Why marijuana is thriving in Colombia

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Marijuana has been spreading its roots globally. Uruguay and Canada were the first two countries to fully legalize cannabis. Thailand is advancing its medical marijuana market. New Zealanders are making a strong case in support of legalization. To learn more about this phenomenon, read Cannabis: While the US Waits, the World Opens Up. Mexico could be next.

Colombia legalized medical marijuana in 2015. Now, it’s working on its booming medical cannabis industry. Let’s take a look at how.

What’s causing the medical marijuana boom in Colombia?

Colombia’s equatorial climate is the greatest advantage the country has when it comes to growing cannabis. Additionally, land and labor costs are cheap. Hence, Colombia is an attractive choice for North American cannabis companies that wish to expand.

Colombia is known for drug-related violence. Hence, now it’s interesting to see how marijuana grown there is used for medical purposes and is used by the world. Many Colombian companies are exporting their products globally.

A Forbes article mentioned that Khiron Life Sciences partnered with US company Dixie Brands to produce cannabis-infused products to Latin America and legal US state markets. Clever Leaves also received Health Canada’s help in exporting cannabis to Canada. It also exported its first hemp-based product to the United Kingdom. The company will also ship CBD (cannabidiol) products to Europe and other medical products to select markets such as Germany.

Rodrigo Arcila Gomez, president of the Colombian Cannabis Industry Association, said, “Colombia can produce cannabis products at lower prices than competitors due to affordable land, relatively low wages and an abundance of skilled farm hands who cut their teeth in Colombia’s booming flower business.” Colombian companies have spent close to $600 million on building medical marijuana facilities.

What could challenge the growth of medical cannabis in Colombia?

Research has shown that the legal marijuana market could grow at a compound annual growth rate of 23.9% and reach $66.3 billion by the end of 2025. The US should take action now. It appears many believe that Colombia could supply two-fifths of the world’s marijuana. However, concerns loom over the industry.

A Financial Times article said that Andrés López, a former director of the National Narcotics Fund in Colombia, feels some factors could threaten the medical weed market in Colombia.

He believes that a good climate, cheap land, and labor aren’t the only factors that produce quality cannabis. He added that it’s difficult for small farmers to afford to produce high-quality products.

Since the weed produced in the country is used for medical purposes, it’s essential that it meet certain standards. High-quality products demand proper research, testing, and processing, which requires enormous investment. Another concern is security in a country such as Colombia, where drug trafficking is common.

Cannabis players are benefiting from the medical marijuana business

Cannabis players are cashing in on the growing medical cannabis industry. Even though Aurora Cannabis (ACB) disappointed with its fiscal 2019 fourth-quarter results, the company saw continued growth in both its Canadian and international cannabis businesses in the quarter. It saw an increase of 86% sequentially in kilograms of medical cannabis produced.

Currently, Innovative Industrial Properties (IIPR), an REIT marijuana company, has gained attention. IIPR isn’t a conventional cannabis company. It provides real estate solutions to medical cannabis players. The company mentioned in its second-quarter earnings that it had made numerous acquisitions to drive growth. It acquires properties for medical-use cannabis cultivation and processing.

Another significant cannabis player, Canopy Growth (CGC) (WEED), saw gross revenue of 23.6 million Canadian dollars from both its Canadian and international medical channels in its first quarter of fiscal 2020. Its global medical revenue could rise further. It also provides medical training programs for cannabis. Additionally, Canopy Growth has invested around $60 million in creating Spectrum Cannabis Colombia with a cultivation site in the southern province of Huila. To learn more about Canopy’s expansion into the CBD segment, read Why Canopy Growth Acquired BioSteel Sports Nutrition. Year-to-date, IIPR has gained 98.1%, while Canopy and Aurora have fallen 13% and 9%, respectively.

The US is still unsure about legalization

A Vice article predicted that Mexico, Argentina, Peru, Colombia, Ecuador, the US, Australia, Thailand, New Zealand, and Chile would fully legalize cannabis soon. The US is still of two minds when it comes to cannabis legalization. However, the Trump administration has left the decision to the states. The US states are taking advantage of this and stepping up to legalize medical and recreational cannabis. Even celebrities are supporting the use of cannabis.

President Donald Trump could use this opportunity strategically for his reelection campaign. Read Marijuana: Will Trump Have an Edge over Biden? to learn more.

Stay tuned to gain more insights into the cannabis industry.

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