Why you should invest in Latin America’s Booming Cannabis Industry?

The legalization of marijuana is becoming increasingly popular in Latin America. A continued trend since the early 2010s. In Uruguay, the government announced in 2012 that they had planned on legalizing state-controlled sales of marijuana in order to fight drug-related crimes.

In August 2009, the supreme court in Argentina declared in a landmark ruling that it was unconstitutional to prosecute citizens for possessing cannabis for personal use. Uruguay has legalized cannabis for both recreational and medical use. Colombia, formalizing its medical cannabis industry in 2017, is set to become a leading producer of the plant.

The region is now witness to countries loosening up their laws with unprecedented momentum to take advantage of the booming cannabis market. Several key factors underline the benefits companies moving early are experiencing in this market.

Take advantage of world supply shortages

Cannabis retailers in Canada began to run low on supplies for recreational use from the very first day of legalization. Shortages were felt almost immediately after recreational cannabis sales began in October 2018. Distributors in Canada blame producers and federal regulators, and an underestimation of the demand. Medical cannabis shortfall concerns appeared even earlier than recreational marijuana, once medicinal use was formally decriminalized in 2001. Some people are worried producers were prioritizing more lucrative recreational products or overseas markets. In response, government regulators pointed to increasing industry inventories and producer licenses.

Rising stars

Colombia has been taking the spotlight when it comes to the cannabis market. The country’s cannabis market is rapidly developing. After having formalized the medicinal cannabis industry in 2017, Colombia intends to produce more than 40 tons of cannabis per year. The government established four licenses individuals and businesses can obtain to cultivate manufacture cannabis and cannabis products.

Since Colombia has the ideal climate conditions for cannabis, Canadian and North American medicinal cannabis providers are investigating growing their products in Latin America. Northern markets can also seek the supply from a Colombian provider as one of their cost-reducing options.

Peru catches up to other regional suppliers

Much like Colombia, Peru has the perfect climate and labor costs when it comes to producing cannabis. Currently, the Peruvian cannabis law regulates the medicinal and therapeutic use of cannabis and its derivatives.

On February 23, 2019, the government approved the regulation of Law No. 30681 that regulates the medicinal and therapeutic use of Cannabis and its derivatives. The purpose is to regulate the legal use, address provisions, encourage research, and provide a strict framework for products. The purpose of this law is to control the legal use and encourage research of marijuana. Peru is now equipped to join the emerging cannabis giants in the region, offering yet another alternative for investors to choose from.

Mexico comes into the mix

This year, Mexico has plans on joining Uruguay as the second country in Latin America to legalize adult-use recreational cannabis. For investors, Latin America is the perfect place to start, when it comes to investing in the cannabis market. 

Because of the shortage of marijuana in Canada and various US states, businesses are increasingly moving to Latin America for to develop a lucrative cannabis supply. As the geographical conduit between regions, Mexico has the opportunity to capture these migrating companies and bolster its export industry.

With a population of just under 130 million people, the country’s domestic market also offers lucrative opportunities for recreational-use products that other nations don’t yet have the legal framework to accommodate.

Low costs of production

Incorporating a cannabis business considering the geography and climate of many Latin American countries, infrastructure and labour costs are comparatively low to other cannabis-producing regions. In fact, the cost of construction and facilities in Latin America can be as much as 80% lower in Latin America than in North America or Europe. 

Year-round temperate conditions provide advantageous growing capacity of cannabis crops. The good weather means businesses don’t have to make high initial investments to build indoor growing facilities. It also offers security for businesses in terms of regular harvests.

Labor in Latin American countries is relatively cheap compared to other parts of the world. While still developing, businesses can access skilled workforces with agricultural expertise for much lower costs.

Offer new market options

While the region’s cannabis industry is still peeling back their legislation against cannabis, businesses have an opportunity to step into these markets and find product niches early. Cannabis is not only decriminalized for medical use in countries like Uruguay. Entrepreneurs should consider cannabis’ versatility in food, beverage, and cosmetic industries.

Ingesting marijuana has always been a popular choice for enjoying the effects of marijuana. Food and drinks containing components of the plant are on the rise as a common way to enjoy cannabis recreationally, in countries that allow it. Beer, cocktails, and non-alcoholic drinks containing cannabidiol are being heavily experimented on, ahead of an expected boom in the beverages industry. Some companies offer products such as cannabis-infused chocolate as luxurious alternatives for consuming the plant.

Demand for cannabis balms, oils, lotions and rubs is increasing among middle class populations for their reported benefits in soothing muscles and clearing skin. Other topical products such as bath bombs and salts, make up and body wash products are also carving out their place in the cannabis cosmetic industry. 

Exciting investment opportunities in the region

Latin America’s medical cannabis market is expected to be worth US$8 billion by 2028. Due to lower overheads, companies based in the region have the potential to provide cannabis products for export at a lower cost than North American or European companies. This makes the region a key player in the production and sale of medical cannabis. Because of the climate and the fast-changing attitudes toward the drug, there are currently more than 40 licensed producers across Latin America.

The Latin America cannabis sector is home to an estimated 12.9 million consumers who spend nearly US$10 million per year on cannabis. Latin America annually consumes over US$5 million pounds of cannabis. This indicates a great local and international market opportunity exists as legalization extends across the region.