(Bloomberg) -- Colombia is already world renowned for its coffee beans and flowers. Now, a new decree could make it a a major exporter of marijuana as well.
A directive signed by President Ivan Duque in late July allows the export of dried marijuana flower, giving a boost to an industry that has so far been restricted to selling medical cannabis locally while exporting a limited range of products, such as extracts, oils and seeds.
Global legal trade in marijuana remains minimal since it’s still illegal in most countries. But if that changes, as expected, companies with access to the best growing climates stand to gain a competitive edge. Colombia, for example, could become a global version of what’s predicted to happen with California if the U.S. allows interstate transport. North American companies like Tilray and Curaleaf Holdings are already seeking optimal climates; both now grow marijuana in Portugal, which has become something of a European hub. Colombia may be better positioned still.
Close to the equator, Colombia gets plenty of sunshine and rain while offering the high altitudes favorable to cannabis plants. A November 2020 report from Prohibition Partners estimated that the cannabis industry in Latin America and the Caribbean will grow to $824 million by 2024, up from $168 million in 2020. The provider of cannabis data and market intelligence predicts that Colombian companies could lead business deals in Latin America and enter markets such as Brazil, Ecuador and Peru.
A handful of companies that have connections with Colombia have been lobbying hard for new export rules, and it’s one step in their plans to position themselves as multinational cannabis exporters.
“The economic advantages of cultivating along the equator, with the geographic advantages that Colombia has, will be game changer for the global cannabis industry,” said Luis Merchan, chief executive officer of Flora Growth, which has its main cultivation center in Colombia and recently announced it would relocate its corporate headquarters from Toronto to Miami. The average production cost for 1 gram of dried marijuana flower is 6 cents in Colombia, compared to about $1.25 in the U.S., Merchan told me in a phone interview.
Clever Leaves, headquartered in New York with offices in Colombia, Portugal and Germany, also praised the new decree.
“We’re in a unique spot to capitalize on this,” CEO Kyle Detwiler said in a phone conversation, adding that the company already has supply agreements with Australia and Mexico that Colombia’s decree will allow it to take advantage of. Duque signed the new decree at the company’s cultivation facility, he said -- a sign of strong government interest in the business.
The sentiment is shared across the industry. Khiron Life Sciences, a Colombian-Canadian company, said in a statement that the new rules would enhance its supply chain for dry flower in Germany and the U.K. Pharmacielo, headquartered in Canada with a cultivation and processing site in Colombia, said its method of standardizing marijuana’s chemical profile positions it to benefit from the decree. AviCanna, meanwhile, also stands to benefit. The Toronto-based company has already sent cannabis extract from its Colombia facilities to Peru.
Colombia’s foreign exchange rate and access to skilled growers in the workforce also help give the nation an advantage.
Then there’s the biodiversity: The same variations in altitude and climate that have made the country one of the world’s top exporters of flowers also mean it can provide a variety of strains of marijuana, said Flora Growth’s Merchan.
“Cannabis is just a specialty cut flower, grown in specific conditions,” he said.
NUMBER OF THE WEEK
- 1,512%: The one-year growth of Colombia’s cannabis exports from 2019 to 2020, according to Prohibition Partners. The exports, which include items such as seeds and extracts to Peru and the U.S., totaled $5 million in 2020, up from just over $300,000 the previous year.
QUOTE OF THE WEEK
“We believe over the next three to four years, Canada, the U.S. and Germany will represent over 90% of the total addressable cannabis market, and by the time we get there you will still have difficulty bringing things over international borders. With Terrascend and Acreage, we have significant cultivation capacity on the East Coast and I suspect we’ll also look to the Southwest for cultivation, which is where I think industry will go after federal legalization,” said Canopy Growth CEO David Klein in a phone interview.
WHAT YOU NEED TO KNOW
- Scott’s Miracle-Gro said it will find new ways to invest in the cannabis industry during a quarterly earnings call. It also announced a bond issuance.
- Canopy Growth reported first-quarter earnings that missed revenue estimates. It said that Covid-19 related issues in Germany hurt sales.
- A U.K. SPAC will buy cannabis company Hellenic Dynamics, a company that specializes in medical cannabis cultivated in Greece.
- Former coal plants are now being re-purposed for uses including growing marijuana.
- Cannabis and biotech entrepreneur Avtar Dhillon was arrested and charged with securities fraud over his sale of shares in two companies.
- Village Farms International reports second-quarter earnings before the market opens.
- Curaleaf reports second-quarter earnings after the market closes.
- NewAge reports second-quarter earnings after the market closes.
- Acreage Holdings reports second-quarter earnings after the market closes.
- Akerna reports fourth-quarter earnings after the market closes.
- Entourage Health reports second-quarter earnings before the market opens.
- Harvest Health & Recreation reports second-quarter earnings after the market closes
- Green Organic Dutchman Holdings reports second-quarter earnings after the market closes.
- Green Thumb Industries reports second-quarter earnings after the market closes.
- Neptune Wellness Solutions reports first-quarter earnings before the market opens.
- Charlotte’s Web Holdings reports second-quarter earnings before the market opens.
- Trulieve Cannabis reports second-quarter earnings before the market opens.
- CV Sciences reports second-quarter earnings after the market closes.
- Goodness Growth Holdings reports second-quarter earnings before the market opens.
- Cresco Labs reports second-quarter earnings before the market opens.
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