The Latin American Cannabis Landscape – Part Three: Economics
Capitalizing on cannabis is occurring across the Western hemisphere. From North America down to South America, there is a trail of expansion, investment, mergers, and acquisitions.
Some may think this process is as easy as counting to ‘one, two, three’ or ‘uno, dos, tres,’ but it’s not that simple. Money still doesn’t grow on trees.
However, by counting on one plant, such as cannabis, it is simple to reach millions of people and capitalize on billions of dollars, pesos, sol (Peruvian currency), or real (Brazilian currency).
After all, cannabis is a cash crop.
The Latin American investment opportunities range from scientific research for pharmaceuticals to formulated products for nutraceuticals, and everything that is required in between (e.g. land, labs, licenses).
From clinical trials to cosmetics, the region is gearing up for high return and low cost of production.
That’s not the only high, low combo to note. As the market develops, high CBD, low THC products may be another opportunity capturing a board’s vote.
Organto Global Cannabis Group recognized this and was just awarded a Colombian cultivation license for non-psychoactive cannabis. That is legal jargon for businesses and people focused on high CBD products.
Organto is one of the first this year to announce plans to cultivate high CBD, which is significant. Being first to market has its advantages, especially in this industry.
There are some key players with an existing presence in Latin America that are demonstrating their strength in the region.
In 2018, Aurora completed their acquisition of Uruguay based ICC Labs. Cronos entered the Latin American market through a JV with Colombian based company, Agroidea SAS. The Green Organic Dutchman entered Mexico with a similar strategy, a JV with LLACA Grupo Empresarial.
Wayland’s approach was through an $8.5 million deal to purchase 819 hectares of land in Argentina.
All of that was last year. It’s barely been four weeks into 2019 and the deals are ongoing.
Khiron Life Sciences continues its Latin American dominance through an MOU with Dayacann, Chile’s first licensed medical cannabis cultivator. Canopy further expanded in the region via Spectrum Cannabis Peru earlier this month. Namaste Technologies, an e-commerce platform, has entered Brazil, Mexico, and Chile.
The region is heating up, and for FouliMed, for example, cultivation is ramping up. The company expects to produce 70 tons in their Colombian facilities.
As Latin America becomes a cultivation hub, there will be an increasing need for labs and testing. Digipath recognized this and announced that their footprint will begin in Colombia, and likely expand from there.
For those reading who currently don’t benefit from a first-mover advantage, there’s plenty of landscape still. Look no further than other parts of Central America, the Caribbean and the rest of South America.
The benefit of the Latin America market is that the region sells itself because cultivating cannabis in Latin America is 80% cheaper than North America and parts of Europe.
According to Civilized, the price per gram in Quito, Ecuador is $1.34 and $2.20 in Bogota, Colombia and Asuncion, Paraguay.
Part of the low cost for production is having the sun as an advantage: there are up to three outdoor harvests per year in many parts of the region. The cost of outdoor rays outshines what any indoor facility’s energy bill may outline.
The profit margin in Latin America provides for a bright, economic future.
As big foreign players scale up commercialization, they are also effectively impacting the local community.
The local community, thus, requires further attention. In Jamaica, for example, legalization has emphasized that small farmers benefit, which is now becoming reality.
Thinking about the potential value of a market is more than economics. Equity needs to be addressed economically and socially.
From hiring local employees to educating the public and navigating national regulations, relationships with the locals are key. Companies and investors are actively building relationships with products, people, plants and policies. They realize that each relationship begins where the latter ends.
As many profit from this lucrative market, it is significant to remember that with vast opportunity comes great responsibility. Don’t worry, no one will be counting their coins as they generate tremendous change.