Latin America – The Cannabis Industry's Low Cost Producers

The region consists of 42 countries, 650 million people, and combined health care spend of USD$354 billion. In Uruguay, it boasts the first country in the world to legalise cannabis for full recreational use in 2013. And through Colombia, it accounts for 44% of the allotted cannabis exportation quota to the international markets.

10 Latin American (LATAM) countries have legalised cannabis for Medicinal usage and 3 have decriminalised for adult use. There are over 40 Licensed Producers operating in the region, a region that boasts some of the most prime real estate and growing conditions in the world.

The region's cannabis industry is set to generate USD$125 million in revenue in 2018. However, this is estimated to explode 10x to around USD$12 billion by 2028. By then, it is estimated there will be just over 4.5 million medicinal patients, which is dwarfed by the 500 million estimated recreational users.

The region boasts exceptional climatic conditions, with lots of sunshine and good rainfall. This coupled with acres and acres of arable land, could make the LATAM region the global leaders in cannabis production.

In addition to the above, the price of labour is exceptionally cheap when compared to it's European and North American counterparts. Combined, it is estimated that LATAM will be able to produce cannabis – in commercial quantities – for nearly 80% less than the rest of the world. That's a pretty big advantage.

 

Regulated Markets

Source: Prohibition Partners' "LATAM Cannabis Report"

 

Medical cannabis and recreational cannabis will be universally legal in the region when cannabis is rescheduled by the United Nations or when cannabis becomes legal at the federal level in the US.  There is sufficient local support to make cannabis fully legal but, currently, no political will to do so.

 

"the economic and medical potential of the industry cannot be ignored by any forward-thinking government and we expect medical and recreational cannabis to become legal in the next 5-10 years."

 – Prohibition Partners

The Medicinal Market

By 2028, the market is expected to be worth USD$8.5 billion, with most of the countries offering some sort of medical aid coverage (albeit to varying amounts). Oils will be the dominant method of consumption, with different laws for how the medicines can be prescribed.

The Recreational Market

The recreational market is expected to be worth USD$4.2 billion by 2028. It is estimated that more than 5% of the total population will make up the recreational user base. At the time of writing, Chile, Jamaica, and Mexico have decriminalised for recreational use.

 

Argentina

Argentina has a population of 45 million and an estimated cannabis usage of 2.2% of the population. It is expected to have a market value of USD$1.1 billion by 2028.

Cannabis was legalised for medicinal use in 2017, with patients required to get a prescription from their GP. The consumption method is through oils only, with the Charlotte's Web's range having been approved for prescription. There is currently no domestic production with all product being imported.

 

Charlotte's Web is currently one of the only CBD products licensed for import to Argentina.

 

Recreational usage is illegal with severe penalties for dealing, possession, and usage. These are primarily in the form of steep fines, although in some cases can result in significant prison time of up to 15 years.

 

Brazil

With 210 million people, Brazil is the second largest market (behind Mexico) in the LATAM region. It is estimated that up to 2.5% of the population uses cannabis, and the overall market is predicted to be worth USD$350 million by 2028.

Medicinal Cannabis is fully covered under the healthcare system, and it has been legal since 2015 to import for personal medicinal usage. However, this can only be achieved by first getting a GP issued prescription, and then gaining government approval for this prescription.

Recreational usage was decriminalised in 2006, meaning that users found in possession of cannabis (up to a certain amount and if deemed for personal use) are issued a warning or given community service.

 

Colombia

With a population of 50 million and an estimated cannabis user base of 3.27% of the population, Columbia's market value is estimated to be worth USD$664 million by 2028.

The United Nations' Single Convention on Narcotic Drugs of 1961, the Convention on Psychotropic Substances of 1971, and the Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988, have developed a framework for the legal development of cannabis products.

These conventions and regulations have established the export quota which each of the signatory countries must abide by and according to the regulations, Colombia has been granted 44% of the total export quota.

