Why North American Cannabis Companies Are Looking At Colombia

In our legalization forecast for 2020, we discussed the progress that Latin America has made in recent years – and one of the major markets that’s come up repeatedly when analyzing the region has been Colombia.  Located a relatively short distance from North America, cannabis companies are increasingly looking to invest, not only thanks to its production advantages, but as a platform for building a market in this newly emerging part of the world.

Colombia’s History With Narcotics

The fact that Colombia is becoming a major player in the legal cannabis trade shouldn’t be at all surprising given its past reputation.

Long before the liberalization of drug laws, Colombia had historically been a major supplier of illegal cannabis, thanks to its climate and proximity to North America (Florida in particular became a major point of entry for pot smugglers).  The country’s reputation for the illegal trafficking of marijuana into the United States led to both the US and Colombian governments cracking down as part of Richard Nixon’s “War On Drugs”.

Partly as a result of the efforts, traffickers in the country formed large scale cartels, ultimately moving and expanding into heroine and cocaine, the latter of which was immortalized by Pablo Escobar and the cartels of the 80’s and 90’s.  The Medellin Cartel dominated and monopolized the illicit cocaine trade, with Escobar himself amassing an estimated fortune of $30 billion dollars before being gunned down by authorities in 1993.

Progressive Drug Laws In Latin America

Both Colombia and its Latin American counterparts have come a long way since the days of Pablo Escobar.  While the image of cartels and shootouts still lingers in the imagination of many outsiders, Colombia has gone from a nation torn apart by violence to a modern, vibrant country with a fast paced economy.

Over the last few years, the region has seen governments rapidly moving to shake their old, outdated laws – between the full legalization by Uruguay in 2013 to decriminalization in the medical space by Colombia, Argentina, Peru, Paraguay and Chile, it’s clear that Latin America recognizes not only the pitfalls of prohibition, but the advantages they possess in this new industry.

Colombia’s Unique Advantages

When it comes to cannabis production, Colombia has a lot of unique advantages that other countries simply lack or are in short supply of.

The first advantage that they have going for them is climate.  Unlike Canada and many parts of the US, the country is blessed with an ideal climate and abundant sunlight, meaning that Colombian growers don’t need to lean as heavily on artificial grow houses.  Its proximity to the equator gives it a perfect 12/12 photoperiod (12 hours of sunlight, 12 hours of darkness), creating the optimal conditions for growing cannabis.

The country also has relatively low labour costs and a skilled workforce.  Colombia is heavily involved in agriculture, and already supplies huge amounts of coffee, bananas, flowers and other products (the cultivation of which comes with skills directly transferable to cannabis growing).

To put it in perspective, Canada’s production costs per gram of pot is about $150.  In Colombia? 5 cents per gram.

Finally, the nation’s geography puts it in a very advantageous position as a major economy that sits nicely in a Latin American market poised to take off, with some estimating that it could be worth up to $13 billion by 2028.

The nation’s geography puts it in a very advantageous position as a major economy
The nation’s geography puts it in a very advantageous position as a major economy

Which Companies Are On Board?

Given the sheer wealth of opportunity that the country represents, it’s no surprise that a number of major North American companies have already made moves in Colombia.

One of the reasons they’re so eager to get in and invest is simple – supply.  All of the aforementioned advantages possessed by Colombia make it prime real estate for production and cultivation, and companies in North America recognize this.

Last month, Clever Leaves, one of Colombia’s leading licensed producers was given a GMP (Good Manufacturing Practices) certification for producing medical cannabis by the Colombian National Food and Drug Surveillance Institute.  The company is backed by Northern Swan Holdings, an investment firm based in New York, and has cultivation facilities with nearly 2.5 million square feet, as well as a facility currently able to extract 24,000 kilograms of flower.

Canada’s supply problems have become notorious over the past year, highlighting the challenges of producers in the face of an ever increasing demand.  The fact that the Colombians are able to produce and grow with such ease makes them a very attractive option for Canadian licensed producers feeling the pressure to meet that demand.

But many in the industry are also looking to get in early in the hopes of being first in the red hot Latin American market.

Last year Canopy Growth Corp launched its subsidiary Canopy LATAM Corp and acquired Spectrum Cannabis Colombia S.A.S., one of the country’s major medical marijuana companies.  The move is part of a strategy to invest in the newly emerging industry, with President Mark Zekulin saying that “This isn’t a strategy about more growing that we’ll try to send back to Canada or something like that.  This is about building a Latin American market.”

Aphria is another Canadian company that clearly sees the potential of medical marijuana emerging in the region.  Earlier this year, the company announced that its own subsidiary, Colcanna SAS, had secured an exclusive agreement with the Federacion Medica Colombiana (the guild responsible for medical professional ethics) to produce curriculum related to medical cannabis.  Emphasizing the importance of building up the region, President Jakob Ripshtein is quoted as saying “partnerships like this between Colcanna and FMC are a direct result of our comprehensive approach to establishing a leading foothold in Colombia, throughout Latin America and in markets around the world”.

As the cannabis industry continues to change and evolve, North American companies are increasingly looking beyond their own borders for investment opportunities abroad.  If the trend continues the way it’s going, Colombia is poised to not only become a major supplier, but a huge player in its own right.