Cocaine country aims to transform into production hub for pot exports
BOGATA Cannabis companies are rushing to set up operations in Colombia, looking to gain a foothold in one of Latin America’s most notorious drug capitals as governments across the world embrace the burgeoning legal marijuana industry.
Growers, many with financial backing of firms from Canada and the U.S., estimate as much as US$500 million has been invested to buy farm land, build greenhouses and set up labs to produce oils, creams and other products that contain cannabidiol, or CBD, an extract used to treat everything from chronic pain to insomnia.
So far, none is growing marijuana rich in THC, the substance that makes smokers high.
Embracing the industry may seem surprising for a country that has long been embarrassed about its status as the world’s largest cocaine producer and struggled to escape its reputation as a violent narco state that gave rise to the likes of Pablo Escobar.
But with the global cannabis market estimated to be worth more than US$50 billion by 2025, Colombia has sought to become a centre of production for exports to countries around the world that are legalizing its use.
Domestic laws permit small quantities of pot for personal consumption, but the country hasn’t put in place final regulations for medical use.
“When you mention Colombia, unfortunately, some people relate that name with illegal drugs,” said Julian Wilches, a former director of drug policy in the Justice Ministry who co-founded the medical cannabis company Clever Leaves, which began operating in 2016.
“We have an opportunity here to take a controlled substance and change that reputation, to bring health to people and development to our country.”
Clever Leaves is producing about 24 metric tonnes of dried cannabis a year, grown in greenhouses on a sprawling farm tucked in a valley about 2,500 metres above sea level in the Andes.
With an expansion already underway, the farm should be able to produce about 324 metric tonnes next year, making it among the world’s largest growers.
Colombia in 2016 joined a small group of countries that permit cannabis cultivation, leading hundreds of companies to apply for licences. The country’s natural advantage is its position near the equator, which provides around 12 hours of sunlight year-round, making it cheaper for growers than places where artificial light is required.
That attracted some of the industry’s largest names, with investments from Canadian, publicly traded companies including Canopy Growth Corp., Pharmacielo, Khiron Life Sciences, Aurora Cannabis Inc., and Aphria Inc.
The expansion has continued even as investors have cooled to once high-flying pot stocks.
The largest exchange-traded fund of marijuana companies tumbled more than 35 per cent in the past three months to a record low this week, dragged down by concerns about vaping-related illnesses in the U.S. and a slow path to profitability for some of the industry’s biggest players.
“The cannabis industry in the last three months has faced a reduction in investment, but the interest in Colombia is still very promising,” said Juan Diego Alvarez, vice-president of regulatory affairs at Khiron, which plans to produce about 80 tonnes a year of cannabis in Tolima, a mountainous area in the Central Andes. “Colombia in the near future will become a centre for development and research for the industry.”
The sector has been held back by a complicated regulatory and permitting system. While hundreds of companies were granted licences since 2016, only a handful have begun growing. None of the cannabis currently being produced is the kind that produces significant levels of THC because of more onerous regulatory procedures for those varieties. Because Colombia has yet to finalize regulations for the domestic market, producers are focusing on exports.
Colombian President Iván Duque Márquez vowed last month to cut bureaucracy and support the industry. Revenue from the sector in Colombia is forecast to balloon to US$791 million by 2025 from US$99 million in 2020, according to a draft study by think tank Fedesarrollo. Researchers estimate the market for CBD in the U.S. alone could be worth almost US$23 billion by 2023.
Clever Leaves became one of the first Colombian companies to book sales, exporting products to the U.K. and Poland. It is targeting Germany after it receives approval from the European Union.
As Colombia looks to ramp up exports, it’s already facing competition from other Latin American countries, with governments from Mexico to Argentina establishing laws to develop industries in those countries.
Colombia is more advanced in the process, according to Kyle Detwiler, chief executive of Northern Swan Holdings, a New York-based firm that has invested about US$40 million in Clever Leaves.
“It’s the perfect region for growing,” he said.
Colombia in the near future will become a centre for development and research for the industry.