Multi-billion dollar legal cannabis industry foreseen for Latin America

Posted on October 9th, 2018 by Bill Weinberg and tagged , , , , , , , , , , , , , , , , .

leafOver the past two years, the Latin American cannabis industry has "emerged from the shadows" to command the attention of international firms and investors. Legal cannabis sales within the region are on track to reach $125 million in 2018—but that figure is expected to rise to $12.7 billion by 2028.

These are the conclusions of The LATAM Cannabis Report, newly released by UK-based international cannabis industry consultancy Prohibition Partners—a rather ironic name, since it is dedicated to tracking and spurring the growth of the sector as it burgeons in the nascent post-prohibition world.

Prohibition Partners arrived at the figures through an analysis of pricing, consumption and patient datasets in the region. The greatest share of the market value will come from the medical sector, anticipated to be worth $8.5 billion a decade from now. Since Uruguay passed its ground-breaking general legalization law in December 2013, no less than 10 countries in the region have legalized medical cannabis to one degree or another.

Following a pattern set in other industries, the report predicts that the Latin American market will undercut global cannabis prices. "Offering a low-cost alternative to North American and European markets, licensed producers will look to cultivate in Latin America, creating an international export market," Prohibition Partners state.

"Latin America has a prospective market of over 500 million adult use customers and 4.3 million patients, making it a core priority in cannabis companies' global strategy. Its low-cost agricultural exports and increasing support for the legalisation of recreational cannabis means it could play a pivotal role in the international cannabis industry."

At the moment, only Colombia is aggressively promoting  cannabis exports, while Uruguay is the only country in the region to have legalized "recreational" cannabis. But the report sees this as only a beginning. Its overview of countries in the Latin American region now allowing a cannabis market, to one degree or another, is arranged in simple alphabetical order. However, in reviewing its findings, we'll break down the countries by their regional placement within Latin America.

Southern Cone
The experiment in Uruguay of course warrants great attention. The country now has an Institute for the Regulation and Control of Cannabis (IRCCA), which registers growers' clubs authorized to cultivate up to 99 plants annually. These clubs now number some 2,500. The IRCCA also oversees pharmacy sales, which began in 2017, with 35,000 Uruguayans now registered to purchase. IRCCA director Martín Rodríguez is quoted justly boasting, "We moved the frontier of what is possible."

But this is one of several places where the report displays more enthusiasm than rigor—and even contradicts itself. It states: "In 2017, Uruguay became the first country in the world to legalise and regulate cannabis..." Elsewhere, the report makes clear that the legalization law was passed in 2013. It just took until 2017 for the first pharmacy sales to be approved. Home cultivation has been allowed since August 2014, when the regulations approving it took effect. The first growers' clubs were registered later that year.

The report also states: "Although recreational cannabis or medical cannabis was never illegal in Uruguay, the country has formally introduced a set of laws for their sale, possession and cultivation." This is an overstatement. A clearer picture is provided by a Brookings Institution report released this year, "Uruguay's Cannabis Law: Pioneering a New Paradigm." In 1975, Uruguay decriminalized personal quantities of all drugs, with discretion left to the judge as to what this actually means. But the country was then under a military dictatorship, and there were certainly no provisions for sale or cultivation.
In Argentina, a medical cannabis law was passed in March 2017, although the program has been moving very slowly. Private cultivation is not allowed. Two government research agencies have been approved to oversee cultivation, and strictly limited imports from Uruguay have meanwhile been permitted—and then only of high-CBD strains with virtually no THC. Small quantities for "personal use" have been decriminalized since a Supreme Court ruling in 2009, but this is again undefined, and left to the discretion of the judge hearing the case. 

Chile passed a law in 2015 allowing sale and use of cannabis extracts for medical purposes, and cultivation for the program has ensued since then under the auspices of licensed non-profits, most prominently the Daya Foundation. Chile's decrim policy has also been expanded, allowing home cultivation of up to six plants.

Brazil also passed a limited medical law in 2015, allowing importation, sale and use of CBD-only non-herbaceous cannabis products. Cannabis has been decriminalized since 2006, but there is no provision for cultivation, and "alternative penalties" such as mandatory treatment program may be imposed. The US-based Medical Marijuana Inc has been approved to import CBD oil into Brazil. The Brazil discussion also includes an inaccuracy, stating that the government is controlled by "a nine-party coalition made up of the Workers' Party" and its leftist allies. This embarrassingly misses the boat on the grave political crisis that has ensued in Brazil since the last Workers' Party president Dilma Rousseff was impeached and the political right took over in 2016.

