New Frontier Data analyzes Latin America cannabis market

Posted on February 14th, 2019 by Bill Weinberg and tagged , , , , , , , , , , , , .

leafLatin America is at the forefront of the global wave of cannabis law reform, according to a new report from a DC-based industry analyst. New Frontier Data sees a $9.8 billion market in the region, with big expansion potential for both exports and serving local consumption. 

"Since Uruguay in 2014 became the first nation to legalize adult use cannabis, its neighbors throughout the Latin American region have begun in varying degrees to embrace possibilities and policies for reform. As the international community increasingly addresses cannabis reform...myriad opportunities are manifesting themselves in places where not long ago such activity seemed unimaginable."

So writes Giadha Aguirre de Carcer, founder and CEO of New Frontier Data, a cannabis industry analyst firm based in Washington DC, in the introduction to its newly released Latin America Regional Cannabis Report: 2019 Industry Outlook.

"All told, the countries regionally included in this report include more than 600 million people, among whom nearly 13 million use cannabis at least annually," Aguirre states. The report estimates the total market value of cannabis in Latin America—including both legal and illicit—to be worth $9.8 billion.

The report was prepared in conjunction with Sao Paulo-based The Green Hub, which bills itself as "the first company focused on leveraging initiatives" in Latin America's medicinal cannabis market.

It examines four major markets in the region, and one smaller one with potential to emerge in the coming years. It finds that "Latin America will play an increasingly important role in the evolving global cannabis marketplace, and the legal regulated industry will be a catalyst for economic development, job creation, and new opportunities in healthcare and wellness across the region."

Uruguay leads the way
The report, not surprisingly, starts with Uruguay, the first country on Earth to establish a fully legal adult-use industry. Consumers can access legal cannabis in Uruguay through home cultivation, cannabis clubs, or pharmacies. Legal users must register with the Institute for the Regulation and Control of Cannabis (IRCCA), and select one of the three sources as their sole means of access. The IRCCA is about to begin receiving applications for additional commercial producers to supply pharmacies.

The program has not got off to entirely smooth start. Uruguay's market faced significant supply shortages after its launch in 2017. Initial delays were caused by the IRCCA's failure to adequately coordinate distribution. Then, the first batch of cannabis produced by local firm Symbiosis did not pass IRCCA testing (for genetics, mold, bacteria, pesticides and other contaminants).

Despite the fact that sales are restricted to Uruguayan citizens and permanent residents, the report sees "cannatourism" nonetheless emerging in the country. "A common way of providing cannabis to non-residents is through illegal but not strictly monitored 'cannabis tours,' where customers ostensibly pay for cultural or social tours during which they receive cannabis."
Colombia eyes export market
The report sees Colombia "positioning itself to be a global exporter of medical cannabis derivatives." The country is said to boast "inexpensive cultivation costs, ideal growing conditions, and experienced cultivators." Colombia is expected to produce cannabis at a fraction of the cost of exporters like Canada. And its geographically central location is also advantageous for global business: "It sits at the center of the Americas, with access to both the Pacific and Atlantic oceans."

A legal medical cannabis industry began in 2015, although then-President Juan Manuel Santos insisted it would not be a step toward full legalization. "Social stigma still surrounds cannabis users in a country with a long history of drug conflict." 

Open-air greenhouses are the preferred method for cannabis cultivation in Colombia, exploiting the country's 12-hour light cycle. This "results in lower energy costs relative to indoor cultivation techniques, and can apply to any of Colombia’s regions."

As of this year, 68 of 73 manufacturing licensees are authorized to manufacture for export. But despite its advantages, Colombia faces a challenge in catching up to the countries already established in the cannabis export market. The International Narcotics Control Board reports that over the past five years, the UK and the Netherlands were consistently the top two exporters of legal cannabis .

Brazil: biggest market potential
Brazil, with the region's largest population, is also home to its greatest number of cannabis users—an estimated 4.2 million. The report states: "Medical cannabis is legal in Brazil, and possession and cultivation of personal amounts are decriminalized." (These are somewhat misleading statements, however, as the medical program is CBD-only, and mandatory treatment programs are sometimes imposed even for possession of small quantities.)

Brazil's medical cannabis program is the fruit of activism and litigation. In April 2014, a judge permitted the importation of CBD-based products for a mother to treat her five-year old epileptic daughter. Since then, patients have been able to obtain special authorization from the National Health Surveillance Agency (ANVISA) to import CBD treatments. Over 79,000 units of such products been imported into Brazil since ANVISA authorized CBD use in 2015.

Mexico's pot populism?
Mexico may be poised for progress unprecedented in the region. Following a ruling by its highest court in late 2018 that prohibition is unconstitutional, Mexico is expected to fully legalize cannabis for adult use. And while its medical program is for now CBD-only and reliant on imports, this may also be changing soon.

Many are viewing legal cannabis as a means to address Mexico's daunting social and economic challenges: "The main social concerns about violence, corruption, and economic issues are mirrored by the political objectives of incoming President [Andrés Manuel López] Obrador. He and other senior politicians in Mexico are looking to build on the legal medical cannabis program and expand it to fully legal federal regulatory structures... There is an economic case to be made how cannabis can help support the goals of the incoming administration for improving education and economic development in southern Mexico, and reducing dependency on US food imports while increasing exports."

Panama next in line?
Finally, the report turns to Panama, which is said to be "at a crossroads." Cannabis remains illegal in Panama, for now. The government has only recently started permitting exceptional cases of medical CBD use with a special "sanitary permit" from the Ministry of Health. Yet, "the path for cannabis reform has been laid," as the National Assembly is currently reviewing a bill to establish a wider medical program, including domestic cultivation.

No discussion of equity
While the report does touch on the need to establish standards for Good Manufacturing Practices (GMP), it sidesteps some of the deeper implications of its own analysis. When the authors write that Colombia is known for its "low production costs," they note that this is already "seen in its major exports of coffee and cut flowers." This raises the question of whether the cannabis industry will exploit economic desperation as these other sectors have, and whether it will similarly be complicit in repression of labor organizing, or in the usurpation of traditional peasant lands.

The report states, meaning to sound optimistic: "Cannabis producers and processors in Latin America will have a natural cost-based advan- tage relative to producers in Europe and Latin America, based on regional di erences in labor costs alone." It then cautions: "[W]hile producers in Latin America have an advantage toward low-cost production, it is important to prepare for the coming interna- tional competition from producers in Africa and Asia, with countries from Zimbabwe and Lesotho to South Africa and Thailand all preparing to build cannabis export businesses. Consequently, cost containment should remain a strategic priority for all producers in the region."

This smacks a little of what anti-globalization activists have called the "race to the bottom." 

Last year, California passed a law that will create an “equity” program for the state’s legalized industry, aimed at justice and inclusion for those communities hardest hit by cannabis prohibition. The Latin Ameican nations may also have to grapple with this idea if the emerging cannabis industry is to avoid the social injustices that have characterized the region's other agro-export sectors. Only the report's section on Mexico even remotely broaches this discussion.

Like many such papers by the new industry's market analysts, the report eschews the word "marijuana," presumably because it is associated with the stigma, and avoids using it almost entirely.

Cross-post to Cannabis Now 





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