extracts," according to PharmaCielo.

Even prior to legalization, PharmaCielo has been working towards this day. In 2014, the it established a relationship with the University of Antioquia in Medellín to work together on cannabis research and development activities. Like the Santos administration, the company believes Colombia's tropical climate provides vast growth opportunities.

"The process laid out by President Santos is almost complete, and we are pleased to have been granted approval at this important stage," said Jon Ruíz, president and CEO of PharmaCielo. "This approval brings us that much closer to our goal."

According to proponents of legalization, the medicinal marijuana industry in Colombia could become big business. Decades of illicit production have proven how well the nation can produce the crop, and Bogotá would welcome the new windfall of tax revenue as it continues to operate under budget austerity. The slumping price of oil has slashed royalties coming in from the energy sector, and this has coincided with a peso devaluation that is straining the federal government’s investment and operational plans.

In the United States, where medical marijuana is legal in around half of the country’s 50 states, the segment generated $2.7 billion in sales in 2014, according to the Oakland, California-based ArcView Group. Even more encouraging is the growth: that vast sum represented a 74% growth over the $1.5 billion sold in 2013.

On top of the economic potential, Santos has stressed how cannabis can help Colombians suffering from a variety of diseases and ailments. “Today, Colombia took an important step into the vanguard of the fight against sicknesses," said Santos in a statement after formalizing an oversight process for the new industry last year. "We want to facilitate the research and production of medications created from cannabis, just as we do with any natural element that can provide relief from sickness and pain.”

Studies have shown that medicinal marijuana can be an effective treatment for cancer, HIV, multiple sclerosis, Crohn’s disease, seizures, epilepsy, and nausea, among other conditions.

The future of oil: A crude bargain

Posted: 29 Jun 2016 12:56 PM PDT

Oil price forecasting is a difficult game. Some observers think that the price moves in only one direction – up or down, but not up and down. Still others seem to think that the more they repeat their prediction, in public or in front of the mirror, the more likely it is to come true.

In 1979, during the Iranian Revolution, prices were predicted to explode, with OPEC countries piling up enough wealth in a matter of a few years to buy all publicly traded shares on the U.S. exchanges. But, after rising for about two years, prices declined and remained stagnant for nearly two decades (with a short-lived spike when Iraq invaded Kuwait in 1991).

Some then predicted permanently low oil prices and the collapse of oil exporting countries. But, forecasters were off the mark as prices rose to their highest nominal level to date, reaching more than $145 a barrel in 2008 with some oil ministers predicting prices surpassing $175 a barrel. Instead, prices fluctuated and then went down to a little over $26 a barrel on Feb. 11, 2016 – and with oil experts joining the bandwagon and predicting even lower prices of below $20.

In my view, the combination of market forces and the respective interests of Iran and Saudi Arabia will mean that the price of oil will generally remain below $60 a barrel for the next decade.

Oil prices are determined by the interaction of the market forces of demand and supply.

Demand for oil, as in the case of many other products, is in large part determined by the price of oil, and secondarily by global economic growth, the price of substitutes for oil and factors such as weather; and, of course, there is the short- and long-run impact of factors such as conflicts and wars on the demand for oil (and, more importantly, on its supply).

The supply of oil is also determined by the price of oil; up to about four or five years ago, some very smart people talked about the approaching "peak oil," or a physical limit to ever increasing production, but even that balloon was popped by the emergence of shale oil; and others today are predicting a peak in the demand for oil as renewable sources of energy replace hydrocarbons.

The most unusual factor in the evolution of oil prices is the declining market power of large oil producing countries. From 1980 to 2015, Russia and especially Saudi Arabia could unilaterally move oil prices on a sustained basis by cutting or increasing output and exports. Markets were tighter and Saudi Arabia was the only country with significant excess capacity and a strong financial position, so it could increase or decrease exports and, thus, control prices.