Paraguay in May 2017 authorized the import of cannabis oil, under the control of the Health Ministry. Then, in January 2018, a bill was signed into law that allows for domestic cultivation for the medical industry. It is as yet unclear what this legal industry will look like, but the law is aimed at bringing the black market under control—as Paraguay has long been one of the world's leading contraband cannabis producers.

Colombia and Peru
Medical cannabis was legalized in Colombia by presidential decree in 2015, and in 2017 the government established a legal framework for commercial cultivation. Large exports are anticipated.

We again run into some problems here. The report states that "in 1986, Colombia legalised the manufacture, export, sale, medical, and scientific use of cannabis." A quote from outgoing President Juan Manuel Santos to this effect is taken at face value. That's a reference to Law 30, or the National Narcotics Statute (Estatuto Nacional de Estupefacientes)—a generally hardline measure that nonetheless made note of the right to medical use of cannabis. It did not, however, establish any legal protocols for exercise of this right—and harsh government eradication campaigns of both cannabis and coca only escalated in the ensuing years. Colombia decriminalized personal quantities by a ruling the country's Constitutional Court in 1994.

The report's contention that "Colombia owns the only exportation licence in the region" is contradicted by its own discussion of Uruguay initiating exports to Argentina—although this is certainly small compared to what Colombia has planned.

In Peru, the celebrated case of Buscando Esperanza (Seeking Hope), a collective of mothers who were producing cannabis oil for their epileptic children before they were raided by the police, prompted passage of a medical cannabis law in November 2017. But the implementing regulations are still pending, and it is unclear where supply is going to come from. Personal-use quantities of "recreational" cannabis have been effectively decriminalized. (A chart listing "recreational" cannabis as "illegal" rather than "decriminalized" in Peru is again contradicted by what the actual text says.)

In June 2017, Mexico's President Enrique Peña Nieto signed a bill to legalize medical cannabis (thus far only for CBD products). This was also the fruit of activist efforts—and particularly a court case won by the family of eight-year-old epilepsy sufferer Graciela Elizalde two years earlier, allowing her access to CBD oil. There are a few more slip-ups here: we're told that it was Mexico's Supreme Court that ruled in the case; in fact, it was a lower court in Monterrey. We're also told that "Home-grown cannabis for personal use had been legalised" in 2015. Not exactly. That was a Supreme Court decision, but under Mexico's legal system there must be multiple high court rulings on a question before it has force of law. Mexico's 2009 decriminalization law contained no provisions for cultivation. 

Central America and the Caribbean
On the Central American isthmus, Panama has made the most progress. In 2016, President Juan Carlos Varela signed a law "to enable the legalisation of medical cannabis"—but not actually legalizing it. Legislation to implement the framework established by that law remains pending.

In the Caribbean, the report looks at Jamaica and the Cayman Islands—two countries that are not actually in Latin America, as they are both English-speaking. The Caymans are in fact not even an independent country, but a British overseas territory—although with broad autonomy. Jamaica legalized medical cannabis in 2015 as part of a general overhaul of its drug law that also saw decriminalization and provisions for sacramental use by Rastafarians, The Cayman Islands passed a CBD-only medical law in 2016.

Missing: the social justice factor
The LATAM Cannabis Report provides a useful if sweeping survey of the region's emerging cannabis industry and legal environment. Apart from its various small errors, its biggest weakness is its failure to grapple with the question of what others have called "cannabis equity." The report's text about low costs making the region attractive to foreign investors raises the question of whether the cannabis sector will suffer from the same iniquities that characterize the traditional agro-export sectors in Latin America: serving agribusiness and corporate investors as the peasantry is further marginalized. Or will the campesinos, who have borne the brunt of prohibition-related militarization, be assured of a dignified place in the emerging legal industry? Colombia is now grappling with that very question. The Prohibition Partners report does not.

Like other such recent industry reports, The LATAM Cannabis Report eschews the word "marijuana" in favor of the more clinical and less stigma-laden "cannabis." The former is used only when unavoidable—for instance, in quotes from officials who use the word.

Cross-post to Freedom Leaf 





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