California dominates U.S. legal cannabis sales, but Puerto Rico’s transformative laws are luring major investment from the Golden State. We called the company behind California’s iconic Jay and Silent Bob’s Private Stash to explain why it is so excited about Puerto Rico.
With 2018 retail sales of $2.5 billion, profits from California’s massive cannabis industry are heading to fresh jurisdictions. With a year-round growing season and cannabis-friendly government, Puerto Rico is attracting millions of these investment dollars.
California-Puerto deals are announced regularly. Just this week, another multi-million dollar investment was announced by Chemesis International (OTC: CADMF), a California-based, “seed to sale” cannabis producer. The company behind popular Jay and Silent Bob cannabis products, Chemesis is buying roughly 20% of GSRX Industries, a major Puerto Rican cannabis retailer.
The deal highlights California’s complimentary relationship with Puerto Rico. The U.S. island territory legalized medical cannabis in 2015, and its government already has a Department of Cannabis, with established patient and dispensary licensing procedures.
Importantly, businesses in Puerto Rico benefit from the Tax Incentives Act of 1998—and individuals working at Puerto Rican companies can claim tax benefits from the 2012 Acts 20 and 22—all of which can reduce business operating costs by over 20% versus any other state.
From cultivation, to manufacturing, distribution, and retail, Chemesis’ premium products are sold under various brands around the country. Chemesis produces and sells its products at retail store fronts in California, but sees Puerto Rico as a transformative jurisdiction for growth.
“The Latin American market holds some very major advantages over regions that do not have such great climates for growing cannabis and hemp,” said a Chemesis representative, who explained that both California and Puerto Rico “offer climates that allow for up to three harvests per year, which significantly increases usage and annual yields. Along with the ability to grow year-round, they both allow for cost efficiencies that otherwise cannot be realized in other regions.”
Chemesis noted the island’s tax benefits, as well. “Puerto Rico allows Chemesis to leverage these benefits, while also not being subject to duties when shipping to the continental United States.”
Chemesis retain key operations in California, and in fact, recently opened another manufacturing and extraction facility in California’s Cathedral City. “Our team in California has been involved in the state for decades,” the Chemesis representative explained. Puerto Rico will not replace, only complement its California operations. “California is the largest cannabis market in the world. The additional manufacturing and extraction facility will allow Chemesis to fully realize a large portion of what this market has to offer. The facility is strategically located near our existing facilities, which will reduce time and cost for brands and businesses that need quick and efficient services.”
Like many California investors, Chemesis sees the fertile, tropical land of Puerto Rico as a major opportunity. Last month, Chemesis increased its hemp cultivation land in Puerto Rico by 1,000 acres, with an option to add 5,000 additional acres. “The island has been in need of an agricultural revolution, and the hemp industry promises much needed jobs,” said Chemesis CEO, Edgar Montero. “Puerto Rico’s tropical climate makes the island an ideal competitor in the hemp industry, furthermore it will allow the Company to harvest up to 3 crops per year compared to 1 in many areas around the world.”
As cannabis sales exceed all-time highs nearly every quarter, almost every major California operator is expanding. A Chemesis representative said they have no plans to slow down, “The Company continues to increase its footprint by ensuring the services we provide are led by teams of operators whom are not only skilled, but passionate about the industry they are in.”
The spokesperson continued, “Chemesis has a lot of exciting and unique plans for the coming year. We accomplished many things in the back half of 2018, and the team was able to execute on many things to set us up for a great 2019. Those who have followed Chemesis, and our story know that our assets and acquisitions were completed in 2018. We are now concentrating our efforts into those acquisitions as we continue to turn potential revenues into realized profits.”