Today, things are different. Shale oil (and gas) production and slow world economic growth have created a global oil glut of about 1.5 million to two million barrels a day (b/d) that looks to be around for at least a few years; Iran is free from sanctions and will do all it can to attract foreign investors to increase output dramatically; Iraq plans to increase its output even further if it can restore political stability; and Saudi Arabia may be expanding its own sustained production capacity by about another two million b/d over the next 3-5 years because the rulers believe that the economic lifespan of oil as an energy source may be no more than 25 or so years.

All of the above notwithstanding, the conditions within Saudi Arabia and Iran, and the relationship between the two, will have a material impact on oil prices for the foreseeable future.

For the rulers of Saudi Arabia, the Al-Sauds, the overriding goal is to remain in power; everything else is secondary and pales in comparison. The Al-Sauds see the country as "theirs" and they intend to keep it that way. They have used the country's vast oil wealth to buy the citizenry (excluding their 12-15 percent Shia citizens) and the support of the corrupt religious hierarchy. Wasteful subsidies, heavy military expenditures, corruption, generosity to foreign supporters and the active obstruction of effective institution building have had a deleterious effect on the development of a thriving private sector and building a large and well-managed sovereign wealth fund to provide equitable benefits to future generations of Saudis.

While reforms are essential, they will be politically challenging and will cause a backlash from different segments of society: business interests, the ruling Al-Saud family, those with lucrative government jobs, the religious establishment, and especially the general citizenry who lose the handouts afforded to previous generations as a birthright.

In conjunction with their paramount goal of survival as the rulers of Arabia, the Al-Sauds have an overriding fear that the regime in Tehran is determined to overthrow them. Thus the Al-Sauds will do nothing to help and everything to weaken the regime in Tehran. They see oil prices as the most effective weapon in their arsenal to keep Iran at bay and thus if low oil prices reduce Iran's oil revenues then it is the weapon of choice.

The mullahs of Iran want to stay in power, too, but their background and conditions are very different from the Al-Sauds. They don't see Iran as theirs. They realize that Persian heritage and history is bigger than the mullahs. They had lost power and wealth under the Shah and they have regained both to a bigger extent than they had thought possible in their wildest dreams. The religious establishment recognizes that it needs the Islamic Revolutionary Guard Corps (IRGC) to rule; if the IRGC wanted to assume power there is nothing they could do about it and the IRGC could easily take over the reins of power. But the mullahs see the IRGC as a part of the Revolution and a takeover would not drastically damage their position.

The focus of Iran's oil policy is purely commercial – deliver maximum oil revenue to keep all constituents as happy as possible in order to stay in power. But Iran does not fear the Saudis or the other countries of the Gulf Cooperation Council (GCC) to use oil and oil prices as a weapon to affect revenue. The mullahs have no desire to overthrow the Al-Sauds per se, but they would like to re-establish Iran's dominance over the region and among the Shia worldwide, and show all Iranians that they have restored Iran's position in the wider region beyond anything that the Shah had achieved – they see this as the best way to guarantee the Revolutionary regime's (mullahs, the military and the intelligence services) long-term survival.

Iraq potentially could have as much, if not more, oil as Saudi Arabia. Iraq's political turmoil does not invite sustained development of all oil fields. Until stability is restored, Iraq will be about where it is today, but a big increase in Iraqi production is always a threat to other major suppliers and, depending on the eventual political outcome, a potential ally of Iran in all spheres.

How will all these interests and relationships play out in the future and how will they affect oil price developments along with expected market developments in supply and demand?

On the demand side, world economic growth will not go back to its trend before the Great Recession. At the same time, growing concerns about global warming will begin to have a significant impact on national policies and personal choices. Electric and natural gas-powered vehicles will become a more significant part of the global vehicle fleet. All renewables are likely to make an increasing contribution to the global energy balance. The combination of these will slow the growth in oil demand.

