Latin America’s Emerging Cannabis Market
November 11, 2019 -
I’ve been closely watching the Latin American cannabis market develop since December 2013, when Uruguay’s president, Jose Mujica signed legislation legalizing recreational cannabis. With that legislation, Uruguay became the first nation globally to federally legalize recreational cannabis.
Uruguay’s legislation legalized the commercial growing of cannabis by farmers and allowed individuals to grow up to six cannabis plants. It also enabled the establishment of growers clubs, which could grow up to 99 cannabis plants, and are essentially government-controlled dispensaries. The legislation also established regulations for pharmacies to sell cannabis. In 2017, sixteen pharmacies were finally authorized by the country’s government to sell cannabis commercially.
Over the past couple of years, Colombia has also taken steps to establish a cannabis industry. Since 2017 dozens of companies have registered with the Colombian government to manufacture a variety of cannabis products. Key for the country’s industry is the potential of an export market.
Mexico, which has continually delayed the legalization of recreational cannabis, has the potential of becoming the world’s largest recreational cannabis market due to its population. Mexico’s Supreme Court recently granted the country’s Congress until April 30, 2020, to approve legislation that legalizes all forms of cannabis. It’s likely that the legislation will limit foreign ownership, limit vertically integrated operations consisting of growing, extraction, and retailers, and will preclude the ability to resell licenses. All of these limitations will likely put a damper on Mexico’s cannabis industry’s ability to attract capital.
Latin American cannabis entrepreneurs often point to several benefits they have over Canadian and U.S. cannabis producers. These include 12 hours of year-round sunlight, low costs for electricity, low labor costs and inexpensive land. Of these, my conclusion is that the most significant is the low labor costs compared to the US or Canada.
Due to the early-stage of the cannabis industry and the difficulty in estimating illegal sales, I continue to question the reliability of most cannabis market data. But, it’s clear that the Latin American cannabis market will be very large, provide significant entrepreneurial opportunities, lots of new jobs, and more than likely an additional source of significant tax revenue.
A useful yardstick to measure the Latin American cannabis market are Grand View Research’s projections for the industry. The firm projected that the global medical cannabis market, without adult-use or recreational sales, will reach $146 billion by 2025, almost four times their estimate of the current market of $40 billion.
Earlier this year, New Frontier’s Latin America Regional Cannabis Report: 2019 Industry Outlook, estimated the current legal and illegal Latin American cannabis market at $9.8 billion, based on a population of the countries they focused on of 600 million. The report indicated that the top regional markets were Brazil at $2.4 billion, Mexico at $1.9 billion, Chile at $1.5 billion, Argentina at $1.1 billion and Colombia at $700 million.
The Latin American cannabis market is very embryonic but growing at a very fast rate. Much of the future of cannabis in Latin America will be about the largest economies, Mexico and Brazil, the largest economies in Latin America. While it appears that Mexico will finally have a recreational cannabis market next year,
Brazil is taking a slower and very conservative approach, regarding the production, and use of cannabis and cannabis-derived products.
The Latin American cannabis market provides significant strategic opportunities for Canadian and U.S. growers and extractors bringing their expertise to the region’s cannabis businesses. If a business direction didn’t work or was problematic in Toronto or Los Angeles, it doesn’t mean that it might not work in Latin America. However, this experience may prove beneficial to Latin America’s growers and extractors who may significantly benefit from the North American industry’s experience, expertise, successes, and failures.
About Phyto Intel
Phyto Intel provides strategic assistance to enable businesses and entrepreneurs to enter and succeed in the fast-growing and fast-evolving legal cannabis, hemp and CBD markets in the United States and globally.
Phyto Intel’s services are focused on four general areas:
Formulation of food, beverage, and cosmetic products that include CBD
Providing proprietary information on federal, state, and local regulations regarding CBD and products that include CBD
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Post-product launch services including analytics and market feedback
Phyto Intel also provides market intelligence, formulation and “go to market” strategies for Consumer Packaged Goods (CPG) companies and CBD producers interested in developing, formulating, manufacturing and marketing food, beverage, nutritional supplement, and cosmetic products containing hemp seed oil and/or CBD.
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