 

Colombia could become a major legal cultivator with substantial export potential.

 

Medicinal cannabis has been legal since 2015, with medicinal oils legalised in 2016 and flower in early 2018. No government approval is required for prescription, with GP's having full discretion. However, only certain registered pharmacies may distribute to medicinal patients.

However nearly 20 years prior, in 1986, Colombia legalised the manufacture, export, sale, medical, and scientific use of cannabis, with cannabis for personal use (up to 20 grams) also permitted. But due to a lack of regulation on production and use of medical cannabis, production could not be initiated for several years to come. In 1994 cannabis was regulated and consumption was decriminalised.

Thereafter, in 2012, the Colombian government decriminalised the possession of up to 20 grams, in addition to the aforementioned personal cultivation of up to 20 plants, of cannabis.

 

Mexico

Mexico has the largest population in the region with 131 million. It is estimated that cannabis use is around 2% of the population, and the region is expected to be worth $1.98 billion by 2028. This makes Mexico by far the biggest LATAM market.

Medicinal cannabis has been legal since 2017. This was driven by unanimous public support of little Graciela Elizalde's need for medicinal cannabis to treat her aggressive form of childhood epilepsy.

Such was the support, that she became the very first medicinal patient in Mexico when she was granted special access to her CBD oils in 2015. Graciela is regarded as being as important as young Billy Caldwell was in the UK, in generating significant public awareness around the issue. 

Cannabis can be prescribed by a registered GP, and only medicinal oils are allowed (which cannot contain more than 0.3% THC). There is currently local cultivation, and hence medicines must be imported. There have been 308 registered imports to date (at the time of writing).

 

Source: Greencamp

 

Recreational usage is currently illegal however this is rapidly changing. The Supreme Court of Mexico recently ruled that the prohibition of cannabis was unconstitutional. It is expected that the laws will be changed in 2019 and Mexico will lift prohibition and legalise for adult recreational use.

This would include the right to carry up to 5 grams of cannabis and the allowance for home grow (although the amount of plants is still undecided).

 

Uruguay

Uruguay was the very first country in the world to fully lift the prohibition of cannabis and legalise in 2013. Uruguay with a population of 3.5 million people, has an estimated cannabis user base of over 9% of the population. This is way above the region's average, but with full legalisation, this is to be expected.

Only registered Uruguayans are allowed to purchase cannabis, and there is a strict set of laws that govern the sale, possession, and cultivation of cannabis. There are currently only 2 Licensed Producers who supply all of the cannabis to the IRCCA (the regulatory body that is responsible for Cannabis distribution in Uruguay).

Registered patients may only purchase from registered pharmacies, and at the time of writing, there are currently 23,000 registered pharmacies. Patients are also allowed to grow up to 6 plants in the own home and may produce up to 480 grams per annum. No private selling is allowed.

The region is characterised by the prevalence of over 2,500 private Cannabis Social Clubs.  These clubs allow for the consumption of cannabis and assist Uruguayans in the edification of implementation of home grows.

It is estimated that there are more than 35,000 purchases per annum.

 

Source: Prohibition Partners' "The LATAM Cannabis Report"

The Bottom Line

Although the current quality of the Cannabis produced in the Latin American region is not great, it certainly is the cheapest. Self-cultivation is a big thing in the region, with Chile, Jamaica, and Mexico all allowing home grow. Consequently, more and more cannabis clubs and communities are popping up to support this growth.

The region is known for almost perfect growing conditions, and when coupled with large amounts of available farming land, very low costs of labour, sunshine that can drive up to two harvests per annum, and the booming home grow culture mentioned above, you have a region primed to potentially become the global leader's in low-cost cannabis production.

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Mark Bernberg
Mark Bernberg

Mark Bernberg is a long-time cannabis investing enthusiast and founder of The Green Fund, Asia Pacific's preeminent media house, positioned at the forefront of the global cannabis industry.

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