On the supply side, I believe that there are strong forces indicating plentiful supplies. The shale oil revolution, so underestimated by experts, is here to stay and may in fact expand; yes, there will be production shutdowns as prices decline but given the sunk costs and depending on the location and financial condition of the shale oil producing entities when oil hits $55 a barrel, they will start coming back on line; and shale oil and gas production around the world (i.e. outside the U.S.) will be developed and begin to climb.

Iran, Iraq, and Saudi Arabia will all increase their production levels. Iran will do all it can to ramp up production output to more than seven million barrels a day (from 3.6 million in March) and exports to over 4.5 million b/d (from 1.75 million in March) over the next 5-7 years. If Iraq can achieve political stability, it could increase output to eight million b/d (from 4.5 million in March) and exports to 5.5 million b/d (from 3.8 million in March). And Saudi Arabia is likely to increase its sustained production capacity by about two million b/d (to about 12.5 million b/d) over the next 3-5 years.

If market conditions were not enough to dampen oil price expectations, there are also the political realities mentioned above. Namely, while oil output and exports are important to the Al-Sauds, it is trumped by their survival instincts. Being totally convinced that the regime in Tehran is set on their destruction, they will not do anything that could help the mullahs. It is the principal constraint that encourages maximum Saudi oil output now and an increase in installed oil production capacity of about two million b/d over the next 3-5 years to afford Saudi Arabia continuing market power and to get oil out of the ground faster. It is these Saudi motivations that impose the operative lid on oil prices for the foreseeable future.

Putting it all together, I cannot see oil prices (West Texas Intermediate crude) going above $55 to $60 in at least the next decade. The only exception might be short-lived jumps as a result of conflicts and disruptions.

About the author: Hossein Askari is the Iran Professor of Business and International Affairs at the George Washington University. He served on the executive board of the International Monetary Fund and was special advisor to the Minister of Finance of Saudi Arabia.

This article is part of a syndication agreement  between The Mark News www.themarknews.com and The City Paper.

Azimos in La Macarena: A Bogotá café with charm

Posted: 29 Jun 2016 12:41 PM PDT

It's easy to find Azimos. You just need to follow your nose. This charming brunch place spreads its delightful smell of baking through the streets of La Macarena, one of the growing neighborhoods of Bogota.

Many Bogotanos already know the fresh pastries of Azimos (Cra. 5, No. 26- 64). The establishment opened in 2004 before expanding last year. Today, more than being a gourmet bakery, Azimos is also an organic shop, a conscious restaurant and a cozy café.

It features an open, wooden kitchen, a restaurant flooded with light, and alleys full of natural products. Marcela Velásquez, the founder of Azimos, made a trip to New York last year to get inspiration from other organic concepts. That's why you can taste a little something of the Big Apple while having brunch. Today, Azimos is one of the rare places in Bogota where meat lovers and vegans can meet, eat, and chill at the same table.

Marcela saw the need for healthy nutrition rising in the capital for the past ten years. "Colombians are more aware of the importance of healthy eating than before," she said. "The demand of organic, vegetarian, and local products is growing fast."

Velásquez is motivated by the changing habits of her city and is happy to give people more options. "Azimos aims to contribute to its customers well-being through healthy and environmental-friendly food, while supporting the local and artisanal production," explains Marcela. This ethical way of thinking reflects her philosophy of life. She believes that "conscious eating" creates interactions and community.

Whether you choose the Napolitan or Santandereano, the breakfast wont dis- appoint. Bogotanos and foreigners alike come to enjoy granolas with fresh fruits, organic scrambled eggs, soups, and croissants while reading their favorite news- paper. Depending on their mood, the quiche of the day can be served with a fresh juice, a chai tea, or a glass of Argentinean wine.

In the aisles of the delicatessen, Colombian artisanal products such as the delicious arepas de chocolo and vegetarian tamales live side by side with Belgian chocolates, Italian prosciuttos, and French Camemberts.

Velásquez is even considering expansion throughout Colombia. Maybe in the future, paisas, caleños or costeños will be able to enjoy the taste of Azimos in their own hometown.

Azimos. Cra. 5 No. 26- 64
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