In 2017 Colombia, Argentina, Australia, Mexico and Germany joined Chile, Jamaica and Italy in legalising cannabis for medicinal purposes. As one of the world’s newest and fastest-growing industries, the legal medical marijuana market could to reach $146bn by 2025, according to a report by business consulting firm Grand View Research. Colombia has passed legislation at a time when many countries are ramping up imports of raw materials due to underdeveloped or non-existent local cultivation. This puts Colombia in an advantageous position for two key reasons, according to Rodrigo Arcila, executive president of the Colombian Association of Cannabis Industries (La Asociacíón Colombia de Industrias del Cannabis, Asocolcanna), which guides and promotes the development of cannabis growing. “First, the regulatory framework is solid and well structured, attracting companies to participate in the sector,” he told OBG. “Second, the natural climatic and geological conditions mean that Colombia is one of the most wellsuited geographically to grow the plant.”
Further commenting on Colombia’s advantages, Bibiana Rojas, CEO of Canopy Growth Colombia, told OBG, “Our isothermal climate, stable levels of daylight throughout the year, a variety of different thermal floors, as well as the quality of human resources stemming from a strong tradition in agricultural activities all provide a competitive advantage for the development of cannabis production in Colombia.”
Legality & Regulation
The first step to legally produce marijuana for medicinal purposes came with the passing of Law No. 30 of 1986; however, the regulation was unclear. It was only when Law No. 1787 of 2016 and Decree No. 613 of 2017 were passed that a regulatory and legal framework for the cultivation and production of products was clearly codified. The legislation states that individuals and legal entities can participate in the legal marijuana market by obtaining one or more of a total of four licences. Three of these are administered by the Ministry of Justice and Law (Ministerio de Justicia y del Derecho, Minjusticia) permitting the use of seeds for sowing and cultivation of both psychoactive and non-psychoactive cannabis plants. The manufacturing of cannabis derivatives is regulated by the Ministry of Health and Social Protection (El Ministerio de Salud Protección Social, Minsalud). Licences are issued for five-year intervals and can be reissued an unlimited number of times. Stakeholders are able to apply for licences simultaneously from both ministries; however, should applicants wish to grow psychoactive cannabis, they must first obtain a licence to manufacture cannabis derivatives from Minsalud before applying to Minjusticia for the subsequent licence. It is not necessary to apply for authorisation to manufacture cannabis derivatives should the applicant only look to grow non-psychoactive cannabis. For growers, their land cannot be approved for cultivation unless it can be confirmed that there are no signs of previously grown illicit crops, including cannabis.
Although the wheels were set in motion by the administration of former President Juan Manuel Santos, some in the sector have commented on the slower movement of key organisations. “Some countries have regulated the cannabis industry after Colombia and have made significant advances. While we have a clear regulation for planting and manufacturing cannabis products, we need to make progress on patient access to ensure they have the access they need to medicinal cannabis products,” Rojas told OBG.
Institutional Support
As the industry is relatively new, activities will receive support largely from existing institutions, adapting cannabis cultivation and production into already established remits. The main industry body, Asocolcanna, was formed in July 2017 and consists of 19 companies associated with the growth, production and sale of cannabis. Still, the sector is not without its challenges. According to Sebastián Londoño-Ochoa, general manager of pharmaceutical company Medpharm, the principle hurdles include facilitating farming techniques and business management, securing financing for the production cycle, protecting prices, and accessing the compliance and risk administration system.
Other actors have mentioned the importance of facilitating a comprehensive development programme around value chains to allow the industry to expand and become more sophisticated. “All actors should be involved in the development of the sector,” Arcila told OBG. “The state should be pushing a wide-ranging development agenda, while small and medium-sized companies and growers work together to build capacity and capability along the value chain.”
Financing
Financial backing also presents a hurdle.
The first investments in cannabis cultivation came primarily from US, Canadian and European companies that were based in Colombia for other (mainly agricultural) practices. In 2018 the Agrarian Bank of Colombia agreed to prepare specific financing options for firms wishing to cultivate cannabis. This involved establishing bank accounts, opening credit lines and permitting foreign investors to bring money into Colombia.
However, this may not negate the benefits of institutionalising the cannabis industry within existing establishments and their financing initiatives. “When a particular agricultural product emerges as a high-potential, high-value product, it ought to be included within existing agricultural programmes. In my opinion, there is no need for special or separate financing programmes just for cannabis,” Arcila told OBG.
Measuring Data
Securing large-scale investment without solid data may prove similarly challenging. In an effort to provide accurate and comprehensive figures, June 2019 marked the start of a detailed first-hand analysis by a range of actors.
“Most segments of the agriculture sector have precise figures on a number of variants such as number of hectares under cultivation, as well as current and future productivity levels,” Arcila added. “Because we are such a recent industry, we have yet to gather such data. However, the data-collection process has commenced, and we hope that by the end of 2019 we can have a mass of information with which to strategically plan the expansion of the sector.” Gathering data will involve interviewing sector stakeholders and using their existing business projections and plans, he explained.
Expansion
While a number of cannabis-derived products – especially cosmetics – have been sold within Colombia over recent years, raw materials are still imported, leaving ample investment opportunities to cultivate Colombian-grown ingredients. Indeed, licensed companies have been actively looking to expand. Global medicinal cannabis oil supplier PharmaCielo started 2019 with 6 ha and looks to end the year with 20 ha. Other companies are also planning large expansions. “We have 5 ha of active crops and are looking to expand to more than 25 ha by the end of 2019. The goal is to have more than 100 ha by 2023, and we are even thinking of increasing that objective more,” Andrés Fajardo, president of pharmaceutical firm Cleaver Leaves, told local media in February 2019.
Export Markets
Industry development in the coming years will depend greatly on securing export markets. As many countries around the world are liberalising their policies on cannabis regulation, exports are likely to grow significantly during the first half of the 2020s. Although many US states have legalised cannabis for both medicinal and recreational purposes, federally it still remains illegal, meaning imports are prohibited for the time being. Germany is the largest market in Europe, with demand currently outstripping supply. Legislation there permits the import of cannabis from other markets where the plant is grown in a legal, well-regulated environment.
While cannabis-derived medicines are legal in Mexico, the government does not permit cultivation. Australia similarly has no cannabis supply domestically, therefore both of these countries provide a significant opportunity for potential exporters such as Colombia.
In 2018 Canada legalised cannabis for recreational use, although medicinal use has been legal since 1999. This is one of the most lucrative potential exports markets for Colombia, with a total value estimated to reach $921.5m by 2020. In February 2019 Colombian medical marijuana growers Clever Leaves became the first producers to export raw material to Canada.
Outlook
Shifting perceptions globally will likely lead to an increase in demand for medical marijuana. It is therefore up to Colombia to ensure it leverages its solid institutional framework and advantageous natural conditions to ensure a favourable market share globally. Mainly focused on the cultivation of cannabis rather than manufacturing products, the industry is likely to evolve over the medium to long term to produce final products for both the Colombian market and abroad, adding significant value to the industry. Ultimately, this will depend on the ability of sector stakeholders to design a comprehensive and inclusive operational strategy, and provide institutional and financial support for growers and actors at the bottom of the pyramid.
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